4 Ways You Can Profit from the Falling US Dollar
April 23, 2008
The value of the US dollar is dropping and hitting many of us smack in the pocketbook. What can you do about it?
It’s a discouraging situation; you’re working just as hard as you always have but your money isn’t going as far, thanks in part to the falling dollar. It’s also frustrating that it’s such a huge issue and we feel as though there’s nothing we can do about it, that we’re just along for the ride.
The good news is that although we can’t change global economic momentum there are several ways to make money from this fall in value of the dollar.
Invest in Multinational Corporations
This method is probably the most obvious and involves the least amount of effort. CNNMoney recently took a look at how exchange rates are influencing the performance of multinational companies.
“Declines against world currencies make U.S. products look cheap overseas, and translate into big returns when sales are converted back into dollars.”
Investing in the stock of multinational companies such as McDonalds, Microsoft, Coca-Cola, Caterpillar, and IBM allows you to relatively easily put some of your money where it could potentially benefit from the drop in the dollar. Do your own research on these companies; they’re just examples of corporations whose organizations and sales extend outside the boundaries of the US.
Invest in Foreign Currency
As the dollar weakens and other currencies are on the rise, this presents an opportunity for those willing to risk some money in foreign currency exchange, otherwise known as forex. If you use the dollar to purchase a foreign currency, wait for that currency to rise in value, then trade it back in for dollars you’ll come out ahead. Of course foreign currency exchange is a rather speculative market but it is a huge one. According to Investopedia:
“The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world. It is open 24 hours a day, five days a week, and currencies are traded worldwide among the major financial centers of London, New York, Tokyo, ZÃ¼rich, Frankfurt, Hong Kong, Singapore, Paris and Sydney – spanning most time zones.”
This is probably the riskiest of the options discussed here because of the frequent fluctuations in the currency market and the knowledge you’d need to comfortably invest in forex.
How much time do you think it would take to setup to start exporting products overseas? Would you believe you only need the 15 minutes it takes to signup for eBay? By selling online, you can personally leverage the same trend the multinational companies are seeing where products sold in US dollars look cheap to overseas buyers.
Let me give you an example. I spent about $400 dollars at a local Adidas outlet buying clothing that was worth about $1000 retail. I listed the clothes at around 25% below retail in my eBay store and the orders from England started rolling in!
Exchange Rate Benefits
One British pound can buy about two US dollars so customers in Great Britain were able to buy Adidas clothing from me at about half price due to the exchange rate, plus the discount I was offering. Although the shipping wasn’t cheap, the savings more than covered the cost.
Choosing Products Wisely
Of course, you have to be smart about the products you sell, the Adidas gear was perfect because it was light to ship, has appeal in many different countries, and can be quite pricey for consumers to purchase retail. Good candidates are products you can only get in the US or something you can get in the US considerably cheaper than people in the rest of the world.
Selling Nike Shoes in Europe
Don’t be scared off by the unknown of selling internationally. My boss had never sold on eBay until I mentioned the possibility and he did something similar with tennis shoes.
His brother works for a shoe company that offered older model shoes to its employees at large discounts. He filled up the back of his van and sold them all online. He made a lot of the money selling Nike shoes via eBay to customers in Europe, France in particular.
These examples are just to show it’s possible for the average person to do it. All you need is a little time to learn the ropes and find the right product and anyone can become an exporter of goods.
I use eBay in my examples, it’s a great place to reach customers around the world since it’s an international marketplace but there are certainly other sites that offer global reach. One thing you’ll want consider when selling internationally is that you’re very clear about your refund policy, return shipping on items from overseas can be pricey.
Export Your Services
If you’re not into selling products internationally you might consider selling your professional services. In a global information economy, you can provide consulting services in your area of expertise to almost anyone, almost anywhere in the world. Using sites such as eLance, you can bid on a wide variety of projects in areas such as:
- Design & Multimedia
- Sales & Marketing
- Finance & Management
- Engineering & Manufacturing
The person or company posting the project looks at the various price bids that come in, the experience of the providers, and choose someone to hire. The weakened US dollar means it is cheaper for clients in countries whose currency is stronger than the dollar, ex: British Pound & Euro, to hire you.
Of course there are many providers on eLance from countries with currency weaker than the dollar, ex: India & Russia, who can underbid you. However, that doesn’t mean you can’t be the cheapest “preferred” provider. For example, a job description in a recent posting for a designer, stated “Prefer U.S., UK, European design experience”. Thanks to the exchange rate, the client gets a built in discount if they hire you over a British or European designer.
Who knows how long the value of the dollar will continue drop and how low it will go? Although there’s nothing you can do to stop it’s decline you can try these strategies to leverage the opportunities the new exchange rates are creating.
- Invest in Multinational Corporations
- Invest in Foreign Currency
- Export Products
- Export Your Services
Last updated by.
All posts by Ben Edwards