Weak Dollar Investing

The current administration in Washington has signaled that a weak dollar is ok with them. As this scenario plays out take caution to what works well in a weak dollar environment.  A strong dollar environment as championed by Reagan and Clinton helps stock markets and particularly growth stocks.  Bush began a new era of the weak dollar and Obama has doubled down on this approach. A weak dollar makes hard assets such as gold, metals, buildings, and commodities more valuable.  In this posting I will concentrate on weak dollar investing since that is what we currently have and look to have going forward.

 

A weak dollar means the federal reserve is printing money and the federal government is spending like mad. That is indeed happening right now. Therefore with more dollars chasing goods and most importantly chasing limited supply hard assets they grow in value.  Goods related to hard assets such as food have already seen large increases in cost.  Goods where supply is not limited like electronics and clothing have not seen large or sometimes any price movement.  This could change is business conditions improved and people had more money to spend. But even then that would be doubtful since many households are still de leveraging from debt overload of the past decade. The federal reserve wants people to spend their money or invest it and is keeping interest rates near zero so that in itself tells you that economy activity will be suppressed for some time to come.

 

The best investments going forward currently are metals such as gold, silver, copper, platinum, and such. I am not a gold or silver person preferring copper. Gold and silver are generally good holds of value but can be wicked in their downward move if you own it when traders consider conditions are going to change. I also favor dividend paying metals and SCCO fits my criteria there. SCCO's dividend fluctuates since this company's profit is tied directly to the price of copper. Point is this makes for serious upside potential when copper value is moving upward.

 

Oil, which is in limited supply due to restrictions on drilling in this country remain and good value as well.  I know I have suggested ERF as the choice here for some time and the price has been trending lower lately. This is due to some weakness in oil prices and the resulting concern with ERF's value. I am not concerned the management here is top notch and the dividend should be safe unless the bottom falls out of the price of oil.

 

POT which is direct play on food commodities is your best bet for a stock related to farmland and farming. Frankly the ownership of farmland is a better choice, but if you do not have access to such,  being the arms dealer to farmers is a good bet too.  If you are looking for a dividend play here TNH is your choice, high dividend and direct linkage to farming via fertilizer.

 

There is a reason stocks such as NNN and O have held up well in the recent downturn in the market. They own premium valued commercial buildings with triple net leases which tend to hold up very well in weak dollar environments. Both these stocks raise their dividends annually and provide good protection for your money going forward.

 

Once more may I suggest you consider agency reits such as NLY, HTS, and AGNC. These stocks pay double digits dividends and are safe going forward for two years since the fed has said no rate increases for three years. Not having the opportunity to buy into the soon to be disposal of the huge federal housing auction the agency retis give one a chance to make money on the mortgages for these soon to be bought homes.

 

I hold either as an option or long in, NNN, O, ERF, HTS, AGNC, and SCCO.