Dear friends,
The prospect of opening a Swiss bank account had always fascinated investors. For decades it was linked to secrecy and stability, a safe haven for people that wanted their savings to be beyond the reach of their governments, the journalists, or their relatives. It is not an exaggeration to say that for many people holding a Swiss bank account was a good indication that they “made it”. There are two sides on the secrecy coin though.
Swiss banks attracted money that was obtained by illegal means and since the 1980s there have been a series of scandals involving the mafia laundering money, politicians siphoning money from the countries, and celebrities who wanted to “optimize” their tax liabilities. Usually once the allegations came into light the authorities would impose a (relatively) small fine and life would go on for the banks. However the 2008 global financial crisis changed that. The governments in Europe and the USA increasingly looked for more revenue and pressured Switzerland to get rid of the banking secrecy. The fines went up and the secrecy was gone. Therefore with the secrecy not being a competitive advantage anymore, at least Swiss banks could at least rely on stability. Right?
Well, not anymore. Last week’s events involving Credit Suisse demonstrated that stability is not a given even in Switzerland. A global bank which was founded in 1856 and had a successful track record in wealth management and investment banking, disappeared in just a few days after experiencing record outflows of deposits. Suffering a crisis of trust, and under the orders of the Swiss government, Credit Suisse was sold to another bank (UBS) at a huge discount. The depositors were protected and they will continue the services of Swiss banking by UBS. Unfortunately, the shareholders and the bondholders were not. The shareholders of Credit Suisse lost approx. 3 billion Swiss Francs and the bondholders lost approx. 16 billion Swiss Francs. That’s a lot of lost Francs from a “stable” institution, but it was clear that the Swiss government put its interest above the interests of the investors. Institutional investors have received the message: if you want stability get the Franc out of here!
At Artemis Assets we have interpreted the message in the same way. The investor rights to shares and bonds are not the same as the rights to Real Estate property. Banks fail all the time and this is part of the capitalist economic system. However, we can never imagine a scenario of a government seizing the houses of ordinary citizens that are regularly paying their mortgage just because they took one from a bank that later failed. By buying Real Estate you preserve your wealth. And it gets even better because at Artemis we can help you increase it with above 15% yields.
Until the next one!
