Economic Crisis: The Dollar Is Crashing: These Four Execs Are Laughing…
Take a look at the list below…
- David Taylor, CEO of Procter & Gamble
- Jeff Immelt, CEO of General Electric
- André Calantzopoulos, co-CEO of Philip Morris
- Louis C. Camilleri, co-CEO of Philip Morris
They’re all smiling as the U.S. Dollar breaks down.
You see, ever since topping in December, the value of the U.S. Dollar has been trading lower. And as this trend picks up momentum, it will send shock waves throughout the global economy.
So why are these four execs celebrating? Let’s talk about what’s happening with the greenback…
The Dollar is moving lower as it becomes clear that the Fed is less likely to aggressively hike rates this year. In Fed announcements and minutes, Janet Yellen has made it clear that the Fed will be very cautious going forward.
Yellen is worried that raising interest rates “too soon” will hurt the modest growth in the U.S. economy. And with so much uncertainty in the market this year, I wouldn’t even be surprised to see the Fed resort to lowering rates in the not-too distant future.
As the market comes to terms with a more cautious Fed, the Dollar is sinking.
The reason is simple. For years the market has been waiting for higher interest rates. And higher interest rates strengthen the U.S. Dollar — after all you’d have to pay more to borrow it.
But the opposite is true with lower interest rates. With rates expected to stay lower for longer the outlook for the Dollar weakens.
You can see the start of the U.S. Dollar’s breakdown in the chart below.
The Dollar is heading downward… and that makes a certain subset of executives giddy.
It’s not because these executives relish the lower value of the dollars in their bank accounts. No, it’s because a weaker U.S. Dollar will boost profits for their respective companies. (And in turn, their executive compensation, their stock options, and their corporate empires will all increase in value.)
Here’s how it works…
Most investors don’t realize that a weak U.S. Dollar actually benefits American companies that do business overseas. But the truth is, a weak Dollar actually does wonders for companies who sell products or services to international customers.
There are two major reasons why a weak U.S. Dollar helps these companies…
First, a weak U.S. Dollar makes American companies more competitive. This is true for companies that sell products around the world, for service companies that have customers in other parts of the world, and for any U.S. business that generates revenue in non-U.S. currencies.
Think about a company that sells aircraft engines to an international customer base.
This company has expenses associated with each engine it produces. For simplicity sake, let’s say that it costs $1 million to produce an engine, and the company targets a $1.2 million selling price. This way the company can turn a profit on each engine it produces.
In December, one euro could be exchanged for $1.04 in U.S. Dollars. So to generate $1.2 million in revenue, our company would need to sell an aircraft engine for roughly 1.15 million euros.
But look what happens when the Dollar breaks down and it costs $1.08 to buy a euro.
Now, to collect $1.2 million in U.S. Dollars, the company only needs to sell each engine for 1.11 million euros. Even with the lower price point, the change in currency rate still gives our company plenty of Dollars to turn a profit.
So as the U.S. Dollar declines in value, American companies can sell products and services for cheaper prices on international markets — and still turn a profit!
This advantage will only get bigger as the Dollar breakdown accelerates.
Now, let’s take a look at the second advantage for a lower U.S. Dollar.
The second advantage comes into play when American companies report quarterly and annual profits.
A global company headquartered in the U.S. will have divisions around the world. And these divisions will generate profits in many different currencies.
But at the end of every reporting period, the company must tabulate its profits from each division and report the value of those profits in U.S. Dollars. (It would be extremely messy if you had to wade through an earnings statement that showed a portion of profits in euros, yen, Canadian Dollars and so forth).
When these profits are reported in U.S. Dollars, the figure goes up if the U.S. Dollar is weaker. That’s because it takes more “weak Dollars” to equal a certain amount of foreign currency.
For American companies that generate profits around the world, a weak U.S. Dollar will actually help boost earnings per share.
And of course, when a company reports earnings that are steadily growing, the company’s stock price is likely to move higher. These companies are also likely to pay higher dividends because their U.S. Dollar profits are steadily increasing.
So while the term “Dollar breakdown” may sound like a catastrophe (and can certainly be damaging to the value of your savings account), a weak Dollar can actually generate big profits for a certain category of American Companies.
Here’s How to Play a Weak U.S. Dollar
The U.S. Dollar is breaking down, so let’s cover the best ways to play it.
Besides playing gold, which we covered earlier this week, I’ve got three great American stocks that you should own today.
Remember the executives that I mentioned at the start of today’s article? The multi-millionaires who are laughing as the Dollar breaks down?
Well these are the executives of the companies you should be buying today.
David Taylor is the CEO of Procter & Gamble (PG). This international company sells consumer staples around the world. I’m talking about the products that people must buy every day. Things like toilet paper, toothpaste and laundry detergent.
Few companies have the international reach that P&G enjoys. And PG has a record of nearly 60 years of steadily increasing dividend payments.
Jeff Immelt is the CEO of General Electric (GE). As an industrial powerhouse, GE has a diversified assortment of products and services it sells to international customers. Investors in GE currently enjoy a 3.2% dividend yield and as profits continue to grow I expect this yield to move higher.
