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How a Falling Dollar can
Make Americans Rich
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Published:
December 26, 2007
Compared to the S&P's +7.5% gain this
year, one of the most popular foreign benchmarks -- the Morgan
Stanley MSCI Europe, Australasia Far-East Index, or EAFE -- is
ahead +12.8% in U.S. dollar terms.
What's driving these international stocks to new heights?
Economic growth is the main force -- the International Monetary
Fund (IMF) forecasts the world economy will grow more than +5%
this year, slowing to a still healthy +4.8% next year. However,
the U.S. economy is expected deliver economic growth of around
+2.0% this year, and that figure should fall in 2008.
That's a marked decline from the +4.2% growth it posted in 2004.
Then there is the falling dollar. As the U.S. economy cools and
the Fed continually cuts interest rates, investors are moving
capital out of Treasury bonds and into foreign assets -- helping
to push them higher. And as a result, foreign currencies are
continuing to strengthen against the U.S. dollar. The U.S.
Dollar Index, which measures the value of the greenback against
six major world currencies (the euro, Japanese yen, British
pound, Canadian dollar, Swedish krona, and Swiss franc), is down
nearly -10% this year.
The good news for U.S. income investors is that a weaker dollar
translates into stronger returns from overseas investments. For
example, ADR
shares of Italian utility Enel are trading at around
$58 per share and provide an annual dividend of about $3.40.
The share prices and dividends of Italian stocks are based on
the euro. Right now, the euro is worth $1.46. That means EN's
share price is equivalent to about
39 euros and its dividend
equates to about 2.32 euros.
Going forward, suppose the dollar weakens, and one euro is now
worth $1.61. Since Enel's share price is based on euros, its
value would increase about +10% in U.S. dollars. EN would now be
worth about $63.65, and its annual dividend would jump to $3.74.
And keep in mind this takes into account no dividend increases
or share price appreciation -- it is just the effect of currency
exchange. Considering that shares of Enel have risen about +15% in the last year, your returns would likely be even more.
As you can see, investing in international high-yield securities
can add an extra zip to your income stream. That's why I focus
only on foreign securities paying
the best dividends in my new
newsletter,
High-Yield International.
Whether they be in China, Italy, Brazil, or some other far-away
destination, we make it our duty at
High-Yield
International to seek out the companies and securities
paying the richest dividends. So while your friends may be stuck
with the diminutive yields offered in the U.S. (the S&P 500
offers an average yield of only 1.7%!), you'll be earning a rich
income stream and outsized returns by looking abroad.
And we've prepared a
complimentary special report to give you a taste of our new
international income-investing service --
High-Yield International. Read it today and we'll
reserve your spot on our "V.I.P. List," giving you the
opportunity to save an additional $100 off the already
discounted charter rate. Only V.I.P. members will be entitled to
this discount, so make sure you're on this list!
Visit this link to join the
High-Yield International V.I.P. List and get your
complimentary report.
Nick Lanyi
Editor
High-Yield International
About High-Yield International
High-Yield International is
a monthly investment newsletter focused on bringing subscribers the
highest-yield securities in the world. By focusing solely on those securities
trading outside of the United States, this newsletter offers a host of relatively
unknown investment options that you probably won't find coverage of anywhere
else.
Many of these securities provide investors with annual dividend yields of 10%,
15%, even 20% or more, while also outperforming the major U.S. averages.
About Nick Lanyi[includes/bios/lanyi.htm]
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