How to Cash In on the Best Currency Plays Selling at Extreme Discounts
Its been a wild year so far. We have seen civil wars in the Middle East some of the largest earthquakes ever in Japan and New Zealand tsunamis, nuclear reactors blowing up oil prices above $100 a barrel nervous central bankers cutting and hiking rates
And now a coordinated intervention to drag down the Japanese yen on March 18th. Whew! Usually you dont see that much drama in a whole year let alone a few months. The upside of all this is the U.S. dollar is about to rally.
A strong dollar means a short-term pull back in some of the best fundamental currencies in our portfolio.
In other words, the momentarily strong dollar will give us the best opportunities of the year to buy foreign currencies on the cheap! Some of the most solid fundamental countries on the planet will sell at extreme discounts. These plays will reap the benefits from the strong dollar and pay dividends along the way.
This month, were taking an in-depth look at our portfolio to make sure none of us miss out on any of these opportunities.
Already in the Best Place to Profit from $100 Oil & $1,400 Gold
Best Buy: If theres one play I love the most in our portfolio right now its the Currency-Shares Canadian dollar fund (FXC). The Canadian dollar is an easy way to profit off rising oil prices, because Canada depends heavily on its oil exports.
More importantly, Canada is half a world way from the civil war in the Middle East, so Canadas oil resources wont be interrupted like in the Middle East. With the situation in Libya intensifying with each passing day, it will take months if not a year for the Middle East to start exporting oil like usual.
That will boost oil profits for Canada. When that happens, our Canadian dollar ETF (FXC) will also power ahead. Im rating this play a buy.
Best Buy: Then theres our South African Rand CD another great anti-dollar play. South Africa is the worlds third largest gold producer, so the rand tends to rise and fall with gold. (As you can imagine, $1,400 gold is helping the rand.)
Even better, this CD pays a high APY interest of 3.68%. Thats about six times what a bank account pays now. Since the rand tracks gold, its like holding gold with interest. Now its possible the rand may pull back this year, but I still recommend buying this play for the long-term, and collecting the interest in the meantime.
Best Buy: Then theres our Brazilian Real CD. This CD is one of our long-term favorite plays because it shells out over 6% in interest each year.
Personally, Id rather own Brazilian real for the long-term, and earn interest thats 10 times higher than your average money market account. The global chaos may force the real to pull back slightly. So if you havent invested yet, Id say use this opportunity.
Market Chaos = Profits for Our Short Plays
Best Buy: As you know, weve been bearish on the Japanese yen for a while now. The coordinated intervention is finally putting a ceiling on the yen. That will benefit our ProShares UltraShort Yen ETF (YCS). In fact, it puts us on the side of all the central bankers who are pushing the yen lower.
Best Buy: The euro is about to suffer a major correction. Right now, Moodys, Standard & Poors, and Fitch all take turns downgrading the credit ratings on the most troubled E.U. nations. All these downgrades force the PIIGS to shell out more money to finance their bonds, which they already cant afford.
Things are about to get worse. High-priced oil will only further drag down the Eurozones anemic GDP (which is at 0.3% currently). Also, soon the Eurozone will have to raise rates to fight inflation. While that could boost the currency briefly, it will also compound further problems for the PIIGS.
Add it all up and its an ugly situation for the Eurozone. It will end up ultimately pushing the euro lower. That will cause our ProShares Ultra- Short Euro ETF (EUO) to rally. Im rating it a buy this month especially since we see a dollar rally coming soon.
Hold: Then theres our anti-treasuries play, the ProShares UltraShort 20+ Year Treasury ETF (TBT). A recent report showed that China trimmed their treasury holdings by over $5 billion, also Hong Kong cut back their holdings by over $6 billion.
More and more countries are starting to second-guess holding our debt, and that just spells good times ahead for our short on U.S. Treasuries. Continue to hold for now.
Hold: While were talking about debt, we should mention our Wisdom Tree Emerging Market Local Debt Fund ETF (ELD). I believe this fund has finally turned a corner and will benefit as more investors turn to the emerging markets and away from ailing treasuries. Hold for now.
Best Buy: And finally, we have our latest play on the U.S. dollar. We look at buying the dollar as a short-term play to profit off this dollar rally, and a nice hedge for the rest of our plays. We see a dollar rally coming in the short-term. To take advantage we recommend the PowerShares DB Index Bullish (UUP).
The Better Euros
Hold: I love Nordic currencies. Right now, we hold the Norwegian kroner, Swedish krona and Danish krone through the Viking CD (now a hold in our portfolio), along with the Norwegian kroner CD.
Best Buy: These European currencies have far superior fundamentals than the overall Eurozone. We prefer to invest in choice European countries for the long run. Thats why we lovingly call these currencies better euros. Specifically, we love the Norwegian kroner for the long-term. Recently, this gem of a currency has pulled back in price. Our Norwegian kroner CD is now selling at a discount, so Im rating it a best buy.
Best Buys: Also, if youre a new currency investor, were still recommending the newly revamped All-Weather Portfolio, and the Asian Portfolio. Both are great long-term plays for dollar diversification. Both are showing double-digit profits that means these CDs are producing stock-like returns, without stock market risk.
Hold: Meanwhile, our locked in MarketSafe plays the MarketSafe BRIC CD and Gold CD continue to produce solid gains. These were both limited time 5-year offerings, so they are not available anymore. But if they offer them again, well let you know.
Get Paid to Wait as Global Chaos Reigns
With all the drama in the markets, we like solid dividend-paying foreign stocks that will pay you to wait out this crisis.
Even better, these plays are denominated in solid currencies like the Singapore dollar (Singapore Telecom 4.95% yield), Mexican peso (Telefonosde Mexico 4.91% yield), Australian dollar (ANZ Bank 5.5% yield) and Israeli shekel (Partner Communications 11.73% yield).
We believe that as the world continues to seek higher yields in sound currencies, these foreign, high-yielding stocks will continue to prosper. Many of these stocks earn double or even quadruple what blue chip U.S. stocks pay.
Best Buys: We still own gold and silver in pooled accounts and gold American Eagle coins in our portfolio. As more turmoil happens in the Middle East, oil soars higher, and sovereign debt issues abound, gold and silver provides some nice insurance for your portfolio.
With all this unrest around the world, gold and silver prices could look cheap a year from now. Already, silver has climbed almost 250% since we first recommended it. Gold has climbed over 50% and still looks to go higher. Both are long-term buys, even at these prices.
Speak Your Mind