What does Safe Haven mean in these troubled times?

We find ourselves yet again in a crisis and are reminded that some perspective is needed.  From CNBC at the end of last year.

The S&P 500 has returned more than 50% since President Trump was elected, more than double the average market return of presidents three years into their term, according to Bespoke Investment Group.

After that the equity market took the advice of Jeff Lynne and ELO as 2020 began.

And you, and your sweet desire
You took me higher and higher, baby
It’s a livin’ thing

Whereas a few minutes ago Bloomberg tweeted this.

European equities are poised for their worst week since the 2008 financial crisis.

So ch-ch-changes and another clear reminder of this came from Bloomberg as recently as the 20th of this month.

Virgin Galactic climbed again to a record high, defying analysts who say the stock is overdue for correction

We can stay with the theme of the man who fell to earth because since then the share price has halved from $41.55 to $21.30 after hours last night.

If we take this as a broad sweep ELO were on the case it seems.

It’s a terrible thing to lose
It’s a given thing
What a terrible thing to lose

Where can you go?

Japanese Yen, Swiss Franc and Euro

You may be questioning two of those so let me explain. If you look back in time I wrote quite a few articles on the “Currency Twins” the Yen and the Swissy. This was because they were borrowed heavily in before the credit crunch and people rushed to cover positions as it developed. This was equivalent to buying them and they surged building a safe haven psychology. Although it was more minor there was some of this in the Euro as well.

If we move forwards to now the simplest is the Swiss Franc based as it is in a country which is considered safe and secure, hence the demand at times of fear and uncertainty. The Swiss National Bank has returned to selling the Swiss Franc recently to try and keep it down. Switching to the Yen the main issue here is the large size of Japanese overseas private investments. At times of uncertainty the fear is that the Japanese will start to repatriate this and push the Yen higher so markets shift the price just in case. The Euro is not quite so clear but the area does have strengths as for example its current account surplus. Also at times like this it gets a bit of a German sheen as well.

You may have noted an interesting similarity here. This is that all these three currencies have negative interest-rates and I have posted before that there are avenues ahead where the SNB will cut to -1%.

US Treasury Bonds

There are two factors here of which the opening one is the effective reserve currency status of the US Dollar. So you can always buy commodities and the like in US Dollars with no risk of devaluation or depreciation. Next comes the fact that bonds offer a guaranteed return as in you will always get your nominal US $100 back as well as some interest, or if you prefer yield or coupon. So you get both the reserve currency and some interest, hence the knee-jerk rush into US Treasuries at a time like this.

The problem is the old familiar refrain that things aren’t what they used to be. In particular you get a lot less yield now as for example both the two and five-year yields have fallen below 1% overnight. I have chosen these because in a safe haven trade you tend  buy short maturity bonds. But it is also true that longer-dated bonds do not offer much these days as even the ten-year Treasury Note has seen its yield fall below 1.2% now. Some events here are contradictory because the two-year future is up 27 ticks this week and whilst that is really rather satisfactory for those who got in early it should not move like that if you are looking for stability. You do not want Blood Sweat and Tears.

What goes up must come down
Spinnin’ wheel got to go ’round
Talkin’ ’bout your troubles it’s a cryin’ sin
Ride a painted pony let the spinnin’ wheel spin

Some of the logic above applies to other bond markets which have soared too. Although in some cases the logic gets awkward because both the German and Swiss bond markets have yields which are negative across all maturities. So here we are back to the currency being a safe haven and such a strong one that people are willing to accept increasingly negative yields to take advantage of it. My home country the UK has seen Gilt yields plummet too as a combination of factors are in play. The irony is that the safest UK  haven which is RPI linked Gilts already were extremely expensive and frankly having little relationship with inflation which seems set to fall in response to the present crisis.


This is something of an old curiosity shop in these times. In general we have seen a gold price rally which continues a phase we have been noting in recent months. But it is also true that just when we might have expected it to rally rally further the price of gold fell backwards.  There are an enormous number of conspiracy stories about gold and its price but for out purposes it is something of a patchy safe haven. Our favourite precious metal was of course “The Precious! The Precious! ” in Lord of the Rings but in our world the central banks give that title to other banks.They however are most certainly not a safe haven as we learn more about the use of the word “resilient ” by central bankers.


Let me add another factor in the safe haven world which is timing.If you had movd into any of the markets above earlier this week you would now be doing rather well. This comex with an implication that prices and levels matter which often gets forgotten in the melee and excitement.

There are also other winners which get given temporary safe haven status at times like these.For example those producigface masks or involved in teleconferencing.  I have to confess I had a wry smile at the price of teleconferencing companý Zoom rising as it did not work on my laptop when I tried it for Rethinking the Dollar.

Apologies to those affected by a blog misfire earlier as Windows 10 played up again.

8 thoughts on “What does Safe Haven mean in these troubled times?

  1. Hello Shaun,

    Q:What does Safe Haven mean in these troubled times?

    A: a return of some of your money , not a return on your money ….


  2. UK Gilts were once considered as good as real money could get, but alas due to endless devaluations by the Bank of England since WWI it is now always one of the hardest hit majors when any thing like the current panics emerge, to counter this you would think(traditionally and historically) that the coupon(interest rate) would be relatively high to compensate for this guaranteed loss on maturity, but hey this is the new normal where you lend a bankrupt country like the UK your money at a rate of interest that is a fraction of the real uncounted inflation and as if that were bad enough, you also lose your capital since on maturity you get back less than you paid for it.
    A double loss, less than inflation interest and less than the purchase price on maturity, both of which are also reduced by inflation over the time you have held it as well, today the UK 10 year is yielding 0.43% and the 5 year(used for mortgages) is 0.32%.

    Central banks will soon be announcing programmes of massive stimulus – i.e money printing soon to prevent their bubbles from deflating and further cuts in rates, which will achieve absolutely nothing but re-inflate asset prices, the real economy will be slowly dying as the money supply in it dries up, but that will only lead to more calls for further intervention.

    I previously thought the central bankers would crash the market to get Trump out, but this Corona virus could just be an opportunity too good to miss for them, they have the perfect excuse for the markets crashing – its the virus not us! AND they get rid of Trump, since he has foolishly claimed ownership and credit for the stockmarket bubble.

    • Hi Kevin

      This evening’s close in the US stock market where it went from heavily down to up on the day in the last 5 minutes or so suggests that briefly fear of the Corona Virus was overwhelmed by fear of being short into central bank action. Looking at bond markets they are pricing in at least a 0.5% move by the US Federal Reserve and maybe 0.75%. The problem is that it does not address the problems we face.

  3. Not sure Japan is a safe haven. Its handling of the virus has been astonishingly incompetent. And its cold there at the moment, which is good for contagion.
    Still on China’s doorstep in Thailand, and the only increases in recent positives were 3 returning from Japan. Its about 90F and flu-type viruses don’t like heat, or high humidity or increased IR from the sun. So after sending home literally millions of Chinese in January after their New Year, the number of cases has barely moved, now 40, no deaths and majority recovered. It is inconceivable that with the number of Chinese in the country that there were not many Thais ( and visitors) infected. However no-one knows because they were all very mild. All Thais know that flu comes from China every year, it seems this year has been no different in severity.
    Which makes one ponder about the mindless, headless ‘precautionary principle’ led panic now ensuing across the globe.
    There is seriously something sick about human society and its nothing to do with covid-19.

    • Agree, flu viruses emanate mainly from China due to the way they rear pigs and chickens together, considering the misery of flu and the shear number of deaths worldwide it is simply mind-boggling that there isn’t massive pressure being put on the Chinese government to change their methods, but the silence is deafening.

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