Gyroscopic Investing

I noticed that the Swiss Franc, which is a component of the PRPFX, reached a new all time high today as much crashed around it. Could this be the secret weapon of the PRPFX?

This is an interesting question, and I have wondered about the role of the Swiss Franc in PRPFX. 

I initially thought that it was basically simply an inflation hedge.  In reality, I think it performs similar to cash in that it represents a flight to safety.  I'm not sophisticated with any of the charting techniques to back test and see what the reality is, but maybe someone here will know.

I am nowhere near as knowledgeable about the PP as many here, but my impression was that the original purpose of the Swiss Franc was something similar to the purpose of gold, because the Swiss Franc was one of the only currencies actually backed by gold.

Given that the Swiss Franc's gold-backing is either gone or substantially in-question (see the other thread about Swiss banks refusing to give gold for Francs), I'm not really sure what the purpose of the Swiss Franc in PRPFX is today.

View it as a "hard currency" component.  The Swiss Franc's up 30 per cent in the last three years.  (The Australian currency's done even better.)

And it seems that when the Japan catastrophe was occurring every asset class was dropping precipitously including gold save for long term bonds and the Swiss Franc.

longeyes wrote: View it as a "hard currency" component.  The Swiss Franc's up 30 per cent in the last three years.  (The Australian currency's done even better.)

This may change...

Harry Browne talked a lot about the difference between gold backed currency and currency which is acutally exchangable for gold (of which there are none, as far as I know).  Gold backed currencies are simply those in which the government has a gold reserve.  In this respect, the Swiss Franc is no different than US dollar.  

For this reason, I am inclined to think that the Swiss Franc is more inline with the cash component of PP.  

One large difference between the US dollar and the Swissie is that the Swissie is not being debased.

The "hardness" of a currency has to do with a nation's fiscal and monetary culture, its intrinsic soundness.  Gold isn't the only source of economic stability.

longeyes wrote: The "hardness" of a currency has to do with a nation's fiscal and monetary culture, its intrinsic soundness.  Gold isn't the only source of economic stability.

I think that's right.  It was clear to HB when he wrote his first book in 1970 that the Swiss franc (and German Deutchemark) was drastically undervalued versus the US$ after years of US inflation under the old fixed-rate Bretton Woods monetary system.  He was right.  He was also attracted to Switzerland's independence, neutrality (though with a strong national defense system), respect for individual rights and stable banking system.  He also lived there for several years in the late 1970's.  By the early 1980's (about when PRPFX came out) I think HB had concluded that the Swiss Franc was no longer undervalued, but could be held for diversification purposes as Switzerland's conservative cultural tradition would keep it one of the world's stronger currencies for many years. 

Does anyone have data on how the Swiss Franc has actually performed in the context of the portfolio?  Does it mimic gold?  (I'd check myself, but I'm not sure how to do it  ).

Adam

Using GLD and FXF as proxies for gold and the Swiss Franc I find that the former is up about 200 pct in the last five years and the latter about 75 pct.  (Source: Yahoo Finance)

http://www.google.com//finance?chdnp=1& ... F&&fct=big

Here's data for the 2008 crash.  Hard to say which asset the Swiss Franc most closely mimics.

I guess that's why PRPFX uses it...

Or for a longer view:

http://finance.yahoo.com/q/ta?s=VTI&t=m ... rpfx%2Cfxf

The Swiss conduct monetary and fiscal policy in a way that tends to debase the currency just like everyone else  -- they respond politically to calls by exporters to prevent their currency from becoming too strong (i.e., to "save jobs" in Switzerland).  In the short run, they are particularly sensitive to the Franc not getting too out of line with the Euro.  But in the much longer turn, they traditionally have not been too reluctant to let the Franc rise against European currencies (now collectively the Euro) and the US$ if market forces dictate.  That is probably because they have a fairly open economy (which allows for smoother internal economic adjustments to currency changes), a conservative monetary tradition, and as HB once pointed out, a rising currency ultimately confers a real benefit on a country's citizens by giving them increased purchasing power in the world markets.  That's especially important to a country like Switzerland that needs to import raw materials and energy.  That last point seems to be lost on many in today's world.

There's a brief article on the Swiss franc called 'Franc Discussion' in the new issue of Monocle magazine. Can't get it online without a subscription (here's a teaser: https://monocle.com/sections/business/M ... iscussion/ ) and the magazine itself is a hefty US$10. The magazine is worth checking out, though. Great article on AlJazeera this month. I'll stop here, because I sound like a commercial.

Swissie up to record highs again as PRPFX benefits.

dualstow wrote: There's a brief article on the Swiss franc called 'Franc Discussion' in the new issue of Monocle magazine. Can't get it online without a subscription (here's a teaser: https://monocle.com/sections/business/M ... iscussion/ ) and the magazine itself is a hefty US$10. The magazine is worth checking out, though. Great article on AlJazeera this month. I'll stop here, because I sound like a commercial.

I used to read Monocle, but I started reading Pince-Nez recently and I find that their coverage of things is broader, provides more depth, and is more gripping.

(couldn't resist)

Swiss Franc up another 1.5% today.

Reub wrote: Swiss Franc up another 1.5% today.

I'll bet the Swiss exporters are in a foul mood.

MediumTex wrote:

Reub wrote: Swiss Franc up another 1.5% today.

I'll bet the Swiss exporters are in a foul mood.

Well the Swiss Army Knife (Farmer model) I just ordered has apparently gone up about 25% over the last couple of years.  I imagine currency is part of that.

The Swissie continues it's historic climb:


http://finance.yahoo.com/echarts?s=FXF+ ... =undefined

Swiss franc assets are 10% of PRPFX holdings. Given the franc is up 30% past 12 mos, I would think it's good for PRPFX.

See WSJ this morning, Money and Investing Section, for story on the Swiss franc.

If one is doing his own pp you could buy the Swiss and Aussie currency ETF's FXF and FXA, possibly a better place of some dollars. Well, at least at the moment. PRPFX is up 9% YTD, surely we can't do EOY 19-20% again. That would be 3yrs running.

pershing83 wrote: Swiss franc assets are 10% of PRPFX holdings. Given the franc is up 30% past 12 mos, I would think it's good for PRPFX.

See WSJ this morning, Money and Investing Section, for story on the Swiss franc.

If one is doing his own pp you could buy the Swiss and Aussie currency ETF's FXF and FXA, possibly a better place of some dollars. Well, at least at the moment. PRPFX is up 9% YTD, surely we can't do EOY 19-20% again. That would be 3yrs running.

At some point these currency trades get tired.

How long are Swiss manufacturers going to sit around watching their businesses erode as they lose all pricing power due to currency exchange issues?

At some point I would think that domestic Swiss politics would begin to exert pressure to devalue the franc.

In the meantime I'll bet there will be a surge of Swiss tourists at Disneyworld.