The US and Canadian dollars are at par

[Meadbh]

The Associated Press: Canadian Dollar Reaches Parity With U.S.

 

[REWahoo]

Oh no! Does this mean I'll have to give up my Moosehead and go back to drinking Lone Star?

 

[youbet]

Oh no! Does this mean I'll have to give up my Moosehead and go back to drinking Lone Star?

And worse...... the so-called "imported" Guinness we drink down here is actually made in Canada, not Ireland. I'll bet Liam down at the pub is thinking about raising prices already!

At fishing camp last summer near Red Lake, Ontario, the owner said he was already seeing an impact on business from the diminishing value of the dollar up there. It's moved additionally since then. Wonder what the total impact of this on USA tourism to Canada will be?

Of course, Canadian bux will be flowing like water down here. And that's what floating exchange rates are supposed to do I guess.

 

[bssc]

We are going to be in Canada for three days. It will make things easy to figure out.

 

[youbet]

We are going to be in Canada for three days. It will make things easy to figure out.

Depending on where we were in Canada, we sometimes had enterprising Canadian entrepreneurs try to charge us in US dollars for items priced in Canadian dollars, so you'd have to stay on your toes. Now..... no problem.

 

[Meadbh]

And then there's the Euro......

http://www.nytimes.com/2007/09/20/b...gin&adxnnlx=1190325674-onLV750aiaefPRL7LNIqTw

 

[bosco]

It sure makes it tough to invest if you live in Canada and have a lot of assets in the US.

YTD, I am up nearly 15% measured in $US, but about dead even in $CD.

Since my pensions are denominated in $US, every time the loonie rises, I get a pay cut. I try to compensate by skewing my investments away from the US market, and weighting natural resources heavily. It helps somewhat....

 

[FIREd]

Meadbh,

Don't even talk about the Euro... I just bought a new computer for my mom who is retired in Europe, and while the price in Euros seemed fine (800 euros), the price in dollars after currency exchange and fees is giving me heartburn... (almost $1200).

 

[ShokWaveRider]

Thanks GWB for DESTROYING our currency for the benefit of big Business and the expense of our middle class............. Me!

Americans are 50% poorer since GWB came to office. DO THE MATH!

"We support a strong Dollar" they said... my @$$. Governments says what they want us rabble to hear and do what benefits their own pockets and retirement.

You would think we would learn. Nope, the majority of us are simply sheep that follow the leaders and suck it up with a smile.

At least in Canada and the UK you can chuck your useless governments out if they fail. Here we just encourage them, continue to fund them, and bleed profusely for up to 8 years. When will it end? When we have a $0.50c dollar?

If you calculate the difference in the price of the stock market and oil prices with relationship to the dollar value over the same period. We are no better off economically at all. You bet the price of oil is high. Double what it would be if we had a currency that was worth something. If I was selling oil I would want more or I would ask for payment in Euros.

There is a reason why the currency is getting greener, MILDEW....... vanquishing at the bottom of the chasm in the stream, holding on to a raft made out of porous palm tree wood imported from Iraq and Afghanistan. Not China, we get food and lead from them.


Off Soap box....



SWR

 

[chinaco]

Thanks GWB for DESTROYING our currency for the benefit of big Business and the expense of our middle class............. Me!

Americans are 50% poorer since GWB came to office. DO THE MATH!

December 1999 the Euro was almost on par with the USD .98 E to 1 $.

No offense Canucks... but now we are on par with the Canadian $. What's next, par with the Mexican peso?

How far have we fallen.

 

[Martha]

Well, I am seeing a lot of vehicles lately in town with Ontario license plates. Good for business in northern Minnesota.

 

[Nords]

Thanks GWB for DESTROYING our currency for the benefit of big Business and the expense of our middle class.............
Americans are 50% poorer since GWB came to office. DO THE MATH!

Could it be an asset allocation problem? In the last seven years we've heavily tilted our ER portfolio to international investments and small-cap value stocks.

The ER portfolio has doubled since then. I don't think it's a coincidence.

As long as our portfolio keeps rising faster than our inflation, and as long as the vast majority of our expenses are in dollars, I don't see a problem.

 

[MasterBlaster]

Thanks GWB for DESTROYING our currency for the benefit of big Business and the expense of our middle class............. Me!

Americans are 50% poorer since GWB came to office. DO THE MATH!

SWR:

Tell us what you really think

Your crediting for GWB's job creation strategy is misplaced. You can thank anyone who bought a foreign anything car/big screen TV/clothing/toys or the oil to use and prioduce those things for the dollar situation. Perhaps even you have some influence here.

