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How to Easily Diversify Your Wealth Overseas... and Collect Super Safe IncomeBy
Tuesday, May 3, 2011
If you want to "escape" the plummeting U.S. dollar, you have to travel to a banking haven like Switzerland... or own foreign real estate, right?
Wrong.
In the special DailyWealth "wealth protection secrets from Switzerland" series last year, I contributed one of my favorite "escape the dollar" wealth protection secrets... one you can take advantage of immediately, from the comfort of your living room.
All you need is an Internet connection and a regular brokerage account... and you're ready to participate in one of the easiest, safest ways to diversify a portion of your wealth out of the depreciating dollar... and into safe, income-producing assets. As I'll show you in a moment, this strategy is bringing in cash for many readers...
Once again, here it is:
For folks worried about diversifying their assets out of U.S. dollars, one of the greatest ideas in the world is to own America's best dividend-paying companies that earn a big chunk of their profits in foreign currencies.
It doesn't matter what currency the company is making profits in – Russian rubles, Swiss francs, Chinese yuan, Indian rupees, euros, and all kinds of other currencies work just fine. U.S. multinational companies earn their profits in foreign currencies and then convert them into annual dividends.
Owning big U.S. blue-chip multinationals gets you exposure to rapidly growing emerging markets... and still gives you plenty of "sleep at night" peace of mind that your investment is in a stable company with a long track record of performance... operating under a developed legal system that protects property rights... and subject to reasonable regulations.
My favorite example of this idea continues to be the quintessential American brand: Coca-Cola (NYSE: KO).
You know Coke is the No. 1 beverage company in America. But what you probably don't know is, Coke sells the No. 1 soda in China: Sprite. Sprite is the No. 2 sparkling beverage in India. While the per-capita consumption in both countries is 15% of what it is in the U.S., most beverage experts believe consumption will grow faster in the Asian nations. Coke sells nearly 3,300 beverage products worldwide... and gets most of its revenues (77%) from outside North America.
Coke has used its "all over the world and in all major currencies" business model to pay $11.4 billion in cash dividends to shareholders and purchase $2.6 billion in stock over the past three years. Currently, the stock yields just under 3%, and the company is sitting on an $11 billion hoard of cash. I wouldn't be surprised to see it increase dividends or buybacks.
Big blue-chip multinationals have the ability to pass increased input prices on to consumers. Plus, they offer dividend yields in the 3%-5% range... so I see them as great inflation hedges as well (even better than gold). We're not seeing any inflation at the moment, but if you're worried it's coming, these companies are a great place to park some of your wealth.
With the dollar striking new multi-year lows almost daily... with folks worried sick over inflation... and with income one of the most important factors in the success of your overall portfolio, this idea has never been more important.
Here's to our health, wealth, and a great retirement,
Doc Eifrig
Further Reading:
Last fall, we brought you a series of "from your living room" wealth protection ideas. Revisit this series now for tips on how to store, protect, and grow your nest egg...
Our government is deeper in debt than ever... a little asset protection (some of it outside of the jurisdiction of the U.S. government) could go a long way...
For the maximum in wealth security, your gold storage plan should have both a domestic component and an offshore component.
Waiting until disaster strikes and then trying to transport a few dozen (or hundred) ounces of gold on your person is asking for trouble... and it likely would be illegal.
You won't hear about this wealth protection strategy on television or in the newspaper... But it's the easiest way to instantly protect your wealth from what's happening in the U.S.
If you're interested in a dollar hedge and large dividends, you should know what's going on with one of Buffett's favorite stocks...
Market NotesWHAT YOU DON'T KNOW ABOUT RISING GASOLINE PRICES When economists list potential threats to business growth, rising gasoline prices are usually at the top.
The common talking point here is that every one-cent rise in the price of gas takes $1 billion from U.S. consumers. And baby, gasoline is rising... priced in U.S. dollars, gasoline has gained around 40% in the past year. The national average is around $4 per gallon.
But regular DailyWealth readers know there are always two sides to a price. On one side, you have the asset, service, or product being measured. On the other, you have the measuring "unit." The trouble with measuring assets in dollars right now is that the measuring unit is worth less and less each day.
How about gauging gasoline's price action in a durable currency like the Australian dollar? While the Australian dollar is no absolute safe haven, the country has managed its finances better than the U.S. Plus, Australia's dollar is heavily backed by awesome deposits of natural resources like natural gas, iron ore, uranium, and gold.
Below is a three-year chart of gasoline in the eyes of an Aussie. As you can see, when measuring gasoline in a durable currency, we see the fuel is up modestly in the past year... and has actually declined in price over the past three years. Want to protest high gas prices? Protest the plummeting dollar!
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