What goes up when the dollar goes down – MoneyWeek

Buthowcanyoubenefit?

Anyindividualorbusinessearningmoneyinarisingcurrencyand/orspendingmoneyinafallingcurrencystandstogainfrommovementsincurrencyprices。

ThatmeansBritishtouristsshoppinginNewYorkaresetforaverymerryChristmas,whereasAmericanswholiveinEuropebutgetdollarsalariesfromtheirUSemployersarefeelingmuchlesscheerful。

Foressentiallythesamereason,Americanexportersgainfromaweakerdollarbecausetheirgoodscostforeigncustomerslesstobuy,sotheybuymore。

Similarly,firmswithsubsidiariesincountrieswithastrongercurrencywillbenefitwhentheirprofitsareconvertedbackintodollars。

Withthisinmind,GoldmanSachspointstoAccenture,with44%ofearningsnon-dollar,Flextronicswith41%,andHewlett-Packard,alsowith39%。

Allstandtobenefitfromstrongforeignearnings。

Butremember:UKinvestorsconsideringbuyingdollar-denominatedshareswillinevitablybeexposedtotheweakeningdollarthemselves。

Ifthedollarcontinuestofall,thesharescouldendupworthlessinsterlingtermswhentheycometosell,evenifthedollarstockpricehasrisen。

Thatmeansthismaynotbethebestwayfornon-USinvestorstoapproachthefallingdollar。

BuyEuropeintheshortterm

Instead,oneshort-termwaytoapproachtheproblemmaybetoconsiderhowthebigglobalinvestinginstitutionsmightreacttothefallingdollar,saysBenWright,writinginTheBusiness。

AccordingtoStateStreetGlobalMarkets,equityinvestorsarealreadystartingtopullmoneyoutoftheUSandpouritintoequitymarketsintheeurozoneinsteadwithaviewtoearningmoneyineurosnotdollars。

Andtheirtargets?

Companiesoperatingintheeurozonewithnoexposuretothedollar。

ThatmeanswecouldseeupticksinthesharepricesoffirmssuchasthelargeFrenchbanksBNPParibas,SociétéGénéraleandCréditAgricolewhichearnmostoftheirrevenuesdomestically。

BanksintheNordicregion,ItalyandGermanywillalsobenefit。

ThesameistrueoftheEuropeanutilitiesandtelecomssectors,whichtendonlytohavedomesticrevenues。

MerrillLynchanalystDavidBowershasalsoscreenedforthecompaniesthatusuallydobestwhentheeurostrengthensagainstthedollar。

Europeanfood,utilitiesandreal-estatecompaniesdominate,withBelgium’ssupermarketoperatorColruytandelectricitysupplierElectrabeltoppingthelistandbrewerHeinekenfurtherdown。

ThesearesomeofEuropes“mostdefensivestocknames”。

Concentrateonyieldlongterm

Thecompaniesthatwillgainthemostwillbethosethatspenddollarsbutearntheirmoneyinnon-dollarcurrencies。

Thatmeansthatsensibleinvestorswillcontinuetoseekouthigh-yieldplaysthatpayinsterlingorineuros。

Actlikeamulti-nationalcorporationbuyhigh-yieldinginvestmentsintheUKorEuropewhilespendingasmuchaspossibleinAmerica。

Yourincomewillgoupasyourexpensesgodown。

Already,American-madeproducts,realestateandvacationsaremuchcheaperthantheywereayearago。

IntheUK,thatmeanslookingtotheUKandtotheutilitiesandfinancialsectorsinparticular。

UnitedUtilitiesstillyields8%,SevernTrent5。

4%,LloydsBank7。

9%andFriendsProvident7。

9%。

ThosesterlingyieldsaregoingtolookparticularlygoodwhenyouareoutandaboutshoppinginNewYork。

Buygold…

Almostalleconomistsagreethatthedollarmustgodown,saysTheDailyReckoning’sBillBonner。

Butagainstwhat?

Europe’smoneysupplyisactuallyincreasingfasterthanAmerica’s。

InBritain,thebroadmoneysupplyisrisingtwiceasfastasAmerica’s。

Andeverymajorcentralbankintheworldiscommittedtokeepingitscurrencyfromrisingtoosharplyagainstthedollar。

Butifthedollaristogodown,ithastogodownagainstsomething。

Thatisprobablygoingtobegold,theworld’soldestandmostreliablemoney,theanti-dollar,thenaturalrivalofallpapercurrencies,andthethingtowhichinvestorsturnwhenothercurrenciesletthemdown。

Thisyear,thedollarhasfallenfastagainstgold,andmostlikelygoldwillcontinuetoriseasthedollarfalls。

Andifthedollarslideturnsintoadollarcrisis,goldcouldsuddenlysoar。

Theinflationcrisisofthelate1970sdrovegoldupmorethan2,000%injustfiveyears。

Adollarcrisiscouldhavethesamesortofresultespeciallyifitwerelinkedtoinflation。

Anomen?

USproducerpricesrose1。

7%inOctoberthebiggestincreasein14years。

…andcommoditiestoo

Butevenbetterthangold,saysinvestmentlegendJimRogers,arecommodities。

RogersthinksthatAmerica’shighlevelsofdebtwilleventuallyforceacrisis,whichwillinturncauseinvestorstolosefaithinUSstocks,bondsandthedollar。

Instead,theywillwantrealassetssuchascommoditiesandthatwillpushthepriceup,especiallyascommoditiesaretypicallyquotedindollars。

Butthere’ssomethingelsepushingupcommodityprices。

Cotton,sugarandcoffee,saysRogers,aresellingathistoricallylowprices。

Whilepricesarelow,demandisgrowingrapidly。

AsAsiagetsricher,itsconsumersspendmore。

Butconsumeritemsincludingfoodcannotbemadewithoutrawmaterials。

AccordingtoRogers,commodities,thecompaniesthatproducethem,andthecountriesthatexportthemwillbebigwinnersintheyearsahead。

Theirpriceswillgoupindollars,butthey’llalsoriseineveryothercurrencytoo。

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