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  • Canadian Dollar peaked?

    If commodities have peaked then the Canadian dollar has peaked too? The analysts are predicting a decline into 2009. Up until now it was always parity or an increase. Is it time to:
    1) Move CAN funds into US currency???
    2) Move CAN funds into other currency
    3) Hold?




    --------------
    Oil, gold and other raw materials account for half of Canada's exports.
    Crude oil gained for a third week.


    Currency Forecast
    Canada's dollar will decline to C$1.08 by the first quarter of 2009, according to the median forecast of 38 analysts in a Bloomberg survey.






    http://www.bloomberg.com/apps/news?p...d=atj0Gd2wvLNg

  • #2
    Re: Canadian Dollar peaked?

    Originally posted by NFN_NLN View Post
    If commodities have peaked then the Canadian dollar has peaked too? The analysts are predicting a decline into 2009. Up until now it was always parity or an increase. Is it time to:
    1) Move CAN funds into US currency???
    2) Move CAN funds into other currency
    3) Hold?




    --------------
    Oil, gold and other raw materials account for half of Canada's exports.
    Crude oil gained for a third week.


    Currency Forecast
    Canada's dollar will decline to C$1.08 by the first quarter of 2009, according to the median forecast of 38 analysts in a Bloomberg survey.






    http://www.bloomberg.com/apps/news?p...d=atj0Gd2wvLNg
    As you note, the Canadian $ is highly correlelated to commodities, particularly oil. It's the same bet, whichever way you happen to be leaning re: commodities right now.

    But note that the pundits have been predicting a peak in commodities/oil for many years now. Why would you think they are right this time?

    Comment


    • #3
      Re: Canadian Dollar peaked?

      Originally posted by NFN_NLN View Post
      If commodities have peaked then the Canadian dollar has peaked too? The analysts are predicting a decline into 2009. Up until now it was always parity or an increase. Is it time to:
      1) Move CAN funds into US currency???
      2) Move CAN funds into other currency
      3) Hold?




      --------------
      Oil, gold and other raw materials account for half of Canada's exports.
      Crude oil gained for a third week.


      Currency Forecast
      Canada's dollar will decline to C$1.08 by the first quarter of 2009, according to the median forecast of 38 analysts in a Bloomberg survey.






      http://www.bloomberg.com/apps/news?p...d=atj0Gd2wvLNg
      I note the article recommends selling Loonies against Yen and the Swiss Franc.

      The Yen and Swissie are also favourites of others like Jim Rogers, who are probably much smarter than I am.

      However, about two months ago I closed my approximately 15 month old long Swissie positions and took all my profits. My thesis at that time was that banking is more important to the Swiss economy than it is to the USA or UK, and the Swiss Central Bank and government would likely stop at nothing to protect that industry. Given the severe problems at UBS and some serious cracks at Credit Suisse, seemed to me that the potential for a Fed style bail-out was becoming quite high in Switzerland. And that was unlikely to be healthy for the traditional safe-haven currency that is still living off it's historical (but now absent) gold backing. So I sold.

      Yesterday this showed up on Reuters. The highlighted stuff sure sounds like it could have been lifted directily from a rubber-chicken lunch speech by any of the US Fed Governors. I don't see a strong case to buy the Swiss Franc at this point.
      SNB says ready to bail out banks in case of need
      Reuters, Friday May 23 2008
      ZURICH, May 23 (Reuters) - Switzerland's central bank on Friday opened the door to radical intervention to support the Swiss financial sector in case of crisis, including taking ailing assets from struggling banks onto its books.

      Swiss National Bank chairman Jean-Pierre Roth said the SNB would be prepared to help a struggling bank clean up its books if it threatened the Swiss financial system.

      "In exceptional cases and with political approval, they (central banks) may be forced to take excess positions from the private sector onto their books temporarily," he said in the text of a speech to be delivered in Geneva.

      The Bank of England and the U.S. Federal Reserve have already acted boldly in recent months to prevent crises in individual banks triggering a meltdown in a financial system already seriously destabilised by the credit crisis.

