Friday, July 10, 2009
3, Issue #62
Get the names of my favorite two "oxy-coal" stocks here.
Living in Canada, I see first-hand
the impact of the falling U.S. dollar. From 2002-2007, the
Canadian dollar soared uninterrupted over its stateside
Over that time, it usually cost me less and less to purchase
anything in U.S. dollars... whether it be investments or even
vacations. Even though I was spending the same amount of money,
my Canadian dollar simply went further in the United States.
If you're living in the U.S., don't fret. You can take advantage
of the same phenomenon by investing abroad. And if you're an
income investor, you'll find that your dividends can soar
because of it -- even if the underlying company doesn't raise
them a cent.
However, with the onset of the
financial crisis, the trend reversed. As economic crisis spread,
investors parked cash in still safe-haven U.S. Treasuries to
ride out the storm. As a result, during the height of the
financial turmoil -- July 2008 and March 2009 -- the U.S. Dollar
Index soared +24%.
trial of our live e-mini futures trading room.
But now the long-term
downtrend seems to be reappearing as the fundamental reasons
for the dollar's prior decline have been dramatically
amplified in recent months. The U.S. government has been
borrowing and spending like never before. The Obama
administration estimates budget deficits will soar to $1.84
trillion in 2009 and $1.26 trillion in 2010.
And as panic from the financial crisis has waned, dollars
are flowing out of dollar-denominated assets like Treasuries
and into foreign investments once again -- even though some
of those foreign countries have debt loads and credit
ratings that are worse than the United States'. The U.S.
Dollar Index has already fallen -10% since March, and that's
good news if you're investing abroad for income.
Falling Dollar = Higher Income
By investing abroad, you'll see your dividends increase in
dollar terms as the U.S. dollar falls.
For example, between July 2001 and April 2008 the dollar
lost -46% of its value relative to the euro. Let's say over
that time a European stock paid 5 euros a year in dividends.
In 2001, you would have received just US$4.20 in exchange.
But after the dollar fell, that same 5 euro payment would be
converted to US$8.00 in 2008 -- an increase of over +90%,
even though the actual payment didn't increase by one cent.
Investing abroad isn't as exotic as it sounds, either. Many
foreign companies trade right on the NYSE. They simply make
dividend payments in their native currency and then
translate them over to dollars for U.S. investors. In
addition, several full-service and discount brokers offer
direct access to foreign exchanges denominated in foreign
Either way you go, as the dollar declines, your income and
the value of your dividends will increase in dollar terms.
And given how enormous deficits and continued foreign
investment will take their toll on the dollar, this boost
could happen sooner rather than later.
If you want to take advantage of the falling dollar, you
might like CPFL Energia (NYSE: CPL). I'm looking at the
Brazilian energy giant right now... it already yields a
whopping 7.8% based on payments totaling about US$3.70 in
the past year. And over the past four months, the dollar has
fallen about -20% against the Brazilian real. If that
continues, you'll see even higher payments from CPFL in
-- Carla Pasternak
P.S. -- My July issue of High-Yield International is now
available . In it, I share some of my favorite ways to turn
the falling dollar in your favor, including a list of 10
star performers from around the globe. You can get my issue
just follow this link.
Additional Investing Ideas
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