As I said in one of my previous PROFIT CONFIDENTIAL articles, there is not much else to talk about in Canada other than our soaring loonie. This time, instead of discussing the often depressing and certainly overly publicized macroeconomic implications, I thought it might be good to talk about how Canadians can have fun with it.
So, how about finally becoming a snowbird? Or how about that always dreamed about trip to Disneyland? Or how about a property in troubled spots in the U.S. real estate market, such as, oh, I don’t know, Arizona? And, while talking about investments, how about stuffing your portfolio with some undervalued quality U.S. stocks? And let’s not forget going on a long overdue shopping trip either by driving to the U.S. or by Internet-shopping in the U.S. in the comfort of your home.
And while economists and politicians lament about the dangers of supporting too strong a currency, Canadian shoppers and investors finally have the pleasure to adjust upward to more purchasing power awarded to them by a strong loonie, even after all the exchange fees.
Just as long as you remember that our loonie has been performing well in comparison to the U.S. dollar, but not so much when compared to other world currencies such as the euro. To illustrate, about a year ago, CDN$100.00 could buy about 70 euros. Today, it can buy approximately 73.5 euros. Sure, our dollar has appreciated even against the euro, but not as much as compared to the greenback.
Now, I can’t deny that, if you bought U.S. securities about a year ago when the greenback tried to stage a comeback, you are not hurting right now, as the loonie has gained significant momentum. But there are ways to offset this by investing some money back into U.S. assets at much, much lower prices. Just as long as we are clear that U.S. stocks are not exactly undervalued from the fundamental point of view, but they are on the cheap side when paid for with Canadian dollars.
Plus, when the loonie starts retreating to more appropriate levels, as is ultimately expected, your U.S. assets will start to appreciate nicely. Basically, you’d have figured out how to buy low and sell high, the longest lasting mantra of market timers. (Note that I don’t believe markets can be efficiently timed, but overall adjustments of the portfolio can be done when trends are so clearly displayed.)