Finally, André Calantzopoulos and Louis C. Camilleri are co-CEOs of Philip Morris International (PM). Historically, this company has been one of the largest international cigarette makers. This makes for a very reliable business, and very reliable profits. More recently, PM has been growing its less harmful e-cigarette and vape business lines. As these products gain popularity, PM will grow international profits, on top of the added tailwind from a weak U.S. Dollar.
All three of these reliable stocks should do very well in a weak Dollar environment. So in addition to protecting your wealth with gold, it’s a great idea to start building exposure to these international blue-chip dividend stocks.
I’ll keep my eye on the U.S. Dollar developments and continue to bring you the best opportunities to play a Dollar breakdown.
I have to admit, some days there isn’t as much to write about as others. It’s not often, but in a world of perpetually controlled financial markets and relentless “fake news,” “eyes of the storm” are often witnessed. This is particularly the case in gold and silver, where the Cartel is desperately trying to push prices below the 200 week moving averages they surpassed last week, for the first time since Election Day; such as yesterday, when first the “8:00 PM algo”; and then, the 819th “2:15 AM” EST raid in the past 937 trading days this morning, followed up yesterday’s prototypical COMEX-opening attack – amidst a sea of bullish PM news – in an attempt to divert attention from the ominous issues such a powerful technical achievement portends.
But rest assured, truth-seekers, the “PiMBEEB” threats are no less virulent today than at yesterday’s COMEX open; let alone, a few hours ago, at 2:15 AM EST; and mathematically, they are guaranteed to continue worsening, as history’s largest, most destructive fiat Ponzi scheme rages through its cancerous, terminal stage.
Amidst this morning’s news and market “calm,” I figured I’d point out a few disturbing trends that stand out amidst the relentless, propagandistic hype – supported principally by 24/7 market manipulation; that those simply watching the PPT-supported “Dow Jones Propaganda Average” are likely missing. Such as, for example, the hundreds of “hedge bombs” going out of business each year, because their “genius” portfolio managers can’t understand that the only equity “bull markets” are in the PPT-supported large-cap indices, as opposed to the vast majority of wildly underperforming smaller stocks.
For one, we have the energy sector – which despite relentless “production cut” hype, continues to dramatically underperform the market. This week’s news that OPEC deal compliance is plunging, with just three months remaining on a deal that has yet to make a dent in record global crude inventories; not to mention, yesterday’s news that non-OPEC Brazil’s production rocketed higher by 14% in the past year; only proves the point further, of why the energy ETF has been steadily declining since the fraudulent “Trump-flation” trade took hold.
And what more fitting day to present the nearly identical chart of the ongoing “retail Armageddon” – as depicted by the equally dramatic underperformance of retail stocks – than the day Ralph Lauren announced the closure of its landmark Fifth Avenue store? Not to mention, as Zero Hedge highlights, the fact that if Amazon.com stock rises another $100/share, Jeff Bezos – the man who is single handedly destroying the retail and commercial real estate industries – will be the world’s richest man!
And how about the collapsing automobile industry, as symbolized by the stock of Ford – who’s CEO, last month, proclaimed that industry-wide sales had “plateaued,” potentially for years to come? This, as the world’s biggest subprime bubble – in automobile loans (arguably, tied for that honor with student loans) – is showing ominous signs of bursting. And by the way, this week, Tesla’s market capitalization surpassed both Ford’s and GM’s, to become America’s largest automaker. Considering that Tesla has just 30,000 employees, compared to the 410,000 employed by Ford and GM combined, this is an equally ominous economic trend.
And finally, the “world’s most systematically dangerous institution” – which the IMF deemed Deutsche Bank last June. As you can see, the stock fell to an (all-time) low of $13/share when that occurred, plunging to as low as $11 when, three months later, the company experienced a major funding crisis. Only a heroic backdoor bailout – replete with an historic propaganda blitz of how the firm was “saved” – enabled it to bounce off that level in October; which naturally, served as a perfect opportunity for the Cartel to launch its mind-boggling blatant “Deutsche Bank Destruction” raid; which just happened to occur “coincidentally” when gold and silver last breached their 200 week moving averages to the upside.
Unfortunately, the bloom is again falling from the world’s most systematically dangerous “rose” – as depicted by its “surprise” issuance last month, of a massively dilutive equity offering (35% below the prevailing market price); once again, putting the world on notice that Deutsche Bank’s inevitable implosion is back on the table.
This, and countless other dying European banks – like Italy’s largest, Uni-credit; which, I might add, could all collapse if either Marine LePen wins May’s French Presidential election, or Greece is not “bailed out” (for the fourth time) in July.
Hopefully, today’s article helps you understand further, that no matter how much money printing, market manipulation, and propaganda the powers that be attempt, they CANNOT usurp “Economic Mother Nature” and the unstoppable tsunami of reality. As I assure you, this morning’s “eye of the storm” will be over soon – perhaps, by the time you read this.