Portfolio Upate: Long Swiss Franc

Our fund just opened some long contracts on Swiss Franc earlier this morning. If you a regular follower of this blog, you might remember that back in late July, just before Swiss Franc crashed from its dizzy heights, I argued extremely hard against buying the currency (Article: Swiss Franc At Extremes & Currencies: Swiss Franc Love Is Everywhere). We have now opened a very small position with a tight stop loss, as we anticipate a reversal of the trend in the Franc either here or very soon down the track - which means we might try again later if unsuccessful here.

The reason for our favourable Franc outlook is due to changed times. What followed after those articles above was a peg by SNB linking the currency to the Euro at $1.20 minimum rate. Swiss Franc sold off all across the board and fell a whopping 31% in August and September against the US Dollar. However, only strong language has so far been used to devalue Francs amazing gains. Has the market tested this peg with its full force and might? No, not yet, but it will soon!

While this might not the bottom just yet for the Franc, various sentiment survey's I follow show that speculators, traders and investors are now so bearish on the Swiss Franc, that this type of uniformity and agreement for it to fall further has not been witnessed for at least a decade according to my data. Therefore, a small position is at least worth the risk for its reward right now and as the trend starts to eventually change again, I will be adding some real decent positions. On the other hand, the love affair with the US Dollar is now towards multi year highs in sentiment readings - I already warned about this last weekend (Article: Weekly Recap: October 2011, Week I).

Currently, majority of the investments have been small speculative trades with risks of a 1% of the capital within our fund. Nothing serious to write home about really. Our cash levels are growing from both revenue made in our private business connected to mining as well as recent returns as we caught crashes on both Gold and Silver. I've also received specific questions, which seem to be very similar in nature from a lot of readers, so I would like to answer these on the blog as well as individually.

Why is your cash position so large and why not short something?

Currently we are 98% cash, but in Australia we earn 6% interest to sit and wait for the right time to invest. In other words, our central bank does not punish savers and actually admits there is inflation, unlike US and UK. Therefore, we aren't forced to speculate on consistent basis or enter dangerous short positions with large amounts of capital.

What are you most bullish on and what will you be buying next?

1.) That depends on the time frames. In the short to medium term I like the US Dollar still, but for example in the long term, I think it will be a total disaster to hold your savings in Dollars.

2.) I also like the whole Agriculture right now including both Grains and Softs. I am actually thinking of deploying first real proper chunk of our capital into Agriculture very soon, especially if we sell off further down in coming days or a week.

3.) I almost shorted the Treasury Long Bond earlier this week, but since we still have risks from both EU and China, I think we are not yet at the final top. But we could be much much closer than before. I'm still got my finger on the trigger here, but not yet ready to shoot!

4.) Finally, while I think Gold and Silver might drop further or at least consolidate in the short term to medium term, over the long term Silver will go so much higher into triple digit territory.