Topic: OT…The rising Canadian Dollar

[saint_satan]

Paul Martin has the best job ever - he can vote himself a pay raise, vote himself out of paying taxes all in the abesence of any real talent. (hmmm...that sounds like a job even I am capable of...)

[Barrie1]

How do you pay Tax's in Canada when you register your Company in the Caymen Islands. The answer is you don't pay any Tax's and just become richer and greedier. Thats where Canada Steamship Lines are Based. They believe in getting all of the Benefits of being a Candian  and Never paying a dime for it.

[S60]

Doesn't Canada send aid to China of just over $50M big ones, for basic human needs and governance.LOL

[Snowman]

Fack……$0.90 by X-mass?...Dubya’s plan of a low exchange rate to combat the trade deficit will make things really interesting in 2005. Think the BOC will raise interest rates in December?
http://www.theglobeandmail.com/servlet/story/RTGAM.20041104.wdoll1104/BNStory/Bu siness/

[johngenx]

Think the BOC will raise interest rates in December?

Yup, I do.  Dodge can "crow" all he wants (get it?  punny, huh!?) about controlling inflation, but core inflation is in check.  There is no need to prop up the dollar with interest rates.  Why then?  Recent small gains in the unemployment figures (100% of the gains from the public sector, btw) are distressing, AND the rates have been low for some time, ignoring the pleas of fixed-income security holders.  Since only upper income folks hold decent amounts of interst bearing deposits, this is in deference to rich folks.

Several bank economists think it's folly, and believe that the rising dollar and $50/bbl oil has already cooled the economy enough.  Hell, what's up with Dodge?  The bank-employed economists are the Friedman worshipers, how can Dodge be tighter on monetary policy? Sheesh.

There is SOME thinking that increasing consumer debt has been built on low interest rates and we need to be "weened" off the use of credit.  BS.  Most consumer related non-secured debt carries userous rates regardless of the prime rate.

There is an area of concern with mortgages.  Canadians are carrying bigger mortgages, and for two reasons...

1. Low rates encouraged people to over-buy.
2. Higher housing costs have forced many to take on big mortgages.

Well, the pickle is that those people that over-bought will be kicked hard by rising rates, and will not "sell down" their housing, but instead curtail their consumer spending, killing the retail sector.

The auto sector is already cooling off despite low rates, but housing remains strong.  CMHC has new incentives for first time buyers (and others) and urbanization drives the major-center housing markets.  It's been a hot housing market in most places, and might carry until Q3 05, maybe longer depending on rates.

John Crow lives in David Dodge, so look for nothing but extreme focus on keeping core inflation very, very low and unemployment above 7.25-7.5% nation wide.  The BOC yanked the bank rate away from the money market and has not looked back.  They now control the economy to a point that it unprecedented.

[wing]

I hope the rates don't go up until I need to renew, then I'll renew for a LONG time on a fixed rate

[Mdxtasy]

I'll never renew my morgage for more than 2 years.  I will play the floating game right now but I don't prefer to lock into a long term fixed morgage.  Each time I can renew the morgage, I can throw money at it and try to pay it off sooner.

[wing]

You can throw money at it anytime MDX, at least you should be able to....

(Message edited by jamesbe on November 05, 2004)

[Mdxtasy]

I'm not sure you can put money in it anytime you want.  I think in a lot of fixed term morgages, you can double up a payment each year but when it comes time to renew....I just put a whole whack of cash down on it and lower the amount I borrow from the crooks/banks.  But that's just speaking from my experience in a few morgage options, there could be some out there that allow you to throw money at it anytime you want.  I just haven't found any.  Short term rates are pretty low.  If the rates skyrocket...I'll consider locking in but it has never crossed my mind before.

[inco]

Oh Happy -(holi) Day
Oh Happy Day
My dollar's improving so I can play
Oh Happy Day
Oh happy (holi) Day

[wing]

Mdx, maybe things are different in Alberta, but here with BMO, PC, ING I had the option everytime.  I could put up to 20% down on my mortgage once a year.

I also have the option to increase my payments at any time.

The only restriction I have is that I can skip 1 payment a year if I wish to.