      The Swiss financial sector has been rocked by $37 billion in writedowns at its biggest bank UBS AG , making it Europe's worst subprime victim, and by almost $10 billion in writedowns at rival Credit Suisse .

      "With its solid balance sheet, the (Swiss) National Bank is prepared to take on risks if the financial stability of the country is threatened," he said. "In times of crisis, the imperative of preserving financial system stability override that of the profitability of a central bank."...

      http://www.guardian.co.uk/business/feedarticle/7536196


      Comment


      • #4
        Re: Canadian Dollar peaked?

        Originally posted by GRG55 View Post
        I note the article recommends selling Loonies against Yen and the Swiss Franc.

        The Yen and Swissie are also favourites of others like Jim Rogers, who are probably much smarter than I am.

        However, about two months ago I closed my approximately 15 month old long Swissie positions and took all my profits. My thesis at that time was that banking is more important to the Swiss economy than it is to the USA or UK, and the Swiss Central Bank and government would likely stop at nothing to protect that industry. Given the severe problems at UBS and some serious cracks at Credit Suisse, seemed to me that the potential for a Fed style bail-out was becoming quite high in Switzerland. And that was unlikely to be healthy for the traditional safe-haven currency that is still living off it's historical (but now absent) gold backing. So I sold.
        The important measure is whether Rogers or you are the wealthier. Remember: he who has the most toys wins, or so some seem to believe
        Jim 69 y/o

        "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

        Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

        Good judgement comes from experience; experience comes from bad judgement. Unknown.

        Comment


        • #5
          Re: Canadian Dollar peaked?

          Originally posted by GRG55 View Post
          As you note, the Canadian $ is highly correlelated to commodities, particularly oil. It's the same bet, whichever way you happen to be leaning re: commodities right now.

          But note that the pundits have been predicting a peak in commodities/oil for many years now. Why would you think they are right this time?
          The Canadian dollar is highly correlated to commodities but there are other factors at play. These other factors are what worry me. In Alberta it's like we're 2-3 years behind the US on trends and we just shadow them. When the housing boom was happening in the US you could still buy homes in Calgary for $300K and homes in Edmonton for $250. Calgary peaked first and then Edmonton a full year later and then the wave spread to Saskatchewan. There's NO shortage of land in any of these places, it is/was all a price run-up based on a shortage of labour.

          Now these places are all sitting on excess inventory. Not on the scale of the US but Canada never does anything to the scale of the US.

          It's just my instinct but it feels like the housing wave rippled into Canada and the crash is going to ripple in just like every other major US trend. If this is true then the US being at it's lowest and Canada at it's highest has created the largest delta and an economic blip resulting in dollar parity between the two countries. It feels like once things start to slow down again in Canada (and that's already predicted) that the Canadian dollar will revert to it's historical mean.

          Any thoughts?

          Comment


          • #6
            Re: Canadian Dollar peaked?

            Originally posted by Jim Nickerson View Post
            The important measure is whether Rogers or you are the wealthier. Remember: he who has the most toys wins, or so some seem to believe
            I am sure Rogers is much wealthier than I, at least monetarily. And although I like to understand the thinking of people like Rogers (although not as old as Buffett or Templeton, I regard him as one of the grizzled old market veteran clan) I never assume they are going to be "right". They are human just like the rest of us, even though they are rich. And as EJ has noted, we may be in a period unlike any the US has ever experienced before, so conventional unconventional thinking won't do (I'm starting to sound like Rumsfeld).

            You may recall that I posted some time ago (in answer to one of your questions in a post I believe) that I thought the Swissie would get to par with the US $ (and the Yen would probably go to 80). Well the Swissie is almost there, and I didn't see a need to get greedy given the UBS and CS balance sheet situations.

            I truly believe that Switzerland now has a big problem, much bigger than anyone expected given the previously sterling reputation of Swiss bankers. And maybe much bigger than many are yet willing to acknowledge. They may be forced to trash their currency, perhaps not against the US $ but against the Euro.

            Comment


            • #7
              Re: Canadian Dollar peaked?

