Oslo, Norway

This is my second visit to Norway since May. Oslo is a great city and a superb walking town. Just 100 meters from my hotel is the Norwegian Parliament building and from there a great “Handler Ømradet” or shopping area littered with all sorts of interesting things to see and buy.

I’ve always been fascinated by Scandinavia and its rich history. I first visited the Nordic region in 1996 when I established a private banking relationship for my investors in Copenhagen. Today, that relationship has grown as Jyske Bank Private Banking represents about 20% of my total assets under management.

I’m in Norway this week to explore asset management potential. This is a country where investors get into bed with foreigners very slowly, especially after the Bernie Madoff fraud and other international fiascos. Norwegians take their time before making an investment – something many of us can learn from to avoid painful and costly mistakes later.

Norway's currency now ranks as one of this year's best-performing major currencies in Europe and isn’t far behind the Brazilian real for the world’s top currency title. In 2009, the Norwegian kroner is up about 10% and has appreciated 8% against the EUR. The British pound has surged 12% in 2009 but only after crashing in 2008; the pound remains a bad bet over the next several years amid a flood of debt issuance to finance its almost insolvent banking sector.

In a world laced with debt-infested currencies the kroner probably has the best balance sheet. Norway is sitting on bulging trade surpluses – mainly because of oil and gas exports – and is home to the world’s largest national pension scheme valued at roughly $350 billion dollars. If you’re looking for a model currency then Norway fits the bill. The country has a positive trade balance and a budget surplus. This is why the currency is strong.

The U.S. dollar, of course, has been heading to the relics of history since Nixon closed the gold window almost 38 years ago this summer. With the exception of a few big counter-trend rallies in the 1980s and 1990s, the dollar has been progressively hitting newer lows every decade. No wonder; out of control spending, two military conflicts and a seemingly never-ending budget deficit don’t bode well for the American dollar. Yet despite all of this overwhelming data the dollar might just be at the cusp of another big bear market rally.

Longer term, no rational investor can make a compelling for the dollar. Yet it seems plausible that if the United States was the first to enter a hard recession in December 2007 that it might also emerge out of recession before any other country, except China and India. The dollar has been pounded over the last few weeks and is oversold. I’m also not so sure why the EUR and other currencies are rallying because they’re just as bad. Yes, the dollar is a total drunk but so are her other trading partners; it’s just a question of how much each currency has consumed at the bar. Since last year it’s been Happy Hour – everyone is piling on debt.

The dollar is therefore likely to post a major counter-trend rally this summer or fall – fooling a lot of investors. This is especially true if the stock market and other risky investments begin to falter again; the dollar would recover rather quickly as short positions are rapidly closed.

As profit-taking eventually sets in this summer I suggest unloading dollars for Norwegian kroner and Canadian dollars. I don’t especially like the EUR or the Swiss franc. I also think most Brazilian assets, including the real, are overbought. The Aussie and kiwi are okay but Norway and Canada offer stronger balance sheets. I’m also a long-term oil bull – something Australia does not produce, unlike Norway and Canada (oil sands and natural gas).

Don’t dump dollars now. At some point later this year or even this summer investors will have another chance to sell dollars for NOK and CAD. Also, don’t forget about gold, which is also likely to crack and possibly test $900 or $850 before finally breaking the $1,000 an ounce level for good. Gold is by far the best monetary value (no one else’s liability) in a world filled with currency drunks, bulging deficits and ultimately, serious inflationary consequences once central banks kill deflation.