Subject: Re: OT: Currency diversification
Couple of thoughts

I wouldn't say the CHF is the only truly safe currency. One potential inconvenience is that, because it is SEEN that way, the level and interest rates are often being "wagged" by the international currency market demands. There is also the issue of what would happen if UBP blew up, as I think their balance sheet is bigger than Swiss GDP.

So, NOK is an alternative to consider. The Norwegian Krone might move up an down a bit more (or not), but one certainly couldn't argue that it isn't a safe currency...the Norwegian government is not exactly broke. Their historical problem has been what to do with all the money, so the sovereign wealth fund owns on average 1.5% of every listed company in the world. The interest rate isn't bad, either.

Personally I put a fair bit of money into sterling. The interest rate is currently excellent (though I don't expect that to last), and the currency has been doing better than some of the UK economy might lead you to expect. In trade weighted terms, the pound has been rising slowly and steadily for 8 years now. Admittedly I do have some expenses in pounds, so it makes a tiny bit more sense for me than for some others.

Another thought: don't pick based on interest rate, pick based on quality as a store of value, which might mean a mix. ("always minimize maximum regret"). Remember the maxim never to reach for yield, and it applies here to a certain extent.

If the currency you pick doesn't offer a good yield, there are ways to "create" a yield with a bit of work. e.g., at Interactive Brokers (and I assume many other place) you can use cash in one currency as security for US dollar derivatives. Say you'd like to pick up Berkshire at 1.35 times book...would repeatedly written puts at a low strike, backed by cash in a safe currency, give you the yield you want? If your puts get exercised you will (briefly) be given a USD loan to cover the shares you were just forced to purchase at a great deal. The next day, do the FX to convert your "safety" currency to USD, and you own some stock with a nice entry. It's not really income, in that you are also making a decision to conditionally purchase a stock, but it doesn't take much return to make a low interest rate into a pretty good one in the mean time. Random example from yesterday, admittedly an unusually fantastic day to start this, a June $415 put would probably get you a premium of $6.75, which is a return of 1.65% on the capital committed, which is 8.9%/year to add to whatever rate your cash pile is earning, or an entry at 1.356 times current book. A September put at $400 would get you a premium of $8.10 for an entry price of 1.30 times current known book, or a rate on cash committed of 4.7%/year, again added to the interest rate you're earning on the cash.

Jim