(Message edited by jamesbe on November 05, 2004)

[ovr50]

Most bank mortgages let you double up, make payment more often than once a month, and let up put up to 10% of the original mortgage amount it every year (but only once a year). You can't just make extra payments occasionally, you have to (say) pay every two weeks always, ie, can't flip-flop around. There's lots of ways to pay faster, even on bank martgages these days.

[wing]

Ovr, that's correct. Although I can't increase the number of payments i can increase the value of them if I wish up to a certain amount.  I'm already paying every 2 weeks, which accelerates anyways.

I dream of having no mortgage payment, then I can spend SOOO Much on a car

[johngenx]

I have read studies on floating vs. fixed rates, and in the last 30 years it has always worked out cheaper to take the floating rate.

But, for some, they dislike the uncertainty, and they should accept the small penalty of fixed rates as the cost for a good night's sleep.  Fixed vs. floating is not a "right vs. wrong" type of debate, as it depends on your risk profile.

I always took floating rates and made no principle payments during low rates and made tons in high rate periods.  By being very careful and minimizing interest costs we paid our house off very quickly.

When deciding, for those that struggle, look to the yeild curve.  When flat (long and short rates nearly the same) take the long fixed rate.  It also depends on your credit-worthiness, as banks usually offer more aggressive floating rates to their top customers and encourage those "marginal" customers to take fixed rates.

However, it's purely which costs the least in the long run, floating rates usually win out.

[wing]

Usually they do, I like these, get a floating you can lock at anytime though

[Mdxtasy]

Sorry...that's what I meant Ovr.  You are guided by how much you can pay on principle each year.  I prefer floating rates and I have talked to my financial advisor.  He's also of the opinion that over the long haul, the floating rate will be cheaper.  I capped my floating rate at 6.5% interest....which means that I pay 0.5% below prime in interest and whatever is left over goes directly to principle.  

[saint_satan]

There is talk of the Canadian Dollar remaining high for the forseeable future.  Is it too much to hope that vehicles and gas prices will come down?  My Father tells me of Americans paying top dollar at the auto auctions buying Canadian lease returns for top dollar when the Canadian Dollar was $0.65. Will this trend reverse with an 85 cent dollar with Canadian dealers finding barins south of the border?  I wonder if the $ increase will benefit the Canadian consumer or if auto manufacturers will pocket the difference.  A healthy price decrease would stimulate interest AND maintain the profit margins in a struggling Canadian market...  What is the law for buying a car in Buffalo and bringing it to Toronto?

[johngenx]

The rising dollar is a double edged sword for Canadian consumers.  Some imported goods may become less expensive (or prices will stay the same and retailers might make better margins) but Canadian exports will fall, meaning the possibility of job loss.

What it will do to the auto industry is hurt Canadian manufacturing.

Have the prices of US produced cars fallen by 10% in the last few months?  Nope.  Will they?  Probably not, since most big companies already use currency hedging to minimize currency risk and it will take time for those option contracts to be adjusted to current pricing, and that will only be reflected if the dollar remains strong relative to the US dollar for some time.

Also, we don't know where parts for cars assembled in the US come from.  The Canadian dollar has not been rising, but the US dollar has been falling.  If the US makers are buying parts, we have no idea of what currency fluctuations have done at those points.

But, I sometimes order parts from a large on-line Mercedes-Benz parts store in the US, and my parts suddenly got a bit cheaper.  If the dollar hits a dollar (get it!?) then maybe I can afford a Porsche again...

[saint_satan]

I would think the the manufacturer only needs to know how much the car cost coming off the line in order to determine a suitable profit - regardless where the various pieces come from.  At the very least the US consumer might take it on the chin soon - given the trade deficit.

Just picking my favourite vehicle, the Jeep Liberty, here is a quick comparison:

Jeep Liberty Limited (base)

U.S. $24210 x 1.20 exchange = $29052
Canada = $32440

Another Favourite Honda CR-V LX


U.S. $21195 x 1.20 = $25434
Canadian = $28200

Add PST and GST (ick) for good measure. If dealers were worried about shrinking sales they might lobby the manufacturer for a break.  Just an observation...

[johngenx]

only needs to know how much the car cost coming off the line

Yup, and that cost may have changed thanks to recent changes in the US dollar relative to many other currencies.  BUT, at this point, I would think that thanks to parts inventories and hedging, the cost has not changed much since the recent drops in the US dollar.

So, don't expect a price break everytime the dollar fluctuates.