Hello Euro

Here's some advice for our pals across the pond whose paychecks come to them in pounds and euros instead of dollars and peanuts like mine. It's time to start investing in US stocks. What you ask? Are you crazy? The US is headed into (or is already there) a recession. The sky is falling...lions, tigers, bears, oh my!

Now that you've had a second to catch your breath, let's discuss why this makes sense. It's quite simple when you think about it really. The dollar has lost significant value when compared to a basket of global currencies (i.e. the pound/euro). What that means to our pals across the pond is that they can buy US investments on the cheap right now. A nice one or two year cycle of periodic purchases into a well diversified, US equity based index/mutual fund should reward our comrades nicely as the dollar eventually appreciates and gains ground on foreign exchange rates. Not to mention this is a great way to 'harvest' some of the implied gains (and hedge the downside exposure) associated with folks who have foreign denominated cash. Now, if I could just get my employer to pay me in yen I could do the same thing.....

Steve & Warren's Piggy Banks

If the dollar was a nursery rhyme character it would be close relative to Humpty Dumpty. Anyone that's followed the crash of this once great currency during our current administration has seen our global purchasing power disintegrate before our eyes. It's certain that it's going to take more than 'all the kings horses, and all the kings men' to put the dollar back together again, but it's also certain that the dollar WILL appreciate again. When you ask? If I knew that I'd be holed up in some eastern European castle driving some car I've never heard of and dating a super model whose name I can't pronounce. Fantasies aside, there are some things we common folk can do to take a stab at a currency play without having to pledge our first born as margin collateral for an FX account. Let's look at a couple of cash rich companies that will inevitably be worth more when the dollar starts its uphill climb.

Apple (AAPL) is currently sitting on a cash balance of $18.45 billion or ~$21/share. If the dollar appreciates just 5% (it's lost 10.5% against the yen in the last 6 months) this would add an additional $1 billion in purchasing power. That's a significant boon to an already strong company and already strong balance sheet.

Berkshire Hathaway (BRK.A) is sitting on a whopping $47.08 billion in cash. For a company that makes headlines and moves markets when it decides to go on a spending spree this war chest will spell opportunity once the dollar cooperates. Anyone that's read the 2007 shareholder letter has a sense of how Warren and the boys were able to capitalize on the dollars decline. The same opportunities to capitalize when it rally's will exist.

So the next time you're at a black tie nose turned up dinner party and some hot shot from New Haven talks about his new Ferrari that he financed with a leveraged put on the dollar remind yourself that his currency play doesn't allow him to sleep at night and yours does.