Are Swiss Frank Denominated Fixed Annuities a Rational Investment Now?
December 26, 2010 by
Filed under Silver Investment FAQ
These would be from Swiss annuity companies or banks. They would pay a fixed monthly sum, but in Swiss Franks not dollars. For example, a 55 year old man buys an annuity from Credit Suisse and pays cash for it now $250.000 USD. If he lives, but only if he lives to be 75 years old, he will get 3,500 Swiss Franks per month for the rest of his life. If he dies before reaching 75, his entire investment is completely forfeit. It’s not inheritable, It’s not transferable. It can’t be paid off with a lump sum payment. He can’t back out of the deal. It’s basically a bet. He’s saying he doesn’t want to be old and poor, so he’s betting that he will live to be 75 and then collect lots of monthly payments after that — maybe 20 years worth. The company says, they will take the bet, in exchange for his cash right now today, they will promise to pay out at the fixed rate per month if he lives long enough to start collecting, and they will pay as long as he lives — in Swiss franks.
The Swiss Franks, of course would arrive at the annuitant’s bank account, and then his bank could arrange to have them changed into US dollars. If the dollar goes into hyperinflation he would be protected, by getting a lot more dollars every month for his swiss frank income.
Swiss franks a currently backed by gold. Gold mining is falling worldwide. The global supply of gold (unlike US paper money) is fairly constant.
By rational investment I mean in comparison with: U.S. Treasuries, TIPS, Stock Funds, Bond Funds, Real Estate, Gold/Silver, or strategic metals (chrome, indium, platinum, rhodium, tungsten).
By rational I mean in accordance with reason, prudence, sound judgment, wise policy, and smart investing.
By “now” I mean by the end of 2009 — assuming no radical changes in the business environment or economic prospects for USA, or for the US dollar.
The Swiss Frank is a very stable currency and probably will hold its value far better than the dollar over time. The current exchange rate is currently almost par. 1.059 CHF+ $1. I remember a time when there were like 4+ CHF to the dollar. However you are betting that you will live a long time so the investor should be in excellent health and not over weight. Also note that you get nothing for 20 years. It probably is a poor investment unless the person lives to be 95+.