Saturday, February 09, 2008

My First Compliment from Fleck

9 February 2008

Bill Fleckenstein is the perhaps soon to be bestselling author of the recent book on the follies of Alan Greenspan during his tenure as Chairman of the US Federal Reserve Board: Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve.

Mr. Fleckenstein is known to his followers as "Fleck." I have subscribed to his site for years. As far as I can tell, Fleck is a contrarian by nature - in fact, down to his sinew and bone. He simply thinks for himself, and he is very rarely impressed.

Fleck invites questions and comments from his readers, but he does not hesitate to let us know when we are simply annoying him with foolish questions and statements which should first have been considered more thoughtfully, and perhaps then never stated.

So why am I mentioning this today?

Well, after over 5 years of reading Mr. Fleckenstein, and perhaps e-mailing several dozen missives to him - perhaps more - I have just received my first compliment.

Let me tell you, when Fleck recognizes you, you will feel worthy. It is not that easy to win his favour (just consider the plight of Mr. Greenspan, who has certainly garnered Fleck's vituperation!).

So, without further ado, please allow me to announce to you my first compliment from Fleck.

My statement, which closely parallels my previous blog entry, is followed by Fleck's reply:


Re: Canadian dollars. I'm not a currency trader, but I am a Canadian. I think the present currency trends are pretty clear.

The commodity currencies are down on the recession trade.

The (low interest) carry trade currencies are up, more or less for the same reason (unwinding of the carry trade).

A look at XJY and XSF pretty well sums it up. I'm happy to hold my recently appreciated Canadian dollars (though the SPTGD has been horrible due in part to the currency trend), but if I were Swiss or Japanese now, I wouldn't buy Canadian dollars so long as recession fears are driving the market.

Once the focus is (finally) on inflation, Canadian dollars and the other resource currencies should have their next leg up, along with the precious metals. But inflation has been raging for years and nobody has noticed. So how long does that take? Might be a while....

• (Fleck replies:) "Excellent points-- I hadn't thought of that... may explain Thursday's weird action in those currencies..."

Fleck has spoken. I am humbled to have gained his recognition.

For more Fleck for yourself, subscribe here.

And beware, Helicopter Ben may be the next to incur Mr. Fleckenstein's wrath!

Here is a list of my blog entries concerning the Swiss Franc:

1. Canadians, Buy the Swiss Franc Now!

2. The Swiss Franc Continues To Climb in Canadian Dollars.

3. My first compliment from Fleck.

4. Currencies 101.

5. Another Swiss Franc Buying Opportunity for Canadians.

6. All You Need To Know About Global Money Supply in One Place.

7. The Swiss Franc Is Still Strong.

. Use "FXF" (CurrencyShares Swiss Franc Trust) To Buy the Swiss Franc.

9. Gold is Better Than the Swiss Franc.

10. Swiss Franc Alert.

11. Gold Isn't Gaining All That Much... In Canadian Dollars!

Addendum: Many visitors to this site have enquired about how to purchase the Swiss Franc. The most direct method is simply to purchase Swiss Francs from a currency dealer. In Canada, Custom House Currency Exchange offers competitive rates. You may also wish to contact your broker about an exchange-traded fund or a Swiss Franc government bond (which would pay interest on your investment, but could be subject to decline in value even if the currency itself rises relative to other currencies). Additionally, some banks permit investors to maintain foreign currency accounts. Sophisticated investors may wish to enter this trade through purchasing futures contracts or other types of options, such as calls. Many brokers specialize in foreign currency purchases, so I suggest that you start with a broker familiar to you. As I understand it, Pamela and Mary Anne Aden at Aden Research, for example, will execute foreign currency trades for their customers. But for those who don't know how, simply purchasing the currency from a competitive currency trader (possibly your local bank, or a trader recommended by your bank) will be a good place to get started. Ideally the "spread" between the buy and ask price for the currency should be less than 4 cents on the dollar (roughly 4%). That is, you should not pay a premium of greater than 2% to purchase the currency. This being said, my own experience with currency dealers is that it is very difficult to exchange currencies in this idealized range. Our local broker's rates are much higher, for example. Never exchange currencies in large amounts at airports, hotels and other locations that are charging large premiums to provide a convenience service to travellers. Look for the best rates any time you exchange currencies!

August 5, 2008:
As currency purchases at fair exchange rates are extremely difficult to obtain, I am now recommending that mainstream investors simply purchase the FXF exchange traded notes, "CurrencyShares Swiss Franc Trust" (denominated in US dollars) through their broker. This exchange traded note uses the interest on its deposits to cover the management fees of the fund, with the result that you will receive modest interest income via this method.

Note (9 August 2008): Most global currencies happen to be weak against the US dollar right now, as the US market is presently driven by the fantasy that the US government's now $800 billion rescue of the financial system by "nationalizing" the government sponsored enterprises (Fannie Mae and Freddie Mac) and using taxpayer money to guarantee worthless bank assets will make everything "all right again." That fantasy will persist for a season, and then it will fade, as all fantasies do.

In the meantime, the Swiss Franc may not have bottomed for US investors. However, I note that the Franc is holding up fine against the Canadian dollar, as both are under pressure versus the US dollar, which is presently enjoying a transient upward move due primarily to concerns about the stability of the Euro. Pamela and Mary Ann Aden advise that the market value of the Euro is presently stronger than that of the Swiss Franc. My own take is that the Swiss Franc clearly possesses superior fundamentals compared to the Euro, which relies upon the historically unproven concept of international cooperation (don't expect the cooperation of the European countries to be maintained in hard times or in crisis!).

October 11, 2008: If you're interested in Swiss Franc Government Bonds, here is a recommendation from WikiAnswers. This brief note recommends EuroPacific Capital. Its C.E.O. and Chief Global Strategist, Peter Schiff, is a long-term US dollar bear who saw the present economic meltdown coming years ago. EuroPacific Capital is a secure and well-managed company, and I can certainly vouch for the reputation of Mr. Schiff, whose articles on the mismanaged US economy I have been reading for years on Safehaven.

While I am currently recommending gold as a superior store of value to the Swiss Franc, gold trades as both a commodity and a currency, with the result that its market price is much more volatile. If you are a long-term buy-and-hold investor, gold will certainly outperform the Swiss Franc as a long-term store of value. But if you don't like $100 price moves in a day (gold has had two such moves in the past month - including only yesterday!), then holding the Swiss Franc may prove less unsettling.


  1. How cool to get a reply from someone like him!

  2. After 5 years, it was definitely a pleasant and somewhat unexpected surprise!