Larry Bellehumeur

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Moon - I sure hope you are wrong, in term of Stimulus II, but you could be right. It would be a disaster, and make this article all the more relevant (something I wouldn't want). It would also mean that the upcoming Inflation issue would be a nightmare for a decade or more....

William -- It is a good point. The main reason that I was focusing on ADRs is the for the simple availability for everyone. As an example, being a Canadian, it isn't as easy for me to buy Foreign-listed stocks in London. Ultimately, the same effect would happen, just in a slightly different way (ADRs would appreciate because a depreciating dollar would boost the earnings per share, where as buying a Foreign listed equity in US dollars wouldn't help the earnings, but you would see the same benefit directly from the currency). Good point....

TheFounder - Also a valid point. My main goal for this article was more to bring up the likelihood of a US dollar drop (which is happening today, ironically), and to give some ideas on how to play it (aside from the usual Gold and other plays). There is no perfect balance, and I would recommend that investors of all ranks hold a large selection of them. Many of them, such as Gold and Oil Stocks, also offer an Inflation hedge, in case that happens too.

Thanks for reading!
Larry

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Hello Everyone,

Dave - The dollar has held up better than I would have ever expected in the past little while. All of the points in the article have been in place for at least months (if not, in the case of trade deficits/debt, years), but the market often flocks to what it knows in times of distress, I guess....

PVizzle -- I definitely wouldn't use these stocks as the ONLY way to play a falling US dollar. I wouldn't even use only stocks in general....gold, Energy Producers, Energy Services companies, REITs, TIPS and other instruments are all going to be necessary for every investors portfolio. I agree that Resource stocks can be a great hedge against a falling greenback. However, they do carry a fairly high level of volatility, and not all investors can stomach that. I wrote an article about Dr. Stephen Leeb a while back, and posted some recommended long-term resource plays in there, including Ag stocks.

To add to your other point, I hate to speculate too much in articles, although, one has to wonder just how long the rest of the world will continue to use the Greenback as both the Main world currency and as a way to price Global Commodities. If either one of those positions were to slip, look out below!

As for companies such as Monsanto, ADM, Syngenta, they do have a good future, and would be good choices to balance off US dollar exposure. You could arguably add in Mosaic, Potash and Agrium......only recently did they ever get down to an evaluation that even remotely made sense to me, however. I have owned Potash in the past, but flipped it out at close to $190 before (didn't reach the top, but didn't lose my shirt on the way down).

Disclosure - No position in any of the Ag stocks, long on a bunch of Energy producers/services, REITs, Gold and TIPS. So, you can see that I think inflation is going to kick in soon!

Cheers to all
Larry

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

thanks for everyone, who took the time to read and comment.

KSA -- I would personally rather look at Viterra than ADM, as it is more of a pure play on Grain prices. If you prefer ADM, you would also have to likely think that there is some validity to the expansion of Ethanol. As for MOO, I just took a look at their holdings. I rather like the broad exposure (Equipment, Fertilizer, Seeds and more). Might not be a bad play.

ChefDavid -- I have heard that argument before. Since there is so much scrutiny on these large companies now, I would have to believe that they are following what is in their mandates. You never know, though, I guess...

DirtyOil -- One does have to admit (even someone who benefits from the Oil Sands, like me, as I like in Alberta), that the Oil Sands do burn off a lot of other resources, including Water and Nat Gas. However, the world simply needs to produce more oil, or risk the price skyrocketing over the next few years. The Oil Sands producers are under extreme pressure to clean up their acts, and with the Billions being thrown at them, one has to hope that they can.

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

ok, having troubles keeping up with all the comments!

George09 -- Can't say that I totally agree. Oil's rise affects all things in the economy, from manufacturing to Ag to Transportation to heating your home. This spike in prices is not caused by inflation, but rather by a supply/demand inbalance. Look at the past few inflationary times (such as the 70s/80s) and it was caused by the sudden spike in Oil. Leeb's theory in the Oil Factor is that whenever Oil rises 80% over the previous year, inflation is bound to build up in the system to cause a recession within 18 months.

Dallas -- to be clear, Leeb coined the term "BRAC". I also agree with the previous comment that many of the Middle East Producing countries could also be mentioned. I wasn't aware of NZ's Commodity promises.....I am curious now.

433429 -- I think that Grain prices may also be an interesting thing to watch. I think that Leeb did mention is, but the major point was that Oil tends to be the commodity that is most noticed in Inflationary results. However, since Food is also left out of the CPI, Ag's true impact may not be fully known. Your point is well taken.

GeoJoe -- To quote the CEO of Suncor, when asked if we are in Peak Oil, "We wouldn't be, if the Oil Companies were allowed full access to all of the Oil that is held by the Nationalized Programs". Peak Commodities is as much Political as it is Geological.

Cheers
Larry

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

This must be my most "Commented-on" article....thanks for all the great comments..

Emerald -- Can't agree with you more. I also like CNQ (which I am long on), due to the fact that I don't believe that their Horizon Oil Sands project has been fully priced into the stock.

Tipalia -- I have to believe that KMP's dividend is sustainable for now. I haven't seen their payout ratio, but Pipelines as a rule generally have one of the best cash flow reliability in all of the stock world. What I would be worried about with any of the pipelines is if they over-extend themselves (build too fast), or if there truly is going to be a lack of product (i.e. conservation) flowing through their product. Not likely scenarios.....Disclosure, no position in KMP

Ozzy -- I think that people, in times of distress, often turn to what they know, which is often the reason that History repeats itself. I think much of what worked in the 70's will indeed work....the only class that I can see not working as well is REITs, but it still will be a better investment than most.

Michael Young -- It should be interesting to see what happens to the Non-Commodity sectors of the BRAC countries. As a resident of "Commodity Rich" Alberta, I can tell you that it became virtually impossible for a Non-Oil/Gas business to afford to remain competitive in Alberta, as the costs of labour just got out of control. As well, the CDN dollar began to trade with the rise in commodities, gaining it the nickname of the "Petro-Buck" locally. This virtually killed much of the manufacturing in the rest of the country, as the price of their shipments globally rose by close to 60% in 5 years. I think that it will be a lot of division in the BRAC countries, which is why I recommend to no use a General ETF to cover each country. It will also be fun to see how they keep inflation cool in the BRAC countries....

Cheers everyone,
Larry

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

Thanks for everyone's comments.

MCI -- As mentioned in the article, Gold (in addition to its inherent protection against inflation) is often seen to as a Safe Haven. My point was more that people did not seem to view it in this way to the extent that one would expect (as seen by many of the investors/analysts). I still personally think that it is a great place to run and hide during bad times, but unless the masses think the same thing, we may not see the rise be as dramatic as it should. The other problem is the nasty decline that Gold took in the early part of this crisis when it should have exploded upwards, but I chalk that up to more of people unwinding positions that they could....

Guapo - Your points are well taken. I personally think that the US dollar may get to the point that even the main commodities themselves won't be priced in them by 2011. Then, it will be a freefall...

If nothing else, Leeb's views make one look at alternative ways to invest, ones that steer greatly away from the usual Wall Street mentality.

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

Update -- I actually did take a small opening long position in BHP Billiton yesterday, with the anticipation of making the position larger if there is any further weakness in the stock.

Thanks for reading, Buy it Cheap! Those who can sell things into any of the Emerging Markets are also likely to do well in the upcoming years....