The Swiss Helvetia Fund, Inc. (NYSE:SWZ) issued its quarterly report. Here are Rodolphe Hottinger and Rudolf Millisits' thoughts on our current economic situation--and they're not a pretty:
It is now apparent that the so-called "debt super-cycle" of the the U.S. economy has gone into reverse and that, consequently, savings must be rebuilt. As a result, much lower consumption levels have to be expected for years to come.
Mssrs. Hottinger and Millisits take a dim view of recent government intervention:
While government efforts are addressing the liquidity issue for now and some of the solvency issues, these efforts have not yet resulted in making private credit more available.
I kept waiting for the silver lining, but to no avail:
The world economic order is being structurally re-balanced away from growth driven by the U.S. consumer. The current process of de-leveraging is the result of a reduction in the U.S. current account deficit, a condition that had been pushed to the extreme. During this adjustment period, accidents are prone to happen.
As more investors seek safe havens, the Swiss franc (NYSEARCA:FXF) may receive a boost. This would allow Swiss companies to increase M&A activity, strengthening their future competitiveness. Roche's (OTCQX:RHHBY) expected acquisition of Genentech (Private:DNA) is one example.
If you're looking to invest in Swiss shares, the iShares Switzerland ETF (NYSEARCA:EWL) has outperformed SWZ over the last two years. Today, for example, SWZ dropped over 3%, while EWL declined by less than 1%. As it happens, I own SWZ. I am unsure whether to add to my SWZ positions, or open a new position in EWL.