Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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As Investors Flee The Dollar for Safer
Alternatives, Australia Presents An Ideal Candidate |
Published:
June 11, 2009
Have you checked your bank statements lately? What you see just
might shock you.
With the Federal Reserve slashing short-term interest rates to near
zero, money markets, CDs and other interest-bearing accounts are paying
next to nothing. One of my banks is currently offering a paltry 0.25% on
ordinary savings -- thanks, but no thanks.
And as any first-year economics student could tell you, you're actually
getting even less than what's quoted after the nominal rate has been
adjusted for inflation. Should prices for everyday goods and services
tick higher, every dollar sitting in these low-yielding accounts might
actually be losing money in real terms.
Regardless of where your assets are parked, the prognosis is for
inflation to heat up at some point -- that's the price that must be paid
for loose monetary policy and trillions in government spending. And
while the financial crisis has helped prop up the U.S. dollar in this
time of uncertainty, it seems likely the greenback will resume its slide
once the crisis has passed.
With that in mind, I think it's a smart idea for most people to have at
least a modest percentage of their assets denominated in something other
than U.S. dollars -- gold is one idea, and currency-based funds like
this one from Rydex are another.
Essentially, CurrencyShares Australian Dollar Trust (NYSE: FXA) acts as
a type of synthetic foreign money market fund. The fund holds Australian
dollars in an interest-bearing bank account in London, using part of the
proceeds to cover a 0.40% annual price tag and then disbursing the rest
to shareholders.
Interest rates have come down almost everywhere, but the portfolio is
currently earning about +2.1% and monthly distributions stand at $0.14
per share. Of course, those payments will be augmented whenever the
Australian dollar is gaining strength on the U.S. dollar.
And as I explained in my profile of Aberdeen Australia Equity (NYSE: IAF),
the odds for a stronger Aussie currency are good.
After sliding to a 5-year low of $0.60 last October amid the unwinding
of the Yen carry trade, the Australian dollar has come racing back. And
it's easy to see why.
Australia has seen a flurry of upbeat economic data recently, from
healthy job creation to robust retail sales growth. Plus, Australia's
resource-driven markets are benefiting from a broad recovery in China
and the anticipation of stronger energy and metals exports. In the
meantime, first quarter GDP climbed +0.4% -- a far cry from the
precipitous drops in most countries.
Against that backdrop, the Aussie dollar touched a 9-month peak last
week of $0.82 -- about +35% above its lows. Meanwhile, in addition to
its monthly payouts, FXA shares have bounced from $60 to $80.
FXA shouldn't be considered a substitute for a risk-free bank account;
the shares will fluctuate. And I don't recommend currency speculation
either -- Australia's own economists were just caught off guard by a
surprising trade deficit, the first in nine months.
However, Australia's short-term interest rates are near 3% -- the
highest of any developed market in the world. And with rates already at
a 50-year low and the economy stabilizing, I don't see much in the way
of additional tightening. That should help keep the Aussie dollar one of
the world's most favored currencies.
Good investing!
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Nathan Slaughter
Editor
The ETF Authority, Half-Priced Stocks
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in-depth guidance on today's leading exchange-traded funds (ETFs), plus
a proprietary ranking system designed to uncover today's most
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Disclosure: Nathan Slaughter
does not own shares of BRF.
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Investing Doesn't Get Any Easier Than This |
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