Time to look at US dollar assets

Now it may be churlish of me to suggest that the ECB is saying one thing and doing something else, but the $1.30 to the euro barrier has yet to be breached and for good reason. This level for the euro is suicidal for the anaemic European economy where recovery is measured in fractions of a single per cent and not jobs.

On the other hand, for holders of euros, or sterling, and perhaps even yen, this is a great moment to be buying up US dollar assets on the cheap. That might be a villa in Dubai, or UAE equities, or a US mutual fund or US technology stocks.

The trick surely is to buy an appreciating asset on the cheap in euros, and then get a double whammy from rising asset prices and a strengthening currency. Let us take the last point first, why should the dollar get stronger?

Well some kind of a US economic recovery in an election year is one answer. A more cynical view is that interest rates must have bottomed out and that rising inflation will soon send them higher - blame it on higher oil prices if you like. And higher interest rates will restore the greenback to its former glory within 18 months to two years.

No matter that this may also happen at a time when the US falls into a post-election recession if George Soros is correct. However, this does mean that the sting in the tail of this investment strategy is that you have to buy the right category of US dollar assets to win.

Wall Street, for example, could take a nasty tumble if inflation picks up and interest rates head back to more normal levels.

So what could you buy? For stocks the presently unpopular oil and petrochemical sectors might be a nice place to park some funds as a contrarian - although oil prices would eventually come under pressure in a US downturn.

Emerging market stocks in dollar-linked economies are another option, though valuations look heady in many places. Real estate too looks rather highly priced in the US, UK, Australia, Ireland, Spain, Portugal and the Netherlands according to The Economist.

Let me be a real bore and suggest that putting cash aside in a US dollar account might be a nice play on a dollar recovery with little downside risk.

If the less optimistic side of this forecast then comes true you would be in a nice position to buy US dollar assets at depressed prices, and a recession is a great time to go shopping for stocks and real estate, so long as you actually have the cash to hand and have not got wiped out by a false recovery.