I was sitting in the center of Europe last week, in Zurich, Switzerland, talking to the managing partner of an investment firm about the fate of the embattled euro.
He told me, “Europe is not sure where it is going at the moment, and no one is talking the same language when it comes to figuring out a solution.”
It’s a message I heard echoed in the numerous conversations I’ve had with investment managers, bankers and asset-protection experts in Switzerland, Liechtenstein and Denmark.
The euro is a mess, they told me. And no one is quite certain how to fix the problem.
After all, when one party has all the responsibility – think, Germany – and the other parties generally take on very little responsibility – insert Greece, Portugal, Ireland, etc. – you end up with a situation where divorce seems inevitable.
Only, no one wants to talk about divorce for fear for scaring the kids … in this case, investors.
Me? I think divorce is all but assured in the euro zone. And the only way to protect against that likelihood is to own exposure to Switzerland.
When the Euro Goes, Go to Switzerland
I don’t know when Europe’s divorce will happen. If I had to venture a guess I would say we’ll see movement along this front within the next three years or so.
But it is destined to happen.
Germans, already burdened by the unification with the former East Germany, have been carrying too much of the euro’s load. At some point the Germans will reach a pain threshold and will scream “Nicht mehr!” No more!
When that day comes, the Germans will talk with France, Finland and likely the Benelux countries about building a new currency – a northern euro or, a better name that recalls the solid Deutschmark, the euromark.
For many of today’s euro-denominated assets, particularly stocks, the divorce will likely be catastrophic.
But in the middle of that potential tempest sits Switzerland and its historically granite-like franc.
Two Swiss Blue-Chip Stocks to Own
Switzerland has always served as an island of neutrality when wars and other geopolitical crises erupt. And for eons the franc has been one of the world’s safe-haven currencies that investors flood into during times of unrest.
In the event of a euro breakup, the franc will be the island of stability in Europe that investors flock to for safety.
And that means large Swiss stocks are where you want some of your wealth.
Owning Swiss shares not only gets your money outside of the U.S. dollar, it puts you into a highly-developed and stable economy (Switzerland), in the middle of the world’s largest consumer base (Europe), yet you’re not exposed to the troubles still to befall the euro.
There are two key Swiss companies you should look to own: ABB Ltd (NYSE: ABB) and Syngenta (NYSE:SYT).
Both are ginormous Swiss blue-chips. ABB’s market cap tops $50 billion … Syngenta’s exceeds $30 billion.
ABB is a global leader in all manner of industrial-automation processes, and serves customers in electric, gas and water utilities, among others. In short, it’s an infrastructure play at a time when both developed and developing markets are pushing to improve various aspects of their infrastructure.
Syngenta, meanwhile, is an agribusiness giant. Its products, including its bioengineered seeds, improve crop yield – a crucial benefit at a time when rising demand for food is leading to the crisis now unfolding in North Africa.
Making Money When the World Panics
As an investor, it is impossible to sidestep all the crises that happen.
But you can increase your odds of surviving – and even profiting from – those events by having some of your wealth in the right location.
When it comes to the pending demise of the euro as we currently know it, having some of your wealth buried on a very safe island like Switzerland is the way to avoid the euro risk … while still protecting against the long-term decline of the U.S. dollar.
Until next time, keep a global view…
Editor, Emerging Market Strategist