How to Benefit From a Falling Dollar…
Depending on how you look at it, we were both idiots.
Me for thinking it was possible.
Her for not having a clue.
This was 1995. Irving, Texas, just west of Dallas. My lunch hour. I was inside a branch of what was then NationsBank. And I was holding a check to deposit.
I handed it to the teller…
And her brain fritzed. I could see it in her eyes. She was clearly flummoxed.
“What is this,” she said. “I don’t know what do with this is. How much is it worth. Maybe my manager will know…?”
The deposit in question was a check made out to me for $122. But I should clarify that. I need to put an “NZ” in front of the $ because the check came to me from New Zealand—my first dividend payment from Lion Nathan, a New Zealand-based brewer now buried inside Japanese brewer Kirin Holdings.
The teller didn’t know what a New Zealand dollar was, and was confused by why New Zealand would use “dollars” when, she claimed, “that’s an American word.”
My stupidity was thinking that a US bank, circa 1995, would accept a deposit drawn on a New Zealand bank. Had Lion Nathan wired money into my account from abroad, that would have been fine. But me presenting a foreign check to an ordinary bank teller… yeah, that was pretty stupid on my part.
But such were the trials and tribulations of operating from foreign bank and brokerage accounts in the mid-’90s.
Today… all you need to do is buy foreign stocks through a US brokerage account such as Fidelity or Charles Schwab and never have to worry about the challenges of depositing a foreign dividend check. The money just lands in your account, automatically converted into US dollars (which is not an American word and actually stems from the German word “thaler” [a large silver coin], which dates to 1520 and the Holy Roman Empire).
But today’s dispatch isn’t an etymology lesson.
It’s the story of foreign dividends and why now is the moment you really want those landing in your brokerage account.
In recent weeks, I’ve sent a few dispatches noting that the Trump admin is angling for a weaker dollar. Team Trump sees the strategy as a path toward rebuilding America’s manufacturing base by making US-made products more affordable for international buyers.
There is some truth in that, though the likelihood that America will experience a re-shoring boom is nothing more than blowing on a dandelion and making a wish.
However, there is a second-order effect—an unintended impact: Inflation on the home front.
This is not a debatable issue. This is not a “well, that’s how you see it, but I see it differently” argument on which economists and politicians and White House spokes-folks can agree to disagree
This is math.
It’s all very simple.
Simple as a see-saw.
Currencies trade in pairs. They don’t trade separately like shares of stock. You don’t buy Apple by selling Microsoft. But you do buy euro by selling the dollar. Or you buy dollars by selling the yen.
As such, the math is first-grade level: One currency going down means, by definition, that another currency is going up.
If $1 = €1, then when the dollar falls by, say, 10%… well, that just means the euro is now more expensive in dollar terms. You now have to spend $1.10 to buy that same €1. Or said more simply: You have to spend more dollars to buy the same amount of euros.
In consumer terms, the match means that the French cheese costing $10 at Whole Foods will now cost you $11 simply because Whole Foods has to spend more US dollars to buy the same amount of stinky cheese.
Or it means Target has to spend more dollars to buy the same Korean TVs… or that Walmart has to spend more dollars to buy the same number of avocados from Mexico or bananas from Costa Rica. It means your favorite coffee shop has to pay more dollars buying coffee beans from Juan Valdez.
All of those costs flow through to you and me, the consumer.
Which means a dollar that is weakening is imposing greater costs on our wallet, since so much of what American consumers and businesses buy comes from overseas, either as finished products (stinky French cheese and Korean TVs) or as raw materials (coffee beans, manganese from Gabon and South Africa that go into American-made steel).
All of which leads us back to foreign dividends.
The beauty of owning foreign dividend-paying stocks is that the income you collect from stocks based in the Eurozone or Japan or Singapore or, well, New Zealand is that those currencies buy more and more US dollars when the dollar is in decline.
If you’re collecting, say, €100 when the exchange rate is $1 = €1, then you’re seeing $100 show up in your brokerage account. But let’s again assume the greenback loses 10% to the euro (the buck is down 10% against the euro in the last four months). Well, that same €100 dividend payment is going to land in your account as $110.
The dividend didn’t change. The European company paid the same amount as before.
But the currency exchange rate changed.
The dollar fell in value against the euro.
So, in dollar terms, you’re collecting more money.
And that is exactly what we want at this stage of the US economy.
I’m not making any judgments on Trump’s stated preference for a weak dollar. It is what it is, and I do understand the underlying rationale.
But that policy has impacts on Americans’ personal finances that we need to understand—particularly retirees, for whom inflation hurts the worst, since they’re largely living on a fixed income.
As I build my new Retirement Income Masterclass, I am focusing this version of that presentation around a larger exposure to foreign dividend bellwethers because that’s where the biggest bang will come from going forward. Every dividend payment will buy more dollars, helping offset the impact of inflation at home.
And because we’re now in 2025 and not 1995, you don’t have to be an idiot like I was and show up at your local bank trying to deposit a foreign check into your account. The dividends will just show up at dollars in your brokerage account.
