In my latest CNBC appearance I share my worries about inflation. With so much money being "printed" by the Federal Reserve we will almost certainly experience high inflation as soon as all these cash injections will hit the market. Hard to say when but this is a really worry. In some countries prices are increasing and, even if in theoretical terms interest rates are very low, banks are still not lending as much as they should.

I am also pointing out that in many makers, particularly the Swiss one, there are screaming opportunities. Some examples:
some regional banks like Banque Cantonale Vaudoise (the State bank of Canton Vaud where Lausanne is the capital) experienced a good 20% increase in the last month Even big banks like UBS had some stunning rallies of 50% in one month as it went from 10.67 Francs, an all time low, till well over 15 Francs of today.

Pure luck or ? Whilst printing money is not the solution to this problems some banks, like UBS, are not meant to go down forever. At the current low valuations some banks (like BCV and others) still pay an healthy dividend. With the cash return on Swiss Francs below 1% (that is, if you want to be safe you are not going to earn more than this in most banks) it might be well worth looking at bargain banks with a long term horizon.

Another important point is that Switzerland isn't America. Mortgages in Switzerland are very healthy and the real estate market is all but a bubble. The demand outpaces supplies in many big cities like Zürich and Geneva. A Swiss mortgage, mostly due to its tax treatment, lasts approximately 100 years (or more, in some cases the mortgage doesn't have to be closed at all) and hence the mortgages fees are very low.

How is this possible? Assume that you want to buy an reasonably big apartment (120 Sq. meters - 1200 sq. foot) and the price is 1 million francs (it will cost that much or more in Zürich). First and foremost you will need 20% cash. There is basically no way to get a mortgage without this 20%. Secondly you will need a salary at least 3 or 4 times higher than your mortgage burden.

So assume you buy this flat at 1 million, you will make a mortgage for 800,000 CHF. At the current variable rate of 2.5% you will need to pay only 1666 Fr per month of interests and 208.33 Fr of amortization for a total of 1875 Fr (such an apartment will cost at least 3000 CHF if you rent it). The issue is that with 3000 CHF per year of principal payment it will take you 266 years to pay back the 800,000 in full.

This model is unique to Switzerland and based on the fact that, as soon as you buy this apartment, your tax burden will increase of the notional renting value of that property. So back to our 1 million apartment: if the notional renting value established by the tax office is, as an example, 30,000 CHF per year, you will be paying approximately 7000 CHF more just because you own that property. On the other hand if you do have a mortgage you will deduct the interests in full and hence you might offset the 7000 CHF extra in taxes.

If you pay the property cash you will be losing 7000 (or more) francs per year based on the current Swiss tax system.

With long term mortgages (basically infinite) and a renting market (only 30% of Swiss residents own their property) defaults are very, very rare. Getting a mortgage is not an easy deal and something you can only dream of if you do not have the 20%, have a valid residence permit and an appropriate salary.

In Switzerland we do not have cheques, overdraft credits and credit cards are paid in full at the end of the month - hence used mostly as charge cards. In this environment the banks are making money almost exclusively with commission and mortgages that, as explained, have a very low risk profile in Switzerland.

Given this picture Switzerland is specialised in managing money. And it is very good on doing it. Many of the regional banks have no exposure to the subprime mess and their risk profile is fairly low. Even UBS and Credit Suisse have certainly learned their lesson. In the current climate they are avoiding all the risky deals and focus on what they do best: manage money. At the current valuations many of the Swiss banks are screaming opportunities.

I have also affirmed that oil won't remain at 50 forever. Just today it had a 10% increase and with the OPEC cuts around the door I do see oil price on the raise in 2009.

Is printing money a good solution ? No it is not. But managing money was and is a good business. Swiss banks are very positioned in this market and are here to stay for several years ahead.