These have certainly been interesting times for the U.S. dollar. That's why we thought our readers would find interesting the outlook on the U.S. dollar and European stock markets from a European perspective. We decided to interview Robert Vrijhof, a principal in the firm of Weber Hartmann, Vrijhof & Partners Ltd. of Zurich, Switzerland.
Q. Let's get right to it. Where is the dollar going relative to the Deutsch Mark and Swiss Franc?
A. Today (mid-August 1997) the dollar is trading at Deutsch Mark 1.8650 and the Swiss Franc at 1.5230. We think it's going higher in the short term. We would not exclude a rise for the Deutsch Mark to levels of 1.90 to 1.95 over the next three to six months.
Q. And beyond that?
A. At those levels, we would be very close to a peak. In the medium term -- twelve to eighteen months -- you're going to see the Deutsch Mark back to levels around 1.70.
Q. The recent 30% rise in the U.S. dollar caught many professionals by surprise. Did this mean large losses for your clients?
A. No. As you know, we do not normally hold U.S. dollar positions, but emphasize positions mainly in Europe and the Far East. However, we make it a point to be hedged against a rising dollar. We have been hedged since the beginning of the year, and most of our accounts show a gain in U.S. dollar terms since then.
I mention this to illustrate a point many American investors miss. They think that once you are out of the U.S. dollar, your fate is secure. In fact, we feel strongly that once you are out of the dollar, the real job actually begins. This is why we argue that those globalizing assets should engage a professional portfolio manager, such as our firm.
Q. What is the outlook for investors with all their wealth still in U.S. dollars?
A. The situation today offers the best opportunity in years to start diversifying. Of course, no one knows just where the exact peak for the U.S. dollar will be, but the dollar is quite strong for the moment and those who act soon will cash in on this strength. As other economies gain relative to the modest growth of the U.S. economy, no one will be surprised to find a much weaker U.S. dollar in the years ahead.
Q. Where is the investment area of choice today?
A. We see exciting investment opportunities in such markets as Holland, Germany, and, of course, Switzerland. We have reached a fascinating point in time which offers rare opportunities to begin international investing. Once more, regardless of where you invest, we believe it's essential to have an independent asset manager. This means a broader range of investment prospects as the asset manager is free to choose from all existing banks. When you rely on a single Swiss bank, you normally find it promoting its own products. They are no doubt good products, but an independent asset manager is in a position to evaluate such products objectively.
Robert Vrijhof is Senior Partner of
Weber Hartmann Vrijhof & Partners of Zurich, Switzerland.
Copyright © 1997
The Investor's Library has reprinted this copyrighted article from the October, 1997 issue of Information Line with the permission of the copyright owner, Asset Strategies International Inc.