How a Falling Dollar Can Make Americans Rich

December 2007

Compared to the S&P's +5% gain this year, one of the most popular foreign benchmarks -- the Morgan Stanley MSCI Europe, Australasia Far-East Index, or EAFE -- is ahead +15% in U.S. dollar terms.

What's driving these international stocks to new heights? Economic growth is the main force -- the International Monetary Fund (IMF) forecasts the world economy will grow more than +5% this year, slowing to a still healthy +4.8% next year. However, the U.S. economy is expected deliver economic growth of just +1.9% this year, and that figure should stay stagnant (at best) at just +1.9% in 2008. That's a marked decline from the +4.2% growth it posted in 2004.

Then there's the falling dollar. As the U.S. economy cools and the Fed continually cuts interest rates, investors are moving capital out of Treasury bonds and into foreign assets. As a result, foreign currencies are continuing to strengthen against the U.S. dollar. The U.S. Dollar Index, which measures the value of the greenback against six major world currencies (the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc), is down nearly -10% this year.

The good news for U.S. income investors is that a weaker dollar translates into stronger returns from overseas investments. For example, Italian utility Enel (NYSE: EN) is trading at around $60 per share and provides an annual dividend of about $3.40. The share prices and dividends paid by Italian stocks like Enel are based on the euro. Right now, one euro is worth $1.46 when translated into U.S. dollars. That means EN's share price is equivalent to about 41 euros per share, and its dividend equates to about 2.30 euros per share.

Going forward, suppose the dollar weakens, and one euro is eventually worth $1.60. Since Enel's share price is based in euros, its value would increase about +10% in U.S. dollars. EN would now be worth about $66, and its annual dividend would jump to $3.70. And keep in mind this takes into account no dividend increases or share price appreciation -- it is just the effect of currency exchange. Considering that shares of Enel have risen more than +16% in the last year, your returns would likely be even greater.

As you can see, investing in international high-yield securities can add some extra zip to your income stream. That's why I focus exclusively on foreign securities paying enormous dividends in my new premium newsletter -- High-Yield International.

Whether they be in China, Italy, Brazil, or some other far-away destination, we make it our duty at High-Yield International to seek out companies and securities that are paying the richest dividends. So while your friends and neighbors may be stuck with the diminutive yields offered in the U.S. (at the moment, the S&P 500 pays an average dividend yield of just 1.8%), you could be earning a rich income stream and outsized returns by looking abroad.

To learn more about my High-Yield International newsletter, please visit this link.

-- Nick Lanyi
Editor, High-Yield International

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The Top 10 Most Common Questions About International Income Investing

With average yields abroad beating the pants off of those in the United States, with economic growth soaring in countries like China and India, with the U.S. dollar plummeting, and with world-class investors like Warren Buffett now scrambling to invest overseas, savvy investors need to start looking abroad in search of solid, reliable income. Click here to read in-depth answers to the 10 most important questions about international income investing.

An Important Note from the Publisher:

We're thrilled to announce that we've landed veteran income investor Nick Lanyi to head up High-Yield International.

This award-winning financial reporter and investment analyst will serve as editor, decision maker and portfolio picker for our new advisory service.

We couldn't have found a better man for the job. Nick has spent 17 years researching and analyzing money-making opportunities for three of the most widely read investment advisory services in history.

At Louis Rukeyser's Wall Street, Nick spent the better part of a decade as Rukeyser's trusted lieutenant, covering the entire investment waterfront. Earlier, Nick refined his touch at Fidelity Insight, a leading mutual-fund newsletter . . . and wrote for the venerable general-interest financial newsletter, Personal Finance.

But it was working with Louis Rukeyser that Nick blossomed into the authority he is today. Louis Rukeyser was the first person to bring Wall Street to Main Street, via his pioneering television show that drew 10 times the audience of the likes of CNBC. And his print advisory was by far the most popular investment newsletter in history.

During his priceless apprenticeship, Nick steadily rose through the ranks to ultimately supervise all investment research for Rukeyser's newsletter. He personally analyzed hundreds of companies and spent years specifically focused on high-yielding stocks, bonds and mutual funds.

Using Rukeyser's priceless Rolodex, Nick established working relationships with the all-stars of Wall Street. He interviewed dozens of top money managers and analysts. And he developed the rare knack for translating their often-arcane statements into plain English that the rest of us can understand and act on.

If anyone was destined to inherit Rukeyser's skill at isolating Wall Street's few proven producers from a sea of riff raff, it was Nick.

Over the years, Nick has had countless extensive private conversations with virtually every prominent portfolio manager you could think of, including Bill Miller (Legg Mason Value Trust), Ron Baron (Baron funds), Will Danoff (Fidelity Contrafund), Harry Lange (Fidelity Magellan), Tom Marsico (Marsico funds), Bill Nygren (Oakmark Select) and Brian Rogers (T. Rowe Price Equity Income), among others.

He has also interviewed most of the top bond-fund managers, including the two giants of the past 20 years: Bill Gross (PIMCO) and Dan Fuss (Loomis Sayles). These men are arguably responsible for investing more money than any other two people on the planet.

Nick also spoke constantly (and still does) with a number of top Wall Street strategists, including Rich Bernstein (Merrill Lynch), Tobias Levkovich (Citigroup), Tom McManus (Bank of America) and Liz Ann Sonders (Charles Schwab). The pronouncements of these men and women move markets . . . and hearing them straight from the source gives Nick an invaluable investing edge.

Naturally, Nick has been quoted in the Wall Street Journal, Boston Globe, Chicago Tribune, Bloomberg and Forbes.com. He has also appeared on CNN/fn and CNBC.

We're tickled pink to add an expert of Nick's caliber to our "editors' circle" here at StreetAuthority. And we're sure you'll be just as happy as you get to know him in the pages of High-Yield International.

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