There’s nothing more beautiful than Vienna in the summer. There’s also nothing better than waking up to Viennese coffee…
The best coffee in the world, in my opinion, is in Vienna. The Austrians borrowed from the Turks during the 17th century amid two Ottoman invasions and walked away with their own version of coffee – now popularly served in Viennese coffee houses worldwide. Basically, the Austrians took Turkish coffee and added sugar and milk to the mix.
And though ardent coffee drinkers like their Joe black, I still prefer the Viennese version.
I usually have one or two cups of coffee per day. But this morning, I had five. The coffee on-board Austrian Airlines from Toronto to Vienna was tops – and coffee on airplanes usually tastes like battery acid. For the record, the food on Austrian Airlines is the closest thing to edible I’ve found on numerous carriers to Europe.
On Monday, I met with several local banks, including Valartis Bank Austria, formerly Anglo Irish Bank Austria. Valartis, which is a Sovereign Society Convenient Account member bank, is one of the few banks among the privacy domain still accepting American clients.
The Swiss, of course, have largely abandoned U.S. business since UBS opened the bank secrecy window this summer under fierce pressure from the United States (though we keep in close contact with a few reputable Swiss banks that will still accept your business).
Still, even the Austrians have recently relented on bank secrecy. It seems the world is heading in this direction as the infamous numbered account eventually goes the way of the dinosaur.
To be sure, Austria hasn’t been spared from the global financial crisis since 2008. The banking system has indeed survived, but with the crucial assistance of government deposit guarantees – not unlike the rest of the euro-zone.
And, like other countries (including even mighty Germany) Austria has also struggled to raise government debt financing as some auctions have been reduced or cancelled since last fall. Germany, by far one of the most liquid government bond markets in the world, saw four auctions either scrapped or reduced in late 2008.
Smaller Austrian local banks have recovered nicely in 2009 as earnings rebound, including Valartis Bank Austria. But larger banks with loans tied to Eastern and Central Europe are still struggling.
These include Bank Austria Creditanstalt AG and Erste Bank AG. Both banks, the largest in the country, have big loans outstanding to their Eastern neighbors; capital markets in nearby Eastern Europe have calmed down since the March lows but a sense of nervousness still plagues the banking sector in this country. Most believe this is a lull and not a market bottom.
Still, despite the regional headwinds facing Austria, I remain bullish.
This is a stable democracy, rich in culture and dedicated to market stability. It’s still a largely conservative country. At some point in the future I expect leveraged markets in the region to finally bottom and that should set the tone for another round of prosperity for Austrian banks and industrial companies. But in no way have we seen the bottom in late 2009.
Fond of All Things Swiss (Except UBS)
I’m often asked where I would live if I had to leave Montreal. And my answer for years has always been the same: Switzerland.
The world’s most famous Alpine country offers a high quality of life, clean air, great views from virtually every corner of its borders and a first-rate transportation system.
My favorite city in Switzerland is Zurich, but other visitors prefer Montreux, Geneva, Basel or Lugano – depending on what appeals to you most. Basically, you can’t pick a corner of this country without being overwhelmed by its raw natural beauty.
Unfortunately, Switzerland’s image has been badly tarnished by the UBS, or Union Bank of Switzerland, fiasco over the last 24 months. If there’s one institution that has served to hurt the Swiss brand amid this financial crisis it’s undoubtedly UBS.
UBS was probably one of the worst managed banks in the world before the credit crisis ripped apart its balance sheet. Management has been a disaster with wave after wave of bad news and write-downs plaguing this once venerable Swiss financial icon. Today, UBS ranks on par with some of the worst managed banks in the world. Its glory days are gone for good.
But let’s keep things in perspective.
What’s bad for UBS has been great for its rival across the Paradeplatz on the Bahnhoffstrasse – Credit Suisse. The latter has been a major beneficiary of UBS’s woes and has largely escaped the credit crisis with shrewd management of its loan book and investment banking unit.
Though UBS has been an utter disaster for Switzerland, other banks, especially smaller institutions have remained true to their clients and continue to attract capital.
Sadly, Americans Shown the Door
But, on a sad note, Americans have largely been shown the door as the Swiss rid themselves of U.S. depositor liability since the beginning of the year.
Some Swiss banks still accept American business (and we can get you in touch); but the primary trend is obviously on the way out as U.S. investors find it increasingly hard to establish an asset base in Switzerland following the UBS tax scandal.
Despite the fallout over UBS and its unruly co-operation with the IRS, Switzerland is still home to an estimated one-third of global offshore deposits. On the other hand, the end of tax dodging for many depositors in this country might also reduce that proud capital base.
Finally, after spending time with some of my friends and colleagues in Zurich last night, you’d never believe the Swiss were victims in this historical financial crisis. Apart from UBS, the financial sector has been hurt but not devastated like the City of London.
Unemployment remains below 5%, real estate office vacancy rates are still low and residential real estate prices remain very expensive. The cost of living here is also still expensive. If there was a correction in Swiss-based assets it was felt only in the Swiss SMI Index, or the stock market – and nothing else.
I’m still very bullish on Switzerland. I always have been. And I eat my own cooking. My largest individual holding in my retirement plan in Canada remains Néstle SA.
Switzerland is still a compelling destination for your assets. In a world gone almost mad over the last decade, this nation still exudes financial responsibility, safety, conservatism and remains a bastion for asset protection purposes.