Connecting the Dots


Connecting the Dots, Patrick Watson’s online newsletter, now lives exclusively on the Mauldin Economics website.

Please bookmark this page so you can always find his latest take on the geopolitical, cultural, and technological forces decentralizing and disrupting the global economy.

The Dollar Dog Ate Corporate America’s Homework: 6 Casualties of the Strong US Dollar

February 2, 2016

“At current spot rates, we would expect a significant impact to revenue and profit again in 2016.”
—Martin Schroeter, CFO of IBM

We’re in the middle of earnings season, and one of the themes I am hearing over and over from American companies is how the strong dollar is killing their profits.

How strong? Since mid-2014, the US dollar has appreciated about 15% against a basket of trade-weighted foreign currencies. In 2015 alone, it was up 12%, the biggest one-year gain since the 1970s.

If you’ve traveled abroad recently, you know exactly what I’m talking about.

While a strong dollar is a positive for vacationing Americans, it is bad, bad news for American companies with significant international business because it makes US exports more expensive to foreign buyers and reduces the conversion of foreign profits from foreign currencies into dollars.

And it is only going to get worse. Wall Street economists predict that the US dollar will appreciate by another 4% against the euro and by another 6% against the Japanese yen.

In the third quarter of 2015, the strong US dollar decreased the average American company’s earnings by 12 cents per share, and a growing list of American companies are suffering even more dollar-related pain.

Dollar Casualty #1: Kimberly-Clark

Kimberly-Clark sells a lot of Huggies diapers all around the world. However, it reported that its 2015 revenues were down by 6%. Worse yet, it warned Wall Street that its 2016 revenues would fall by another 3%.

That sounds like business is bad, but Kimberly-Clark is actually pulling in more sales than ever. It is just the currency impact that makes its business look awful—if it weren’t for the effect of the strong US dollar, management said sales would actually be up 3%–5%.

Dollar Casualty #2: Procter & Gamble

Procter & Gamble gets 60% of its revenues from outside of North America, so it is one of the most vulnerable companies to a rising US dollar.

The company reported a 9% drop in quarterly revenues to $16.9 billion because of the dollar.

Dollar Casualty #3: Johnson & Johnson

Johnson & Johnson said its revenues were reduced by 7.5% in 2015 by currency losses.

Dollar Casualty #4: Monsanto

Monsanto is the world's largest seed company and gets 43% of its revenues from outside the US. The company just reported a loss for the fourth quarter of 2015, citing the strong dollar as one of the main reasons. It also cut its 2016 profit forecast from $4.44–$5.01 per share to $4.12–$4.79 per share.

Dollar Casualty #5: DuPont

Chemical company DuPont reported a quarterly loss of $0.29 per share, compared with a net income of $0.74 per share a year earlier. Sales slid 9.3% to $5.3 billion, but without the effect of the strong dollar, sales would have been down only 1%.

A 1% decline isn’t good, but a 9.3% is horrendous.

Dollar Casualty #6: 3M

3M, the maker of Post-it Notes, gets about two-thirds of its revenues from outside the US, and that global reach has cost it dearly. 3M reported an 8.3% drop in profits to $1.66 per share and expects the currency effects to reduce this year’s earnings by 5%.

The Dollar Dog Ate My Homework”

Those are just a few examples from last week. We are certainly going to hear a lot more companies blaming the strong dollar for disappointing earnings.

And those the-dog-ate-my-homework excuses are going to continue for the rest of 2016.

Here’s what you need to do: Take a look at every stock you own and find out what percentage of the company’s revenues comes from outside the US.

If the answer is more than 40%, you should consider dumping the stock before the dollar shrinks profits (and stock price) even more.

There are always exceptions—but fighting the strong dollar is going to be a battle that your portfolio is going to lose.

I hope you’ll come and see me at the Strategic Investment Conference, May 24–27 in Dallas. The blue-ribbon list of speakers includes Richard Fisher, former president and CEO of the Dallas Fed… Niall Ferguson, historian, author, and award-winning filmmaker… David Rosenberg, chief economist at Gluskin Sheff… Neil Howe, generational researcher and author of The Fourth Turning… and many more. Click here for the full list.

Tony Sagami
Tony Sagami

Discuss This

We welcome your comments. Please comply with our Community Rules.


Use of this content, the Mauldin Economics website, and related sites and applications is provided under the Mauldin Economics Terms & Conditions of Use.

Unauthorized Disclosure Prohibited

The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Mauldin Economics reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited.
Participation in such activity is grounds for immediate termination of all subscriptions of registered subscribers deemed to be involved at Mauldin Economics’ sole discretion, may violate the copyright laws of the United States, and may subject the violator to legal prosecution. Mauldin Economics reserves the right to monitor the use of this publication without disclosure by any electronic means it deems necessary and may change those means without notice at any time. If you have received this publication and are not the intended subscriber, please contact


The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, ETF 20/20, Just One Trade, Transformational Technology Alert, Rational Bear, The 10th Man, Connecting the Dots, This Week in Geopolitics, Stray Reflections, and Conversations are published by Mauldin Economics, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments.
John Mauldin, Mauldin Economics, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.
Mauldin Economics, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Mauldin Economics publication or website, any infringement or misappropriation of Mauldin Economics, LLC’s proprietary rights, or any other reason determined in the sole discretion of Mauldin Economics, LLC.

Affiliate Notice

Mauldin Economics has affiliate agreements in place that may include fee sharing. If you have a website or newsletter and would like to be considered for inclusion in the Mauldin Economics affiliate program, please go to Likewise, from time to time Mauldin Economics may engage in affiliate programs offered by other companies, though corporate policy firmly dictates that such agreements will have no influence on any product or service recommendations, nor alter the pricing that would otherwise be available in absence of such an agreement. As always, it is important that you do your own due diligence before transacting any business with any firm, for any product or service.

© Copyright 2018 Mauldin Economics