By Eric Roseman, editor, Commodity Trend Alert
As I look at the world’s major economies, all I can see is a bar full of drunks.
Whole drunk economies, who do nothing but sit at the bar and guzzle shots of stimulus like only true alcoholics can.
And who’s behind the bar, serving up stimulus shots like its last call?
Why central bankers of course. Bartenders like Bernanke and Trichet have been “serving” since late 2007.
Sadly, it doesn’t look like this worldwide party bar is going to close anytime soon.
So what happens when these whole economies get so drunk that they start to trip over themselves? What happens to the rest of us stuck holding currencies from these drunken nations?
Let’s put it this way. It’s not going to be pretty.
The best thing you can do is hold the one “sober” currency left in the world. As far as I’m concerned, it will be the last currency standing when this stimulus finally exposes the drunks for the reckless nations they are.
Don’t believe me? Let’s take a closer look at the facts…
41 Out of 43 Countries Now Drunk on Debt
Each week, The Economist magazine tracks the economic statistics of 43 nations.
Amazingly, only two countries in that universe sport twin surpluses or positive trade and budget balances. And of those two, only one country makes that special grade in the OECD or the Organization for Economic Co-operation and Development.
That country is Norway.
No other country among the world’s mature or even emerging economies can claim twin surpluses. That’s huge.
It’s important because drunken nations are now fighting sovereign debt crises in the EU. These countries are fighting with the market as bond investors continually demand higher rates to take on their risk debt.
As you may know, I’m a commodity guy myself. I usually look at energy companies, food items and precious metals for the long term.
But in addition to owning gold and a basket of commodities for diversification purposes, my favorite currency remains the Norwegian krone.
It’s no doubt the last currency standing in a world full of drunks.
Again, the Norwegians have the only positive trade and budget surpluses in Europe. More specifically, the krone is the only currency in the western hemisphere to sport a trade and budget surplus! That’s enough to put it on my buying list.
But then you must take into account that Norway is a major oil exporter.
I’m bullish on oil, and longer-term I think natural gas will make a comeback. And Norway just happens to be the largest oil and gas exporter in Europe and the ninth largest producer in the world.
That makes the Norwegian krone an oil play.
In fact, the performance of the krone is highly tied to not just oil revenues, but the cyclical nature of the global economy. The currency also shines thanks to Norway’s fiscal surpluses and Norway’s strong external account.
But there are other reasons to love the krone as well…
Twin Surpluses Reign
Norway is the only nation in the world that has a 9.4% budget balance as a percentage of its gross domestic product (GDP). And its trade balance represents 13.1% of GDP, according to The Economist.
Those are impressive numbers, especially in a world drunk on debt.
On top of that, Norway’s sovereign wealth fund (that’s mostly oil profits) manages more than US$500 billion in assets and ranks as the biggest in Europe.
Combined with the bullish outlook for oil and gas over the long-term term, Norway is a great place to park some currency diversification.
Indeed, in a world full of drunks, the Norwegian krone seems to be the only sober currency left that’s not drunk on its own debt. Go long the Norwegian krone now to profit.
Best Regards,
Eric Roseman
Editor, Commodity Trend Alert