Over the last week or two, the fall in the Australian dollar that we’ve been forecasting for some time has come to pass. After being stuck above 90 cents for months, it’s now hovering at around 87 cents.
But what’s interesting is that markets have followed it south as well.
Peter had this to say about why on Saturday.
“Some of you might have been surprised that stocks have fallen with the diving dollar but this is a well-worn path. As US investors, worried about our currency correction (which too has been overdue) exit $A assets such as our once very attractive yield stocks, the dollar and the stock market had to fall.”
And fund manager extraordinaire George Boubouras also said on Switzer TV last week that it’s not surprising for banks, utilities and REITs to sell off aggressively when the Aussie dollar falls very quickly.
“But remember, depending on who you are, depending on what kind of investor you are, if you are a self managed super fund client, it doesn’t really matter because you are holding those banks for the next 10, 20 or 30 odd years and you need that dividend income coming through and the franking,” he said.
This morning, CBA – which Peter called one of the best companies in the world on Saturday – was trading at $75, off a high reached in July of $83.92, and is likely to go lower. But if you’re primarily interested in yield and are ok with capital volatility, don’t discount these cheaper prices.
Commonwealth Bank of Australia (CBA)
Source: Yahoo!7 Finance, 29 September 2014
If you’re in an SMSF, which is overweight cash, George says “you should re-invest some of that into healthy looking dividend players and the banks are part of that solution, insurance companies are part of that solution, utilities are part of that solution, telcos or Telstra too.”
As the US dollar rises, companies that report in the US dollar, or have a big chunk of their earnings dependent on the US, will eventually do better and one company Peter has liked for a long time is packaging company Amcor.
On Thursday, Charlie has also promised to outline some of the companies that investors should be looking at in this market.
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