Switzerland’s Got a Problem…
… and that problem is its reputation as a financial safe-haven.
As Europe continues to implode, wealthy Greeks, Italian, Portuguese, and the like are pulling their funds from their domestic banks and funneling them into Switzerland.
Because of this the Swiss Franc has been exploding higher, particularly against the Euro:
As you can see, the Franc rose 18% against the Euro in 2010. It’s up 9% against the Euro this year so far.
Now, over 50% of Switzerland’s economy is exports. And nearly 60% of this is to Europe. Combine the Franc/ Euro dynamic and the economic downturn in Europe and Swiss corporate profits and the Swiss economy are getting KILLED.
Which is why the Swiss National Bank has been doing everything in its power to keep the Swiss franc down. So far its efforts have been completely futile: every intervention pushes the Franc down for a few days at the most.
I raise these points as an example of what happens when a Central Bank goes head to head with the market: each intervention accomplishes less and less until the market completely overrides any and all interventions.
Granted, the Swiss National Bank doesn’t have the same monetary clout as the European Central Bank or US Federal Reserve, which is why the market is taking longer to override these latter two central banks’ monetary interventions.
However, we’re fast approaching a time in which neither the Fed nor the ECB will be able to hold the market together. Indeed, we got our first taste of what it will be like at the end of July when the S&P 500 wiped out nine months’ worth of gains in about two weeks’ time:
The Fed and ECB stepped in to try and prop the markets up (the former may in fact have bought the stock market outright) and they got… FOUR days’ worth of gains.
Indeed, the market has already erased most of the snapback rally’s gains. And we’re on our way to new lows in the near future. In fact, I fully believe we’re now officially in the Second Round of the Great Crisis: the time in which financial system comes undone again.
The only difference is that this time around the Fed won’t be able to stop it.
Remember, the only thing that held the markets together in 2008-2009 was the belief that the Fed could backstop the financial system. We now know that the Fed didn’t actually fix anything. In fact, the Fed’s made things worse by allowing the very same issues that nearly took down private banks in 2008 (namely toxic debt and excess leverage) to spread to the public’s balance sheet.
Which means that this time around, it will be the US as well as the banks which go bust. Put another way, we’ve entered the END GAME for the Fed and its policies. So if you thought the first Round of the Financial Crisis was bad, wait until you see the next one. Indeed, I fully expect that what’s coming is going to be 2008 on STEROIDS. I’m talking about market crashes, civil unrest, riots, bank holidays and more.
Many people will lose everything in this mess. Yes, everything. However, you don’t have to be one of them. Indeed, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.
Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).
Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.
PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com.