NEW YORK (TheStreet) -- Headline news last week read there's a run on Greek banks going on and eurozone chaos. As an adviser, I see a classic Greek tragedy, but I also see opportunity. We'll get to the opportunities, but first I want to discuss the fallout from the tragedy.
In a word, it's this:
Call it what you will, stimulus, quantitative easing, monetary policy, but to me it's all the same: printing money. It's happening in the U.S., and it's happening in Europe. Historically, printing money leads to inflation.
Inflation is to savers what kryptonite is to Superman. It's even worse in a low-yield environment, such as the one we are faced with. High inflation and low yields often result in
returns when measured by purchasing power.
For example, someone heading into retirement with $1 million earning 4% may be doing OK. If they are facing 3.5% annual inflation however, their purchasing power will be cut in half over the ensuing 20 years. At 5% inflation, the damage to their purchasing power is devastating.
Further, investors want to know when inflation will materialize. My answer: usually when you least expect it.
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The opportunity is to put together what I call a global cash-flow strategy. Despite what's happening in Greece, Europe and domestically, there are still great opportunities all around the world, in real asset companies, with real cash flow, that pay investors dividends and over time, increase these dividends. This is hardly a new story; it has been in the news a lot lately. But smart investors will take it to the next level and seek out lesser known U.S. and foreign companies.
Now is the time to start doing your homework by creating a wish list and starting to accumulate some of these assets. By doing so, you are likely to increase the cash flow from your investments, and hedge yourself against the inflation that can erode your purchasing power. To me that's the ultimate success story for Baby Boomers in their retirement years.
One way to think about a global cash-flow strategy is to start with countries that are not printing money to prop up their economies. Here are four good ones: Canada, Norway, New Zealand and Australia. Here are some examples of what's out there.
Sydney Airport Holdings
(SYD: ASX). Right now the Sydney Airport, a public company trading in Australia and on the Frankfurt Stock Exchange, is indicating a yield of 22 cents annually or about 9%. In 2004, it was paying 12 cents a share. Even during the worst year of the financial crisis, 2009, it paid 21 cents a share.
EnerVest Diversified Income Trust
(ENDTF: TSX) is a diversified, closed-end fund that invests in income-producing and growth-oriented companies that trade primarily on the Toronto Stock Exchange. The fund makes distributions monthly and is currently indicating a yield in the neighborhood of total 2012 distribution of $1.20 a share (the same as 2010, 2011). With a current price of $12.23, the yield is about 9.8%. The top five equity holdings as of April 30 were
Royal Bank of Canada
Telecom Corp. of New Zealand
( NZT). Telecom is the largest provider of telecommunications and IT services in New Zealand. The company has paid a quarterly dividend continuously since at least 2002. Right now, the stock has been paying more than 6%. With an economy unburdened by government intervention in the money supply, many are speculating that New Zealanders are not going to stop talking anytime soon.
is a Norwegian company headquartered in Bermuda that provides offshore drilling and well services. Currently the company is indicating a 7% annual yield. SeaDrill trades on the
New York Stock Exchange
and the Oslo Stock Exchange.
Yes, there's a lot of negative news out there. And if that's all you focus on, that's all you're going to hear. But now is the time to take advantage of bad news. The bottom line is you must not give up on maintaining the purchasing power on your money over time. The show must go on, and that means basic companies, providing basic goods and services that people must have, is one way to provide yourself a hedge during the turbulent times.
By the way, I don't own any of the stocks for funds mentioned here. Some of my clients do, however.
Finally, next week I'll be sitting down with
-investor Jim Rodgers who co-founded the Quantum fund with that other legendary investor George Soros. Jim and I will be discussing "real asset investing" casually as part of a panel discussion at Temple University. I'll be sure to report some of the insights I learn from Jim in a future column. Stay tuned.
At the time of publication, the author held no positions in any of the stocks mentioned.