Time to Consider the Land Down Under

NEW YORK ( TheStreet) -- Combing the world for great investment themes can be like finding a needle in a haystack. Also, there are usually a ton of variables to digest.

There's nothing like the present moment realities to help us narrow down the choices. (However, if you learn of a very reliable financial clairvoyant -- now there's a new meaning for "FC," which usually stands for "financial consultant" -- please forward me the name and track record.)

Consider these facts, as of Friday:
  1. Precious metals, including gold, silver, platinum and palladium, have staged an impressive rally off the 2013 lows. This has helped the miners and producing companies.
  2. Oil is around $107 a barrel for West Texas Intermediate and over $110 for Brent International.
  3. The central banks of the U.S., Japan, Europe, Brazil, Australia and even China have created "safety nets" under their economies with ongoing monetary easing and record low interest rates.
  4. Australia's central bank reduced its key interest rate (similar to the U.S. Federal Reserve's Fund Rate) to a record low 2.5% on Aug. 6. This was the eighth move in an easing cycle that began back in November 2011 and lowers interest rates below levels seen during the global financial crisis.

These four facts are some of the most important reasons why I'm anticipating a rebound later this year in the Australian economy. The most powerful of the above facts is the fourth one.

The perception earlier this year that Australia's lucrative mining and natural resource industries had peaked motivated the Royal Bank of Australia (RBA) to aggressively cut its key interest rate. Another quarter point reduction to 2.25% is expected before the end of the year.

This has caused the Australian dollar to fall over 15% this year and after the last interest rate cut it traded at less than 90 cents U.S., which was a three-year low against the U.S. dollar. That's part of the good news about this investment theme.

A lower Aussie dollar makes exports more competitive, which, in turn, lifts profits for miners who price their products in U.S. dollars. It brings a sigh of relief to one of Australia's biggest companies, BHP Billiton ( BHP).

As the one-year chart below illustrates, the price of BHP shares fell hard but appear to be staging a rally. It also shows how the company's return on invested capital is a robust 32%.

BHP Chart BHP data by YCharts

Analysts have estimated that for every U.S. penny the Aussie dollar falls, it adds around $100 million Australian dollars to BHP's bottom line. The central bank knows this and is signaling more easing ahead.

"The Board has previously noted that the inflation outlook could provide some scope to ease policy further, should that be required to support demand," RBA Governor Glenn Stevens said after the last rate cut.

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