Switzerland bank says Goodbye

Tuesday, Sep 01, 2009

Founded in 1741, Wegelin & Co. is Switzerland’s oldest [surviving] bank (http://www.wegelin.ch/home/aktuell.asp).

Our bank is in the process of recommending our clients to exit from all direct investments in US securities.

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And as we assume that we are not the only ones who will be pursuing a policy of exit from the American capital market, we expect that the range of non-US securities with American exposure will expand significantly.

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If this picture of a tautologous construct round the US Treasury is correct, then we must at the very least be extremely cautious about nominal values. For Treasury bonds and bills would then be seriously overvalued, as would the US dollar itself, which would naturally argue against all other US bonds. In our view, not even an engagement in US stocks is really worthwhile.

We live at a time of shifting power and influence in the world. Asia is on the rise, and Brazil too, probably. Australia will catch on to their coattails, and Europe may once more be able to position itself within these countries’ recoveries. The USA will remain the unquestioned military power and also an enormous repository of debt and other problems. Because they are painful, and there is always an inclination to shift the blame for them onto third parties, redimensioning processes always harbour the potential for aggression. Switzerland is currently experiencing just this. But it won’t end there. Potential aggression and economic progress are mutually exclusive. Which is why we are well advised to take a general farewell of America. This will be painful, for the USA was once the most vital market economy in the world. But for now, it’s time to say goodbye.

Wegelin & Co, Investment Commentary No. 265, August 24, 2009, Pages 7-8, http://www.wegelin.ch/download/medien/presse/kom_265en.pdf.