THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
As you read in yesterday's A-Letter, our Publisher and Sovereign Society Executive Director, Erika Nolan, is touching base with our contacts at Swiss and Austrian banks to see how they're faring amid today's global crisis. But remember that Erika isn't just talking to run-of-the-mill commercial banks like we have in the United States. Among the sophisticated operations run in the offshore-favorable jurisdictions of Austria and Switzerland, she's also touching base with a few storied private banks.
These banks operate on an invitation-only basis, they back all bank deposits with their own money, and they segregate your assets into a private cell, unaffected by the goings-on of the bank or even other accounts. But more on that later in the week.
Today, she picks up where she left off yesterday...in Zurich and on the way to meet some of Austria's finest bankers...
"After a very formal breakfast - served on china and with silver - I headed over to the Austrian bank that had kindly invited me."
"While the banking crisis flared up in nearly every country, private banking has weathered the storm just fine. Now it seems that the "old school" investment strategies - no leverage, no hedge funds, no �creatively structured' baskets of God-knows-what - has become cool again. I'm talking about investments that focus on value, hard assets, and most importantly, return of capital. Those are the type of investment strategies that private banks have catered to and based their reputations on for decades and centuries."
"We met with everyone...the senior portfolio managers, the Senior Vice Presidents in charge of relationship management and business development...and of course, the CEO and even one of the bank's Board Members."
"I quizzed them about the future of the euro...was it doomed to head lower or would it make Europe the shining star? The answer was mixed. "You know, the weak countries "such as Ireland, Spain, and Italy could pull out of the euro so that they can handle their economic situations freely," said Patrick. "This would strengthen the euro. Of course, the flip side could occur and the strong countries like Germany and France could pull out of the euro...leaving the euro in a bad state. But, regardless of what may happen, it's clear that there is a lot of risk in the Euro zone right now." Patrick added, "I think we could see currency devaluation across the board and this will bolster commodities. But, at the moment, if I had to pick one currency I think my pick would be the Norwegian kroner. The kroner has solid backing with its huge natural oil resources and the large sovereign wealth fund. Oil prices will rebound and as long as the Norwegians can control inflation, they will be sitting pretty."
"Conor chimed in... "The real question for the euro zone is what will happen if Ireland can't prop up their banks without help from the European Monetary Union? Will they jump in to bail out Ireland? What precedent will this set? And, will the German tax payer really want to chip in more to save his EU brother?" With this kind of nervousness in the markets...our conversation took a logical turn. We turned to gold."
"Everyone at the table agreed that gold is the only real hedge against the unknown and upheaval. The bank said they are getting calls on a daily basis from clients wanting to buy physical gold - be it in coins or in 12oz bars. And, most of the bank staff is adding gold to their own portfolios...just in case they have to buy bread, milk, shoes in a world where currencies, as we know them, are worthless. But, another suggestion was offered."
""I know Austrians that to this day buy cigarettes and whiskey every time they come through the duty free shop on their way back from a holiday. They have several cases of whiskey now...many cartons of cigarettes...stored in their cellar. They remember the days when you had to barter for bread...and a few cigarettes and half a bottle of whiskey can go a long way when you can't get change for your gold coins.""
"Hmmm...cigarettes and whiskey. I had never considered it, but I have to say it could be good advice. I am catching an early flight to Zurich tomorrow morning, but I may swing by duty free before I hop on the plane. I wonder what a bottle of whiskey will cost me?"
"Interesting times...until tomorrow from Zurich."
Gold seasonal chart: click to enlarge
