Investing in Switzerland

Finance, Taxes, Banking, Insurance and Retirement
21
You only need to look at the CHF v USD over 40 years to realise that the CHF has not always been strong v the USD. I remember buying on eBay at 1.70 CHF to the USD, it had been 1.10 a couple of years before, not so far from parity today.

22
i thought I would check the performance figures of Fundsmith.

1 month 12.9%

1 year 33.7%

3 years 74.4%

5 years 153.6%

FTSE 100

1 year minus 1.15%

3 / 5 / 10 year appalling as well.

Buy a tracker if it makes you feel better.

23
Since 1986 CH had 45% inflation (LKI from 134.9 to 196.6) whereas the USA had 115% (CPI from 109.6 to 229.5). In the (very) long run the balance should show in the exchange rate change.

I think difference in inflation should show in the exchange rate. However, the latter are much more influenced by lots of noise, in particular GDP growth relative to other countries and central bank monetary policy, so the effect of the inflation difference often doesn't show unless you use very long term figures, and use economically similar start and end points as that's when much of the noise should have similar effects on both points.

Certainly. A similar move as the one in the '90ies from 1.15 to 1.75 in 2000/01 happened in recent years when the USD went from 0.70 to 0.95. But if you agree that a downward trend is characterized by "lower lows and lower highs" (which implies that there will be counter-moves, you don't get highs otherwise) then the big trend is clear.

Impressive performance by Fundsmith. But then again, perhaps not so much as RHS (an SP500 equal weight consumer staples fund, Fundsmith holds 2/3 in US stocks, about 3/4 thereof in staples and IT, NASDAQ 100 showed similar performance) gained 130% over the last five years.

PS:

Thanks for the greenies FMF

24
Sure, but Urs is right, that the USD devalues in the Long term. Look at the Chart I made. After the disband of Bretton Woods, the Dollar lost considerably in value, but since the late 70s it's been devaluing vs CHF at about 1.7% per year.

It's not fair to put FTSE 100 as a respresentative for a broad index. The point is to own as much of the market as possible.

Exactly that! So even Fundsmith can be underperfoming an index it so strongly depends on. And is that a sustainable growth? Can consumer staples outperform the market for decades?

25
Actually Fundsmith gained a bit more than the fund, though to me the difference is insignificant here. What i wanted to highlight is that so far you can't tell whether Fundsmith is an excellent fund indeed, or if it's simply a case of "at right place, at the right time".

Warren Buffet in his annual letter to shareholders for 1995 (BRKA stock had gained 45% in that year, clearly beating the SP500's 34%):

"There's no reason to do handsprings over 1995's gains. This was a year in which any fool could make a bundle in the stock market. And we did. To paraphrase President Kennedy, a rising tide lifts all yachts."

26
Could you explain this to me. The MSCI World and MSCI USA have been performing identically and suddenly, 5 years ago, the MSCI USA started performing much better. What are the economical reasons behind this?

On a more speculative note: Do you think the World will recover, or is it a longer trend?

27
The problem with chart analysis is you can see many different things, depending on your time scale, the assumption that everything returns to the mean is probably correct, however interest rates are so abnormally low when historically only CHF interest rates were low. Not sure looking in the rear view is helpful taking that into account. in 2002 your red line would be in a very different place & has no bearing on where you draw it today assuming your projecting forward..

If you look at salaries & cost of living v neighbouring countries, it would indicate the CHF is over valued, with free movement of people mean reversion should occur if the chart is long enough.

28
That's a very good point. You also reminded me why I want to invest internationally. Right now I am earning and saving in CHF. While the CHF is strong, all is good, but it cannot be taken for granted. But in case the CHF would start losing, my savings will be protected by international diversification.

Are you sure? Currency value is an effect of monetary policy. If you print money the value will decrease. If not, why would it? Maybe the long term perspective is that the salaries will stagnate and prices will go down, while the currency keeps getting stronger?

29
Switzerland did a lot of printing, as did the rest of the world Still very little inflation in the system. What happened when interest rates were 7-15% was very different to today, deflation is likely to be the issue. Debt is real & if it can't be inflated away, then those bullish valuations of assets such as property may turn out to be worth a fraction of reality in 10 years time. I can see some future pain as most property owners are 5 - 25 times leveraged.

Salaries will continue to fall in CH, it's very easy to sack someone & then rehire the same person or someone else at a reduced salary. 15 years ago 15-18k a month was very standard offer if you wanted someone to move to CH, today people will up root for 10-12k a month, thats well above median Swiss salaries.

I retired at 52 as investment gains exceed post tax earnings from working as salaries fell.

30
I think overall, salaries can be expected to fall under the continued grinding pressure of globalisation and automation.

Asset prices will remain high as interest rates remain low.

I'm more concerned about the impact of boomers retiring and liquidating their assets which may be the underlying driver of a future secular bear market in assets.

31
CHF is way overvalued.

32
Invest in water. Your children will be happy.

33
In an open market, I would say that it is fairly-valued, but with the SNB intervening to keep the CHF down, I'd argue it is undervalued.

34
Well if you'd put all your money into the S&P500 in 2000, you'd be at breakeven again in 2013.

That's why diversify.

If you believe you can never beat the indexes, you won't have a successful investing career

35
Dear Poot, that is if you were really so unlucky to invest all your money at the peak of 2000.

So what would be your diversification strategy at that Point and now? Bonds?

So you believe you can beat the market? And what makes you think so? Maybe you have a deep knowledge of the markets, spending countless hours on analyses. But I don't have time for that.

36
Globalisation and automation will reduce production costs, correct. But that's mainly valid for low-level workers, which can easily be replaced.

Then is the question what comes next. I can imagine a following scenario:

Globalisation and Automation reduce demand for Labor Salaries drop, corporate income grows rich get richer, poor get poorer Demand for products falls due to lower salaries Prices drop salaries and Prices dropped? Deflation Again, look one step further. The Baby boomers will convert from Investors to consumers, so we will have an increasing Group of people who don't work, but spend money. How is that bad for Business?

And if the developed societies get older, then not only the Labor demand will drop, but also the supply.

What are you talking about? Can you provide some data to Support this? Below you can see that the average salary went up in the last 20 years.

http://www.tradingeconomics.com/switzerland/wages

37
really... so much for the 120K EF standard

any proof to back this statement

38

These are in nominal terms, not inflation adjusted, and average, not split into quantiles.

39
Average has risen to just over 6k a month, if your earning 6k a month you will be fine. Thats more than 5,000 euros a month, thats considered a big salary in many places in the EU, bi laterals & all that.

18 years ago IT rates were CHF 1200 a day for anyone with a beating heart, more than twice what that same person will earn today.

Plenty of people here are on salaries 50% plus higher than the offer they would get today, I don't think you have been in CH very long.

40
Let's be honest, you can't compare the freelance market with permie... but thanks for clarifying you were referring to contractor market.

to be fair that comparison applies to anywhere in the world... I was contracting with those rates 10-15 years ago but based in southern europe, its not fair to say that is the average wage in southern europe 15 years ago which is how I read your earlier message