              Originally posted by NFN_NLN View Post
              The Canadian dollar is highly correlated to commodities but there are other factors at play. These other factors are what worry me. In Alberta it's like we're 2-3 years behind the US on trends and we just shadow them. When the housing boom was happening in the US you could still buy homes in Calgary for $300K and homes in Edmonton for $250. Calgary peaked first and then Edmonton a full year later and then the wave spread to Saskatchewan. There's NO shortage of land in any of these places, it is/was all a price run-up based on a shortage of labour.

              Now these places are all sitting on excess inventory. Not on the scale of the US but Canada never does anything to the scale of the US.

              It's just my instinct but it feels like the housing wave rippled into Canada and the crash is going to ripple in just like every other major US trend. If this is true then the US being at it's lowest and Canada at it's highest has created the largest delta and an economic blip resulting in dollar parity between the two countries. It feels like once things start to slow down again in Canada (and that's already predicted) that the Canadian dollar will revert to it's historical mean.

              Any thoughts?
              Hard to say if Western Canada will experience a "crash" in real estate, but what you say about Alberta, Sask (& by extension Vancouver) real estate makes sense. Difficult to see how the levered real estate price run-up anywhere in the world cannot be negatively effected by the contraction in credit underway. I agree with you that Canada is not immune. SOunds like you are in Alberta or Saskatchewan and able to watch that real estate market up close?

              I am not sure I see a strong correlation between that and the relative value of the Cdn $. As you say, there's a lot of variables.

              I think there is certainly danger of a Loonie drop vs US$ if the Cdn Govt decides that political heat from Central Canada (Ontario and Quebec) manufacturing provinces is going to be too much going into an election.

              The minority Conservative Govt (I see they have FINALLY stopped calling themselves Canada's New Government :rolleyes needs the votes in those two provinces and may try to find some way to debase the currency before they lose a non-confidence vote and are forced to the polls. They want a majority, not another minority. BUt that is just a theory. I don't see any evidence that Carney is under any pressure to debase. Yet.

              Comment


              • #8
                Re: Canadian Dollar peaked?

                It's more than UBS and Credit Suisse to be concerned about. Back on 25 April EJ posted an item about "UBP in trouble?" in the Rumors section, so there's probably more going on below the surface, out of site.

                Central Banks announcing, as SNB did yesterday, that they are willing to degrade their balance sheets would not seem all that healthy for the currency. Would be interested if any European based finance sector iTulip members (Christoph von Gamm?) might weigh in with their views on the Swiss situation, if they are able to do so publicly.

                Comment


                • #9
                  Re: Canadian Dollar peaked?

                  Originally posted by GRG55 View Post
                  As you note, the Canadian $ is highly correlelated to commodities, particularly oil. It's the same bet, whichever way you happen to be leaning re: commodities right now.

                  But note that the pundits have been predicting a peak in commodities/oil for many years now. Why would you think they are right this time?
                  because the recession is starting to bite?

                  Comment


                  • #10
                    Re: Canadian Dollar peaked?

                    Originally posted by jk View Post
                    because the recession is starting to bite?
                    To butt in, and as usual irritate everyone, here's a picture of why the "Cheap" matters when talking about Peak Cheap Oil.



                    Crude oil prices are average annual in 2007 dollars per InflationData.com.

                    New American Dollars assumes a new national currency by 2030 priced in oil. :eek:
                    Ed.

                    Comment


                    • #11
                      Re: Canadian Dollar peaked?

                      GRG,

                      In a discussion we had nearly a year ago, I had pointed out that Switzerland's currency was 40% dollar based.

                      As it turns out, that 40% appears to be all MBS and CDO.

                      So far, Russia still looking good...

                      Comment


                      • #12
                        Re: Canadian Dollar peaked?

                        Originally posted by FRED View Post
                        To butt in, and as usual irritate everyone...
                        Lukester would approve of that part... ;)

                        Originally posted by FRED View Post
                        ...here's a picture of why the "Cheap" matters when talking about Peak Cheap Oil.
                        ...and perhaps even this part.

                        Originally posted by FRED View Post
                        New American Dollars assumes a new national currency by 2030 priced in oil. :eek:

                        Now that Finster has convinced us that Dollars are just another commodity (albeit without the customary lagging supply constraints) one can imagine "oily dollars" taking their rightful place alongside jk's " greasy wool" in an index??

