So the next question is where can I avoid getting killed since the whole world is blowing up? People keep asking me this. Also there is some kind of idea that because not all currencies can go down together (true) it doesn’t matter where you are (false).
In the US and the UK, there are totally unsustainable borrowing profiles which are politically extremely hard to shift in a democracy. Much of the US budget is entitlement spending; an operational leverage effect that results from that means that any serious cuts have disproportionate effects on the remaining programmes. I still like the US in general because it has the world’s most dynamic economy and the politicians may be smarter than the population and understand that cutting back on immigration is rather bad demographic economics. But you can’t really park there.
In the UK, we have bizarrely just lost the Chief Secretary of the Treasury to a rental payment scandal in which one cannot be sure that his treatment would have been identical had he been heterosexual. He was looking very credible at cutting sufficiently to retain the Aaa rating – which is essential if this borrowing profile of a rather insane £156bn p.a. can come off with some kind of glide path down rather than a hard stop – but we now have the former Press Officer for the Cairngorms who will presumably be just as effective at putting The Fear into Work and Pensions and their £230bn annual spend.
So no GBP and no USD. EUR? Well, there’s Greece. And Spain. And now Hungary. So forget it. It might make holidays cheaper again, but that’s the only benefit.
All three of these problems have a long way to go before being resolved.
So nothing is left, right? No – there is Norway. Seriously. Why?
They have no government debt and so they do not pay interest on it – cf. UK annual debt service £43bn.
Even more amazingly, they have saved their oil revenue in a big pension fund worth about $443bn. They own about 2% of equity in Europe.
The NOK has a number of great things going for it, including the huge pension pot, but also: it isn’t the EUR, the GBP or the USD.
So what should you do? Well, you could just buy the NOK and sit still waiting for the rest of the world to crater. You would probably make out in local CCY terms. But there are proper companies there doing serious things you could look at. These two have NYSE listings:
NYSE Technologies Global Market Data | as of 17:08 ET 03 Jun 2010 | Market data delayed
Name Symbol Listing Last Trade Date/Time Volume Change % Change
Seadrill Limited SDRL NYSE $ 21.20 03Jun10 16:48 ET 1,262,094 $ 0.41 1.97
Statoil ASA STO NYSE $ 20.96 03Jun10 16:02 ET 2,038,401 $ 0.35 1.69
You can guess what they do.
So you could even sit there and gain from any NOKUSD strength without lifting a finger or going to Oslo.