Cash is king in a recession!

'In a recession cash is king'. It is an old saying and not without some wisdom. For when a recession strikes then asset prices fall - shares, real estate, just about everything you can buy - and the person with cash to hand can take advantage.

So if you are pondering how to invest your millions, perhaps the best option right now is simply to open a deposit account with a Triple A-rated bank. How can it be so clear that the future is not rosy?

For a start consider the business cycle. In the US stocks have been moving higher for four years, a downward cycle of similar length might logically be expected as business goes in cycles and not in upward straight lines.

High oil prices - $71 a barrel at the time of writing - and rising US interest rates are clearly not positive factors either. Moreover, alongside the present high asset prices are equally huge debt levels which tend to act as an upward multiplier in the good times but also act as a downward multiplier of ill-fortune.

Worldwide there thus appears to be combustible mixture gathering in capital markets, too idle and complacent to smell what is under their nose.

If nothing else the ordinary investor ought to perceive that there is a high risk in doing something with their cash now which does not justify the potentially modest rewards. It is safer and more logical to sit on your cash, and wait for cheaper markets.

Should this advice prove premature - and it might well - then you still will not have missed much as even super-bulls have modest expectations of the investment outlook today. The important thing is to keep capital intact while others are losing theirs, and to live to invest another day.

That time will come. Share prices will be lower. House prices will be at dream levels. Shops will be full of bargains. All this investment strategy requires is a dose of commonsense.

There might even be a nice twist for US dollar holders. The US dollar is weak because of a large trade deficit which a recession would solve by slashing US imports. It could be that the US dollar would rally considerably under such circumstances, particularly as the downturn in the US as an export market would cripple its competitors.