                        Just askin'

                        Comment


                        • #13
                          Re: Canadian Dollar peaked?

                          Originally posted by jk View Post
                          because the recession is starting to bite?
                          Certainly possible for that reason jk.

                          And more or less how it's always worked in the past (US recession slows raw material & energy demand, prices fall, falling dollar sets stage for reflation recovery in US economy, US $-linked economies like Saudi also recover concurrent with USA, rinse and repeat).



                          Always dangerous to expect it to be "different this time". But if...
                          • we are now in a consumer led recession in the USA;
                          • with spill over effects globally, but tempered by large foreign CB-held fiat currency reserves;
                          • and a Fed already approaching the zero bound (or as close as they would like to be for the moment);
                          • leading to an expectation that the Fed will now stop targetting interest rates and instead focus on the monetary base (as EJ has posited a few times in recent months);
                          wouldn't this "help" for consumers largely gravitate to "needs" instead of "wants". Like the need to eat, and the need to heat?
                          Last edited by GRG55; 05-25-08, 11:02 PM.

                          Comment


                          • #14
                            Re: Canadian Dollar peaked?

                            Originally posted by GRG55 View Post
                            wouldn't this "help" for consumers largely gravitate to "needs" instead of "wants". Like the need to eat, and the need to heat?
                            grg,
                            in general, demand for necessities will hold up better than for discretionary consumption. but even so, won't total demand diminish even for "necessities" in a global consumption-led recession? oil prices will remain relatively high, so consumers with pinched pocketbooks will turn down their thermostats and drive less. part of increased food demand has derived from rising incomes in asia leading to increased demand for meat. with falling incomes, diets will likely tend to become more vegetable-based again, with a leveraged effect on prices. [it takes about 8 units of vegetable food to produce 1 unit of animal product. thus there is a leveraged effect on demand for vegetable-based food as diets change in either direction.]

                            thus, i would expect a recession to temper demand even for necessities. although their prices might remain high relative to their historical levels, surely those prices will be at least somewhat lower in the context of recession than in the context of prosperity. i don't see oil dropping back to $30, but surely it could drop to $70-80, or even 60. do you not think so?

                            Comment


                            • #15
                              Re: Canadian Dollar peaked?

                              Originally posted by jk View Post
                              grg,
                              in general, demand for necessities will hold up better than for discretionary consumption. but even so, won't total demand diminish even for "necessities" in a global consumption-led recession? oil prices will remain relatively high, so consumers with pinched pocketbooks will turn down their thermostats and drive less. part of increased food demand has derived from rising incomes in asia leading to increased demand for meat. with falling incomes, diets will likely tend to become more vegetable-based again, with a leveraged effect on prices. [it takes about 8 units of vegetable food to produce 1 unit of animal product. thus there is a leveraged effect on demand for vegetable-based food as diets change in either direction.]

                              thus, i would expect a recession to temper demand even for necessities. although their prices might remain high relative to their historical levels, surely those prices will be at least somewhat lower in the context of recession than in the context of prosperity. i don't see oil dropping back to $30, but surely it could drop to $70-80, or even 60. do you not think so?
                              Soros thinks so:
                              George Soros: rocketing oil price is a bubble
                              By Edmund Conway, Economics Editor
                              Last Updated: 1:40am BST 26/05/2008

                              Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.

                              The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.

                              In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.

                              "Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.

                              At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses.

                              However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.

                              We'll add George to our iTulip.com Stopped Clock Chorus of Oil Bubble Collapse Warnings.


                              Everyone assumes that global recession will dramatically impact oil prices. Certainly demand will decline. The question we've been asking is, might demand for dollars fall faster than demand for oil? Remember, oil demand in OECD countries has been declining since 2004 while oil prices as priced in dollars have spiked and demand for dollars as measured against an index of other currencies has fallen 50%. What if demand for oil and for dollars declines further in recession? The question is about competing rates of change and lag effects: rate of decline of demand, rate of decline in dollar demand, rate of decline of demand for Asian exports that are supporting Asian economic growth, rate of "Single Malt" oil depletion, etc.
                              Ed.

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