Stay tuned cause things will likely get worse.

Also a longer term perspective on the dolar exchange just might be enlightening for you.

 

[barbarus]

In part, thank Uncle Ben's Bailout. You ain't seen nothin' yet.

One problem is that there are some goods that are only made overseas. One cannot purchase American made products of some types.

It's called inflation kids and it's great for debtors and real bad for savers. It is also something the gvmt wants to promote called monetizing the debt. Don't listen to what they say, watch what they do.

 

[barbarus]

Oh, and least Barbarus forgets, a little, light, evening bedtime reading.

Bloomberg.com: Europe

 

[cyclone6]

In part, thank Uncle Ben's Bailout. You ain't seen nothin' yet.

One problem is that there are some goods that are only made overseas. One cannot purchase American made products of some types.

It's called inflation kids and it's great for debtors and real bad for savers. It is also something the gvmt wants to promote called monetizing the debt. Don't listen to what they say, watch what they do.

Well said. Inflation is already here...its just not reflected strongly in the "core" rate yet. Whenever I hear inflation is contained, with oil at $80+ per barrel, gold over $740, milk at $4.00/gal, wheat at an all-time high - I just laugh. Whats excluded from the "core", uhh...just the "volatile food and energy". Only the basics of life.

Uncle Ben's 1/2 point cut sent the market spiraling upwards. Its temporary. But it did send the $ falling further, and any additional cuts will just worsen the dollars decline. This is why the FED is really in a box. Prices are already at very elevated levels, and a falling dollar is in and of itself an inflationary factor since we import 6% of GDP more than we export. This is before any anti-dollar actions by foreign central banks. How long do the Chinese and Japanese hold dollar assets that day after day, week after week keep going down?

I believe a recession is imminent. The choice before the FED is simple - choose which type of recession. Inflationary, or deflationary. If they continue to cut rates, the dollar plummets (especially if the Asians start selling dollars, oil is repriced in Euros, or there is just a widespread run on the dollar), prices skyrocket, and we return to the '70s stagflation days.

Or the FED decides that inflation can't get out of control, which they can only control by raising interest rates - significantly. Deflation follows as consumer spending dries up - as seen in Japan 1990-2007. Or US 1929-1941. Remember that the dollar was at 20+ some odd year lows before the cut. This is what Greenspan talked about the last couple of days. He said something on the order of a 8+% yield on LT govt bonds...

How to invest now? I don't know. But I do believe this - the FED and we investors are in the box. No easy answers. But if the FED continues to cut rates as the economy worsens, then I'm moving to a TIPS dominated portfolio and sitting on the sidelines for awhile. If no more cuts are coming, then a bond denominated portfolio. And a good chunk of money in an absolute return fund relying on a manager who (hopefully!) knows a hell of a lot more than I do.

And anyone who stays heavily invested in equities with this storm headed our way, well, don't start crying when the market retracts 25-50%.

Its time to pay for the long running excesses and imbalances in our system. One way, or the other.

 

[kumquat]

No offense Canucks... but now we are on par with the Canadian $. What's next, par with the Mexican peso?

No offense taken. It's not the first time I remember that the green back was monopoly money. Can you make it recover? That's what matters

 

[FIREd]

Cyclone,

This is why the FED is really in a box.

I completely agree with you on that. The FED has backed itself into a corner and whatever it decides to do, it's gonna hurt.

How to invest now?

If you think the dollar is about to tank severely, then you should invest in a global bond fund (unhedged). The global bond fund I invest in is directly taking advantage of the fall in the dollar by investing in bonds denominated in foreign currencies that are likely to appreciate as the dollar falls, but also in gold stocks to take advantage of rising gold prices as the dollar weakens.

 

[Grizz]

Oh happy day!! I genuinely feel badly for any of you folks out there striving to become FI/RE with U.S. dollars. Inflation is hurting you despite your best efforts to save, but since these are obviously circumstances beyond my control, I can't help but be a bit excited about some opportunities and changes that may present themselves to Canadians.

We Canucks have been the poor country cousins for a long time. Our dollars haven't been at par since 1976. Now I can afford to travel south, our sports teams (hockey) won't have to re-locate to the southern states because players are paid in U.S. dollars, and many items should become less expensive here. Also, if the Fed's recent rate cut doesn't stop the housing price declines in the States, well, it's building up to be the perfect storm which may allow myself and lots of soon to retire Canadian boomers to pick up a bit of discount real estate someplace where I'll never be able to build a snowman in my front yard.

