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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (47903)	5/11/2012 7:23:16 AM
From: Mr.Gogo	Respond to of 78748

I think there are two things that mainly influence the price of CAD relative to USD. First is interest rates and the second is commodity prices, oil etc. As long as US keeps the interest rate low, we have to keep it low too, or the CAD will increase in price and we will have difficulty exporting to US which is 65% of the export of Canada. It is bad for the housing market, but hey prefer to keep exports. This created a clear housing bubble in Canada. The banks probably are stable because CMHC (government company that insures all mortgages with less than 25% down) insures everything. So, there is an incentive for the banks to sell mortgages no matter what. They have no risk if the housing market does not correct more than 25%. And the standards are loose. But soon the government will have to do something about the swelling property prices - banks will not be allowed to package in mortgage bonds any mortgages insured by CMHC. So, banks will become less profitable IMO. If China starts using less commodities and this is not compensated for by the developing countries as Jurgis suggests, than the Canadian dollar will fall. Jurgis is also right that the balance sheets of CAD companies are very good, which means we may not have the balance sheet recession that was in Japan. On consumer level, deleveraging is inevitable in Canada and consumer prices should not be going up. Down is more likely than up, which is deflation. There too many unknowns to the equation. Will there be QE3, how Europe will deal with the crisis? How much China will slow?