Moody’s Downgrade – Should I Leave Euro Now?
Moody’s is at it again. The ratings agency has just downgraded 11 European Banks and says there will be further to come if Greece decides to leave the Euro. Let’s be straight about this, Moody’s doesn’t in itself guide anything, it reacts to market sentiment, that’s what makes this event so worrying. It also included one Dutch bank which has been marketing itself as a platform of strength and stability in Ireland, Rabobank. This will be a source of worry for Irish investors.
Things are, indeed, getting very tetchy in Euroland and many people are considering a safe haven in the storm.
It once again springs the question that’s been on everybody’s lips since the start of this whole European malaise a few years back – should we have our cash and investments somewhere else?
It’s a difficult question to answer but, to turn it on its head, would you be happier if you had €200k in savings in an Irish bank (or most other European banks, with the possible exception of some of the stronger German ones and one or two others) or the equivalent in a Swedish bank (approx. SEK2m – not an exact calculation but the Swedish Kroner generally trades between 8 and 11 to the Euro)?
Personally I’d be sleeping a lot easier if it were in a strong Swedish bank or high quality investment. Just to be clear, Sweden has a few banks that were exposed to the Euro downturn due to pursuing property portfolios in Estonia in particular during the boom, so all Swedish banks are not on an equal footing.
In any case, I feel that the answer to this question is the answer to your question. If you feel in any way that you’d be happier if your money was resting in the solidity of Swedish Kroner (or Swiss Franc for that matter) then it is probably time to look at your investment portfolio and see just how badly affected you would be if your savings were cut in two (which could happen in the event that a two speed Europe were to emerge from this crisis).
My own obvious preference is for property, I value it highly as a grower and generator of wealth and consider it a great investment play due to the ability to borrow against the asset, but I understand that it is not for everyone as it is an illiquid asset class, particularly if an economy turns (and all economies turn at some stage, it is the nature of capitalism).
I am currently working with some colleagues to see if there is a possibility to set up some simple mechanism for transferring Euro based funds into Swedish equivalents for a period of time (many people are looking for a 3 – 5 year investment timeframe to ride out the storm which is a bit too short for property in general).
I have just returned from Sweden following some promising discussions on the issue with a number of institutions.
Watch this space, I’ll inform you if there are further developments.
In the interim, if you want to know a bit more about Swedish property, you might take a look at this article.