 

[chinaco]

Oh happy day!! I genuinely feel badly for any of you folks out there striving to become FI/RE with U.S. dollars. Inflation is hurting you despite your best efforts to save, but since these are obviously circumstances beyond my control, I can't help but be a bit excited about some opportunities and changes that may present themselves to Canadians.
...

Well, at least somebody on our continent gets to enjoy it.

 

[greg]

Well, at least somebody on our continent gets to enjoy it.

And don't forget $100/barrel oil is just around the corner. With the distances between points of interest in Canada a bit greater, travel expenses rise too. Living in Canada will be like living in Texas . . . but colder. And fewer varmints.

 

[Meadbh]

We have 20-30 years' worth of oil in the Alberta tar sands that we will be happy to sell you. When that runs out, we've got a lot of hydroelectric power just waiting to be tapped.

 

[greg]

We have 20-30 years' worth of oil in the Alberta tar sands that we will be happy to sell you. When that runs out, we've got a lot of hydroelectric power just waiting to be tapped.

You don't have to tell me. The nice part right now is that one doesn't have to convert Canadian divis into [-]real[/-] Merkin money with everything 1:1. At least this week. Everything's sweeeeeet.

 

[Grizz]

I believe that the outlook for the U.S. dollar is grave. A lot of people (including me) around the globe have been accustomed to being able to use the U.S. dollar. For as long as I can remember, it was treated as a rock solid asset, but one should remember that, after all, it is really just paper that signifies a trust in America's solid base of gov't and economy.

America doesn't produce substantially for export anymore. Their natural resources are mostly used at home, and they import lots more items and commodities than they export. It's a model that can't work. The dollar's value is now only supported by the hope and speculation that the country can somehow pull itself out of debt, and to a lesser extent that the war machine is huge and can, for better or worse, impose Americas will.

If those U.S. dollars that are stuffed under mattresses and held by foreign gov'ts overseas are traded in for the currency of a democratic country with a responsible spending system, whose economy is based on real exportable assets, then I fear the worst for the U.S. citizens, and especially for those who attempt to save money. For now, it is in these foreign gov'ts best interest to hold onto and keep accepting the U.S. dollar because the U.S. buys nearly everything that they manufacture or produce. Eventually, (and I mean soon), some nation will reach a point where they make the decision to not sell to the States anymore since every dollar that they take in is devaluing at a fast rate, and when that happens others will follow. Those nations will sell those U.S. dollars and probably buy Gold or the Euro or some other more stable currency with whatever they get for the dollars. Sure it will badly hurt their manufacturing and export industry but accepting monopoly money for your real goods is insane.

With the Fed rate cut, and potentially more cuts to come, coupled with Americas importing economy, I don't see anything but inflation of the U.S. dollar. The cuts do keep Wall Street on life support though.

The only medicine that will bring value back to the dollar, and to bolster Americas worldwide image as a responsible common sense nation tastes very bad. Interest rates must be raised a lot. This would certainly hobble the American economy, and sadly the citizens who for decades have become accustomed to the best standard of living in the world by far, would be in for some very humbling times until the economy sorts itself out and the hangover from the spending binge ends.

 

[FIREd]

This would certainly hobble the American economy, and sadly the citizens who for decades have become accustomed to the best standard of living in the world by far, would be in for some very humbling times until the economy sorts itself out and the hangover from the spending binge ends

Grizz,

thanks for your optimistic analysis of our economic future here in the states. But before thinking that any upcoming crisis would be solely an American one, I urge you to step back and look at the global picture. In the business world in Europe, they have a saying, which translated loosely says "when America sneezes, the rest of the world catches a cold". What it refers to is the fact that like it or not, America is still by far the largest economy in the world. If that economy takes a hit, it will be felt worldwide. China, India and Europe's economies are relying on export industries that are heavily dependent on Americans to buy their products; they in fact have been the beneficiaries of what you call our spending binge. If our economy slows, these companies will feel the pinch (they alrealy do because of the weak dollar, and that will only get worse as the dollar weakens). They might have to slow down their production lines, lay off people and their country's economic growth is going to take a hit. If global growth takes a hit, then global demand for commodities will decline (as will commodity prices). Countries that heavily depend on exporting commodities will see their revenues decline as a result. Your good country of Canada would be doubly affected by any economic crisis in the US: 1) your exporters would lose a big chunk of their business and 2) your economy would take a hit from lower global demand for commodities since Canada is an important producer of natural ressources. So I believe this is in no one's best interest to let things go too far in the wrong direction. Last month we had another reminder of the interconnectivity of our global economies: when the subprime mess hit the US, the pain was felt far beyond our borders.