Weak Dollar Stocks

We have undoubtedly come into a new area in American finance. I have no doubt that in five or ten years we will be calling this time in our history the “age of the bailout” or something along those lines. I’ll leave it up to the business journalists to coin something a little more eloquent.

Regardless of what we call it, in a very short time frame our government has spent huge amounts of money in an attempt to shore up the financial system. Stimulus packages, housing bailouts, banking assistance and $160 billion into AIG have all taxed this government is spending power to the limit.

Whether you agree or disagree with these actions, one thing is true; the money has to come from somewhere. In our country when the government needs money they have the Federal Reserve print it and figure out how to pay it back later.

What this does is dilutes the value of the U.S. dollar compared to other currencies. So now a dollar is worth less compared to a Euro than it was a couple of days ago. Now this isn’t necessarily a good thing, but like anything else you have to find the silver lining in this cloud.

A weak dollar is good for a lot of different stocks. We know the dollar is going lower, so these stocks should trend higher. Combine that with the recent down trodden stock market you have the explosive combination of stocks at low prices that have a catalyst to go higher.

Here is a rundown of great weak dollar stock plays

Commodity Stocks

Almost all commodities are traded in U.S dollars, so when the dollar is lower you can buy more of the commodity for the same amount of cash. Oil, gold, copper, wheat, corn and just about anything else you can think of is worth watching. Find companies that are involved in the sale of these commodities and you will have a winner.

I’d suggest looking at oil. Companies like Exxon, TransOcean, and Haliburton are poised for a big jump.

Companies that Do Business Overseas

When a company does business abroad, they get paid in the foreign currency. If that currency is stronger than you get more U.S. dollars when you convert them. You’ve made money by doing nothing!

The best example of this is McDonalds. They have restaurants all over the world and do a lot of business in the European Union where the conversion rate favors this kind of deal.

Exporting Companies

With a weak dollar the goods we export cost less relative to foreign currencies. Look for companies that make something domestically that are hard to get elsewhere and you should have a winner.

GE with its wind turbine business or First Solar with their solar panel exposure would be good bets here.

As you can see the economic picture isn’t pretty and it isn’t going to get any prettier any time soon. The best you can do is cover your bases and play the cards that are dealt to us. Take advantage of the weak dollar while you can, because hopefully one day it won’t be here.