April 22, 2010 – The Canadian Dollar is About to Rocket

SPECIAL ‘OH CANADA’ ISSUE
Featured Trades: (CANADA), (FXC), (EWC)

 

1) The Canadian Dollar is About to Rocket. The Canadian central bank hinted today that they may raise interest rates at their next meeting, sending the loonie (FXC), rocketing through parity against Uncle Buck for the first time in two years. The move also sent Canadian stocks flying like a surprised covey of geese. I have been a fan of the Canadian dollar and stocks (EWC) for some time now (click here for the call), expecting that parity was just a matter of time. Canada is a huge commodity exporter, the largest foreign supplier of oil to the US (bet you thought it was OPEC), with a small, hard working, English speaking (well, almost) population. They also do banking the old fashioned way up north, with the government requiring 20% reserves that limits leverage to 5:1, versus the 100:1 seen at the peak at some of our banks. That means they missed the financial crisis, and the soul searching, angst ridden self examination and re-regulation that followed. There will be more to come, with at least another decade of commodity bull markets to follow, the source of the country’s life blood. Now that we’ve made parity, look for the overshoot, and more. And no, I don’t know how to sing ‘I’m a Lumberjack, and I’m OK,’ so here is a gratuitous picture of my favorite Canadian, Pamela Anderson.
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