by Michael Arbow MBA
Partner, RSD Solutions Inc.
I have been blogging about the long term strengthening of the Canadian dollar (the loonie) for around 2 years now. More recently David Rosenberg summarized in 15 quick reasons why the loonie is currently rising against the US dollar (see list below). What is interesting is that 13 of the 15 reasons are arguably long term habits of the Canadian economic and political system and thus reinforce the continuing steady rise of the currency.
What is also interesting to note about the past two weeks is that the traditional “flight to safety” to the USD in the face of geo-political and economic uncertainty has not been happening (gold, silver and the Swiss Franc are the current safe havens). I believe that is a significant event and should have the risk managers looking more closely at their US market/investment exposure.
15 Reasons to love the loonie:
1. Better growth than in the U.S.A. and without need for stimulus
2. Responsible central bank, limiting growth in its balance sheet
3. Better fiscal backdrop
4. More conservative political environment
5. Triple the exposure to raw material than the U.S.A.
6. Investors get 115 basis points premium over US Treasuries at the front end of
the government yield curve
7. Canada in the top 15 net oil exporters globally … U.S.A. top importer
8. TSX dividend yield at 2.36%; S&P 500 dividend yield at 1.82%
9. Housing market in balance in most of the metro areas; no foreclosure
supply coming
10. Inflation is low and stable with minimal risk of deflation
11. Economic recovery being fuelled principally by business spending
12. Corporate tax rates on a sliding scale down
13. Immigration and capital flows running at record levels
14. Vancouver rated top city in the world to live (Toronto 4th, Calgary 5th)
15. Stable banking system with consistent dividend growth”
from: David A. Rosenberg (March 2, 2011)
Chief Economist & Strategist Economic Commentary
Gluskin Sheff + Associates Inc.
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