The steady slide of the US dollar over the last couple years proved an earnings boost for many US companies selling goods overseas in local currencies, while reporting the revenues in dollars.

But recently, as the dollar has reversed course, growing in strength against the Euro and yen, I feel a new look at the implications of a stronger dollar is needed to ensure you're not on the backend of dollar recovery implications to your investments. With the economies of Europe and Japan sinking toward recession, I believe the dollar has more reason to gain momentum, and it's time for a fresh look at what the dollar will do to your investment portfolio.

Any boost to the markets from a weak dollar may be fleeting, but as the dollar gains strength, I'm keeping a watchful eye on the consequences of a stronger dollar to the markets in general and your investments in particular - both here and overseas. On the Silicon Valley front, a flood of Q2 earnings reports would have painted a far worse picture were it not for the weak dollar, especially for tech- stocks. Overbought multinationals - are also due for a correction if the dollar strength continues.

Indeed, the dollar's steady weakening has helped improve revenues for US-based tech companies over the past two years, and even companies with non-US currency sales reported a boost when booking their sales into dollars. In Q1 and Q2 the euro and yen appreciated nearly 16% each against the dollar, sending revenues soaring. But over the past two weeks, as the dollar's long slide reversed, the lift anticipated for Q3 for many of the tech companies will be less than half what it was in Q2.

I'm studying the dollar's reversal of fortune and I expect to have at least one reco later this week based on my insights and intel from my staff. Given the exchange-rate shift, for instance, many previous estimates on revenue outlook are now probably too high. The larger a company's non-US.S. exposure, the more risk that current estimates will need to be revised downward.

As mentioned in a recent Barron's article reflecting on the strengthening US dollar, hardware behemoths Hewlett-Packard Co. (HPQ), IBM (IBM) and Sun Microsystems (JAVA) all generate more than 60% of their revenue outside the US and may be vulnerable to the currencies strengthening. Note that IBM's growth would be negligible without the gain from the currency and share repurchase due to a stronger dollar.

But I have a few other potential trades which may work even better - both to the short and long side - as the dollar strengthens, so stay tuned.

US multinationals aren't looking so good anymore as the dollar sustains its climb on weak oil revenues and stock prices

As well as tech stocks, overbought multinationals are due for a correction so, as I see their pilots calling the tower for descent vectors, I think now is the time to short some of these multinationals before their shares -- once strong as based on the weak dollar (until now as the dollar rises) -- don't belong in your portfolios. Since the dollar's substantial newfound strength, while showing its durability as a world currency, has changed some sectors of the investment landscape over the past few weeks, and how this plays out among potential investment targets is the subject of my recos later in the week.

Remember, the odds are impriving that Q2 earnings reports for many of these companies will disappoint shareholders, institutional fund managers and everyday investors, the latter group who will likely be among the last to move out of US multinationals and gain the least from this short. A bet against those companies could mean profits but as it's no easy task to compile a list of recos, I'll spend the next couple of days studying the landscape and I'll have that list ready by week's end... so stay in touch.

One potentially bullish arena which could benefit from the strong dollar: Multinational Banks without much exposure to the US sub-prime market. Watch for more details on at least one of these soon.

Best wishes,
Jeff Manera

G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net