Oslo, Norway.

Depending on your outlook for the global economy and corporate earnings over the next 12 months, Norwegian stocks are either a great buy or a timely sell. In my view, the investment-grade corporate bond market looks far more attractive – especially for dollar and euro based investors.

From an all-time high of about 520 in June 2008, the Oslo Børs or Stock Exchange has declined a cumulative 45%. Recently, the stock market broke above its important 200-day moving average – as did many foreign markets, including the S&P 500 Index. And despite offering attractive multiples and decent dividends the stock market remains hostage to events in New York; the Norwegian market was hammered last summer and along with the kroner (NOK) suffered a dramatic decline in just weeks.

Another correction or stock market plunge in the United States will undoubtedly drive equities lower here, too. The correlation between New York and other major economy remains high and diversification in the worst of economic times is almost futile. We all digested that fact in 2008 – the worst year for stocks since 1937.

Government bonds in Norway are not cheap at this stage, particularly the shorter end of the curve. The entire yield curve is fairly valued and offers little in the scope of additional gains with four-year Norwegian government bonds yielding 3.15% and trading north of NOK 112.

It’s another story altogether for investment grade Norwegian corporate bonds.

Many mid-sized to large-cap Norwegian companies now yield about 5-6% and some even north of 7%. Even better, many issuers are still trading below par value.

For example, Størebrand A/S, Norway’s second-largest insurance company, has a May 2012 issue selling at NOK 97.56 and yielding 5.03% or roughly 182 basis points more than comparable Norwegian government bonds. For dollar based and euro based investors – two screwball currencies with poor fundamentals, the NOK looks far superior.

If you’re looking to add some NOK to your portfolio I’d consider waiting for a correction in oil prices. Norway is mostly about oil. If prices come down this summer then the NOK will follow south. The NOK has already gained about 10% against the dollar and 8% versus the EUR in 2009. The dollar is also oversold and might rebound sharply, if only temporarily.

Yet here’s the primary reason why I like the NOK more than any other currency over the next five years: Norway has a superb balance sheet. The country’s current account balance as a percentage of GDP is a whopping 10.5% compared to 4.4% for Germany, 6.9% for China and 7.5% for Switzerland. Its trade balance stands at $70 billion dollars compared to big deficits as far as the eye can see for the United States, England and several other large European economies.

In a nutshell, strong fundamentals support the NOK – unlike most other currencies.

Of course, gold has outpaced the NOK and other currencies since 2005. I still prefer gold more than any other paper currency in the world and cling to my view that we’re probably approaching the next phase of this economic crisis as currency chaos envelops the United States, Europe and other sovereign nations. The global exchange rate system is sick and largely dysfunctional with crashes, devaluations, revaluations now a regular event since 1992.

Gold is completely outside of the credit system and is not a liability to the investor – unlike fiat money. Also, with central banks cutting rates aggressively the cost advantage of owning gold continues to improve.

Still, we can’t just sit on gold. As the U.S. dollar musters some additional strength this summer in another bear market rally consider selling the buck, euro and most other currencies for the Norwegian kroner, the Canadian dollar and gold. These currencies should lead the charge forward in the future namely because of their commodity wealth and strong balance sheets. Also, the Chinese yuan is part of this special club but only once it becomes fully convertible.

I’ll be in-transit tomorrow from Oslo. See you on Thursday.