Falling Dollar Benefits Large U.S. Multinational Companies
The Dynamic Wealth Report
March 3, 2008
Make Lots Of Money From A Falling Dollar?
Who would want the US Dollar (USD)? This is a question investors and
traders ask themselves all the time. The US Dollar continues to fall and
nobody can see the light at the end of the tunnel. Look at the chart
below. This is an index of the US dollar against a basket of currencies. It makes me want to yell “Pull-up, Pull-up!”
Clearly, nobody wants to hold US Dollars.
This truly looks horrible. The fall in the dollar has been highlighted
by several journalists as the end of the great US economic system. Believe it or not, they’re wrong (journalist can’t be wrong, can they?). The falling US dollar is actually a good thing for the economy, the
financial markets, and especially the mega-capitalization stocks that
make up the S&P 500 and Dow Jones Industrial Average.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
But, before I tell you why, here’s a little background.
About 2 weeks ago, I argued that a falling dollar is good for the US
economy in my article “Can A Falling Dollar Be Good For The Market?”.
Until now, many investors were relying on the decoupling of the US
markets from the rest of the world. Decoupling is a myth. The impact of
a slowing economy in the US will hurt other economies around the world.
As the global economy slows, investors will seek a safe haven for their
investment dollars. The US markets have traditionally been the best safe
haven in the world. The flood of money returning to the US will seek out
investments like stocks, bonds, and real estate. This has already
started to happen with recent investments from sovereign wealth funds.
Something even better!
The flood of money back into the US markets is going to help the economy
over the long term. But, right now there’s a benefit to the falling
dollar. In a word - exports.
The biggest benefit of a lower dollar value: US products are less
expensive in global markets and foreign imports become more expensive.
Think about it this way. If you run a business and your competition
suddenly has to charge more for its products, you would be happy. You
could be more aggressive competing for business and you would capture
more market share, eventually making more money.
This is exactly what’s happening for every multi-national business based
in the United States. Take any fortune 500 company, or any company with
international sales for that matter. They can charge less for their
products overseas and still make a profit. Or better yet, they can
charge the same and make more profit.
Not bad if you ask me - but there’s more.
The falling dollar gets even better. It also works for the benefit of US
companies selling products domestically. Foreign competitors who sell
product domestically must raise prices just to keep profits the same.
They have a choice, raise prices and risk losing customers or charge the
same and risk losing profits. Either way it’s great for US based
companies.
Improved price competition leads to better market share and higher
profits. Both are positives for the company. With business metrics
improving, the price of the stock can’t be too far behind. I’m sure the
hawks in Congress are loving every minute of it . . . but I doubt you’ll
ever hear a politician actually support a weak US Dollar.
How to profit.
This, for once, is easy. Look for large multinational companies that
have US production and significant exports. Almost any
mega-capitalization stock that makes up the S&P 500 and Dow Jones
Industrial Average would qualify. Clearly, you want to focus on those
with strong products and good growth. In this market, I’m partial to
pharmaceutical companies. These companies will probably benefit the most
(especially in a recessionary environment).
For our options traders out there, we’ve been testing a new investment
system that is based on options on currencies. Early results have been
extremely promising. We plan on rolling out the full version of the
system sometime in the next several weeks. Keep an eye out!
• Mobile Telecommunications (Down 21%)
The Mobile Telecommunications industry has been hit hard recently. Major
announcements for new pricing plans created profitability concerns.
Sprint-Nextel’s (S) $23 billion write-off didn’t help either.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map