A Lower Dollar is Good For Canada

The Global markets be it equities, commodities, or currencies turn on a dime with no one knowing who has to unwind heavily leveraged positions at a given moment creating spikes to the upside or downside. I had been saving my thoughts about our dollar for a few days and thought it would be appropriate to comment on it as the intraday high was more than 5% higher than yesterdays close. 

The strength in commodity prices along with the Fed lowering interest rates in the US combined to provide the massive uplift to our dollar which has trading at close to 95 cents at the beginning of the month to a low of 77.68 before reversing trend.

Commentators were exuberant today about the dollars rise coupled with the first two day rally on the TSX in recent memory.  A higher dollar is great for snowbirds and those wanting to buy a second property in the US as well as imports from the US as goods coming in will be cheaper.

However, I would argue that I would rather see our dollar at 78 – 80 cents vs. par over the longer term. Our exports will be more competitive ensuring a lower unemployment rate which means a lower tax burden on everyone. Ontario is currently in a recession and needs any break it can get to maintain jobs. GM and Chrysler are discussing a merger that will eliminate 35,000 jobs. A lower dollar would mean that Canadian workers would have a better shot of keeping their jobs although the US government may put some conditions on who gets laid off in order to qualify for some bailout funds.

In Alberta, our oil and gas companies would be finding things more difficult with oil at $65 a barrel and natural gas at $6. However, a 78 cent dollar creates $84 oil and $7.80 natural gas if you bring our dollar back to par. 

If you are diversified in your invesment holdings and have US equity and international holdings, you have also seen a decline in value due to todays rise in the Canadian dollar. All this to say, we should be pleased to have our dollar where it is. We should be happy to have more jobs and taxpayers rather than saving a few bucks on our next trip down south.

Your thoughts and comments are always welcome.

Some Hope Getting Little Attention

This past Friday, I was looking at the Reuters newsfeed that provides alot of the data that I rely on daily. Of the most recent 50 stories, all but one related to the negative state of the economy, stock market, etc…

What started the domino effect was the decline in US housing prices as sub-prime mortgage rate increases created a slew of foreclosures. Well, we may just be reaching the end as one headline stuck out for me which was that home sales in the US saw their biggest increase since 2003 and that inventories dropped to their lowest level since February. As well, foreclosures declined month over month by 12%.

To view the story, click here

The largest asset for most people is their home. If home prices begin to stabilize, we may actually start to see some stabilization to our financial system as mortgage write offs decline and prices of mortgage backed securities and other fixed income investments return to more normalized values.

What are your thoughts? Do you think we are nearing the bottom of the housing problem?

Warren Buffett…New York Times Commentary

As history has shown, the biggest stock market gains usually come after the largest declines. This time has been no exception with the TSX up 5.5% for the week for the biggest weekly gain in 6 years. 

This article will no doubt be getting some feedback on airwaves around the world and was passed on to me by a couple of mutual fund companies where Warren Buffett discusses his own personal investment strategy during  these tumultuous times. I have provided a link to this quick read and hope you will find it informative and comforting.

The 3 posts that I have put forward this week all have links to 3rd party information of which the NY Times was responsible for 2 of them. I may be biased but I believe they are all very useful and informative during these volatile times.

To read the article on Warren Buffett’s investment strategy, you can click on the link here

Your thoughts and comments are always welcome.

 

Have a great weekend.

Credit Crisis and its Overall Impact


The stock markets around the world have been less than stellar but the underlying problem that is affecting the market is credit. The inability to borrow money to buy a car or a house will lead to negative GDP growth which means recession.

One of the most astute economists in Canada, Clement Gignac of National Bank provided some commentary touching on everything from the markets to future economic growth, mortgage rates, housing prices and the job market. Things that affect everyone, not just investors.

I felt that it would be beneficial to provide the video commentary as it really touches on all aspects of economic life for Canadians and to a lesser extent Americans.

To listen to this video commenary, please click the link to the podcast section of our site and click the Clement Gignac Commentary link.

http://rothenbergcapitalmanagement.com/index.php?id=183

Your comments are greatly appreciated.

Where it all Started…..

The downturn in markets that we have been experiencing has been difficult and many questions are being asked about how Wall Street and banks around the world leveraged their portfolios and how the US government allowed sub-prime borrowers to buy a home with 100% or more of it being financed.

 

I was emailed an article that was re-printed from the New York Times. The original article was dated 1999 and discussed a new initiative that the Clinton administration wanted to be put in place in order to allow every American to live the dream of owning their own home.

To see the article, click here as it is very interesting.

If we only knew then what we know now. Your comments are greatly appreciated.

Some Good News Can Create A Spark

Listening to the Business News Network, I heard that we had one of the worst weeks since 1937 in the markets. Although I didnt verify the statistics. I am feeling somewhat beat up as are most investors and professionals with my afterwork workouts providing me with some sanity.

I keep telling our clients to maintain the course and hold on if they can as the biggest returns take place after the biggest declines. With each passing day, the message seems to get a little old. That being said, I see some positives based on some headlines that get put on the back pages as well as some true valuations that are staring at me right on my trading screen.

First, some of the good news. Walmart announced same store sales growth of 2.4% for the month of September showing that spending by the consumer is not totally gone. To confirm this, Costco announced their fourth quarter results showing that sales increased 16% while same store sales grew by a very impressive 9% while earnings grew by 7%.

Here in Canada, new home starts grew unexpectedly as most analysts were expecting a decline. These figures don’t indicate a depression by any stretch. Couple that with lower interest rates to encourage spending and a $700 billion bailout package that has not yet been fully utilized will inject much needed liquidity into the banking system which should encourage lending to business, individuals and bank to bank.

The bid/ask spreads on many companies are huge right now and in some cases a dollar or more rather than a couple of pennies. The yields on Real Estate Investment Trust has gone through the roof with yields in the 10% – 30% range depeding on the quality. However, some good quality REIT’s that have stock buyback programs in place are yielding 15%. You can’t tell me that the value of their Real Estate has dropped 40% in the last month from an already depressed price. 

Buying will come back in to the marketplace and people will only dream of buying shares at these valuations. Your comments or thoughts are greatly appreciated.

Market Turmoil And Recovery Time

Markets rise, fall, and rise again. Looking back at past turmoil, we have the 1987 crash, the Asian crisis, the Russian crisis, 9/11, the oil embargo of the early 1970’s.

Each decline brought on panic and despair as we watched our savings decline and the media didn’t help with their 24 hour a day coverage of the unfolding events. The knots in our stomach were the same regardless of what prompted the decline.

They have recovered in time and a few companies including Fidelity have been kind enough to provide a volatility calculator where you can look at domestic or international markets and see how they reacted after a market decline. 

The drops you have been seeing lately go beyond the fundamental values of individual companies and buying support will come back into the market.  Here is a link to the calculator where you can view the results of past market declines. 

Should you have any comments or concerns, we would be happy to hear from you.

http://svc006.syd1-0017dpq.server-web.com/market_crises.aspx