I'm certain that 10 years from now, on the other side of the current eurozone debt crisis, higher demand and global scarcity will lead to higher prices for a wide range of commodities, such as corn and copper. If you've got a long-term perspective and can stand the current pain, I think betting on that long-term trend makes sense.
But it doesn't make as much sense as betting on the long-term scarcity of income-producing assets with solid credit ratings. (And for this column, I'm thinking of dividend stocks.)
I'm absolutely certain that those will be in higher demand in that time frame and that they will be in even shorter supply than corn or copper. And, unlike many commodity plays, these income vehicles pay, well, income. Now.
Look at the trends.
The number of AAA-rated bond issuers in the world continues to shrink -- even the number of AA-rated issuers is falling. On Tuesday, Fitch Ratings downgraded Japan two notches to A+. And how long do you think the U.S. AA debt rating is going to last?
Prices of bonds will fall with declining ratings -- which will send yields upward -- after delivering big losses to bondholders. And that's not the only danger. The currencies of deeply indebted countries will depreciate at the same time. You might get paid more dollars, yen or euros, but they'll be worth less.
Jim Jubak
And finally, as the world ages, pension funds, insurance companies and the other institutions that are on the hook to deliver retirement payouts will have an increasing appetite for exactly the kind of income-producing assets that are in short, short supply: highly-rated, high-yielding, stable-currency bonds and dividend stocks.
Know where I'd like to put some of my money to profit from the thirst for income? In the high-dividend stocks of highly rated companies that do business in the world's strongest currencies.
And just in case you agree, I've put together a 10-name portfolio of exactly that kind of stock.
The best deal for your dollar
Why start any kind of a portfolio, even a dividend portfolio, in this scary market? Because when stock prices are depressed, you can buy the most dividend for your investing buck.
And the dividend bargains are even more attractive when you consider that many of the world's strongest currencies are either in countries near the eurozone -- where stocks have taken a pounding in the eurozone debt crisis -- or in commodity economies where stocks have been hit hard by the strength of the U.S. dollar and fears of a slowdown in China's economy.
So what are likely to be the world's strongest currencies in the long run? First, I'd look to countries that run their government budgets and their financial systems very conservatively. That means Norway, Sweden, Singapore and Chile.
Second, I'd look to countries with commodity dominated economies that have a record of coping reasonably well with the wild swings typical of a commodity economy. I'd include Canada and Australia in that group.
Third, I'd be willing to risk a position or two on stocks in countries where the trend in the credit rating is upward and where the fiscal policies of the government show encouraging discipline. Those would include Colombia, Peru and Indonesia. (But be aware that the risk of these countries going off the track is higher; the history we can look at is relatively short.)
Stocks mentioned in this article include: Bradken (BRKNF), Caterpillar (CAT), Joy Global (JOY), CorpBanca (BCA) and Banco Santander (STD).
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