[vampyregirl]

I've been advised to trade for US cash while the Canadian dollar is high, because the US cash will be worth more when the dollar falls. But is this more risky than it sounds? It seems like a long term investment at best. Im contemplating whether to take the chance. Any advice for me?

[BobInget]

USDs' are peaking now because of problems of weak EU members Greece, Spain, and Portugal.
Most people believe Greece will leave the EU this summer. When it does, for a time, the euro will enjoy a 'relief' rally and USD will resume its decline.

The loonie is North America's strongest currency. Canada has been moving away from US export dependence. Controversy over pipelines and oil sands are speeding further ties with China/India.
Canada will continue to be America's first crude oil provider... but as more production cokes on line
it will be sold to Asia.

IOWs' If you are Canadian, keep your money at home. Depending on your age, (dividend or growth centric) you should look at Canadian E&Ps' which are available at bargain, box store prices.
Symbol "ENY" is a so called ETF (exchange traded fund) Google and ask to see the companies that make up its contents. Here, experts have chosen what they believe to be Canada's top bets in oil centered energy. Most, but not, all are paying healthy dividends.

(P/E ratio) For instance, APPL shares are selling for about ten times earnings. Face Book opened at one HUNDRED times earnings. Which would you have chosen?

In Canada you can still buy real-estate trusts which offer great dividends and tax advantages.
Look at Canada's fertilizer companies like POT. They are for the most part, great buys today.
Don't forget energy efficent rails like CN. Here, you have a double play as Canada's rails are now shlepping crude oil and mined goods to West Coast ports nonstop.

If you buy a US company (GE) with CAD, you'r hedging to some degree. If the USD collapses,
Your CAD investment will grow by what ever percentage USD falls. There is no reason Canada will not be as successful in Asian trading as is Australia.

[SeaGypsy]

I think the OP is trying to play currency only? If so, VPG, you need to treat currency trading like a job to have any chance of maintaining a gain beyond inflation. The people who make money out of trading money are news hawks, they would not now be asking the question, the USD$ market moved over the last few weeks. It is now flat, pending an outcome in the EU mainly. Australia and Canada have very similar currency issues, largely hinged around projected growth in Asia. A strong growth outlook means our commodities are sought after, a weak one means mines start closing and the magic pudding disappears. Projected growth in Chindia has slowed by 2% this year, weakening commodity prices somewhat; thus our commodity based currency is down. Any good news about the economy in Asia translates to pips up in our dollars.

The USD$ is going to get another surge if things go even more pear shaped in Europe, which they are bound to. But you could put everything into US cash now and spend 2 or 3 or even 5 years flatlining nominally whilst losing on inflation, should the EU manage to bumble along that far. Meanwhile Asia is still growing at 6-8% nominally, ahead of USD$ inflation by double.

For long term investing without the headaches I think Bobinget is right, better to seek out a strategic commodity portfolio. To play cash and make money, you need a hell of a lot of it and you need to be able to afford to lose.

[Revi]

I think US currency is good, as long as it's pre-1964 dimes, quarters and half dollars. As for the rest of it, what's the difference between any of the fiat currencies? They are all just an IOU.

[smiley]

All currencies seem to be engaged in a race to the bottom.

The economic dogma's of today tell that you cannot have a competative economy with a strong currency. (Strangely a strong currency has been considered an asset for the past 3000 years or so, and the Greecs, Romans, British, Danish, Dutch, Spanish etc don't seem to have been too bothered with the strength of their currencies during the haydays of their empires).

But justification aside, a strong currency is considered a burden now, and you see that every country tries to weaken its currency. And the stronger the currency, the more valiant their effords.

So if you think that a currency is strong and you move your money there, you are placing a bet against the government.

And that is never a smart thing to do. The government can adjust interest rates (Brazil, Australia), launch monetization programs (QE1,2,3,twist, USA) or simply cap the value of the currency (Switserland). All these things can drive down the value of a currency by several (tens) of percent, and as a private you don't have the information access and the reaction time to do something about it.

A second aspect of the current situation is that the market moves mainly on sentiment and political developments which are hard to predict. For instance if the US debate on the debt ceiling this year gets as ugly as last year the dollar could easily loose 25% of its value again against the canadian dollar; if it doesn't it could go the other way.

In the current environment playing the currency market is IMO like playing chicken with a bulldozer, if you have a strong stomach and don't actually need the money you might consider it. But even then the deck is stacked heavily against you.

Buying US stock would be a safer bet. But I'm a bit spooked by the fact that most of the US companies have a very high price to earnings rating compared to the rest of the world, and that the US bourses have not seem the same corrections as the rest of the world. I think some correction might still be coming there.

Anyway. That's not for me. I use my money to pay down my house. That gives me a guaranteed return for the rest of my life. The markets might give me a few percent more, but then again it might give me a lot less.

[SeaGypsy]

The Government/s have to try to keep currency down to keep exports up and imporsts down- trade balance- debt weight balance etc; but the US is in a tricky position where it needs a strong dollar to keep up it's key import volume/ oil. The USA is so heavily oil dependent that it cannot do what it would like to do, devalue by half over a fairly short time, say 2 to 4 years. This devaluation would sort out many of the worst of current economic woes, except for that the resulting oil price would kill millions of small to medium enterprise and perhaps tip the whole economy over. For these reasons, the USA may actually be happy to get out of reserve currency status sooner than later/ to decouple the value of the dollar from the price of oil is the only way to get the kind of currency flexibility desired without this potential disaster.
There is so much turmoil in current markets that there is likely to be money to be made, but some huge unknowns which aren't going away.

[smiley]

For these reasons, the USA may actually be happy to get out of reserve currency status sooner than later/ to decouple the value of the dollar from the price of oil is the only way to get the kind of currency flexibility desired without this potential disaster.

To me the reserve status is about the only thing keeping the dollar afloat. The fundamentals are pretty ugly.

Debt to GDP at 130% (104% excluding states), budget deficit at 8.4%, trade deficit at 50 b$/month.

For comparison the Eurozone (Debt to GDP at 82% (including states), budget deficit at 4.2%, trade surplus at 3-4 bEur/month)

Moodies itself said last year that the reason not to downgrade the US yet was the status of the dollar. When that changes and the dollar starts trading on the fundamentals of the US rather than its purposefullness as a reserve/trade currency, then you might see a large drop in dollar value.

I think that the value of the dollar will start to fall for several reasons.
- US has to start cutting the budget in november (I don't think they will get away with doing nothing again)
- I think we will see a downgrade by moodies this year.
- Reduced statue of the dollar as reserve currency.
China, Japan to Use Yen, Yuan and Not the USD

The Euro: I think when you look at it overall, it could be a strong currency. The fundamentals are good, but the problem is the inability to come to a workable economic and regulatory model. When they succeed the Euro could definately rise, if they fail.....

....well that could be interesting.

Actually I think it is funny to hear this question from a Canadian, because if I would have to pick a currency to put my money in, it would either be the loonie or the Norwegian Krona.

[Revi]

Or you could get pre-67 Canadian silver and modern maple leafs and put them in a safe deposit box.