US Banks

The US banks haven’t been a pleasant place to be invested recently. Here is a snapshot of the price history of some of the big US banks over the last month (remember these loses exclude any losses resulting from the rising CDN dollar)

C
June 25: $51.69
Now: $49.21
Change: DOWN 4.8%

BAC
June 25: $48.85
Now: $47.93
Change: DOWN 1.8%

JPM
June 25: $48.36
Now: $45.27
Change: DOWN 6.4%

USB
June 25: $33.39
Now: $31.14
Change: DOWN 6.7%

WB
June 25: $51.91
Now: $48.83
Change: DOWN 5.9%

WFC
June 25: $35.08
Now: $34.57
Change: DOWN 1.5%

As you can see there where some fairly impressive declines over the last month. So…does this mean it might be time to pickup some big US banks? Personally, I think there might be another round of declines. What’s your opinion?

Canadian vs. US Dollar

The recent and rapid rise of the Canadian dollar versus the US dollar has left many investors (myself included)watching the share price of their US holding appreciate while the value of those same holdings are depreciating. This has left many investors wondering what’s next for the Canadian dollar...are we at an all time high? will it continue to rise? Are we going to par? Etc... Obviously, I don’t know the future and am not employed or trained as an economist but I do have some general views of the Canada vs. US dollar situation and a prediction of where the Canadian currency is headed (please take my opinion as one of many various opinions and certainly do not base your own financial decisions on my opinion)

Basically, I don’t see the CDN dollar staying at these levels for an extended period of time. I think that any significant increase above our current level will be unsustainable for the Canadian economy and here are my reasons why:

•About 80% of Canada’s trade is with the US.

•We are basically a petro-currency. If/when the demand for oil/gas decelerates so will the demand for our dollar.

•Exports to the United States account for approximately 40% of Canada’s GDP.

•The high CDN dollar is starting to discourage Americans from vacationing and shopping in Canada.

•If the dollar increases substantially more it has the potential to decimate our manufacturing and exporting sectors (particularly in Ontario and Quebec).

I believe that the CDN government cannot afford to let the CDN dollar appreciate too much more against the US dollar (unless Canada as a nation can start to develop large, sustainable exporting relationships with a country/countries other than the US). That being said I’m not encouraging everyone to go out and load up on US dollars or securities. However, if you were contemplating adding some US positions to your portfolio right now may not be a bad time. Although I’ve recently increased my holdings in JNJ only about 30% of my portfolio is invested in American companies and I don’t plan in increasing it much beyond that level.

(Disclaimer: I’m not your boss or your spouse so do you own research and make your opinions on when to buy or sell. Nothing I say should be bastardized or construed in any way to be advice)

US Dollar - MMM & GE

Some concerns have been raised about buying MMM or GE because of the potential of a rollover in the US economy and a depreciation of the dollar. Although I’m also a little concerned about the US economy and the dollar I am comfortable holding MMM in a downturn because 60% of their revenues now come from outside the US. In my opinion this acts as a natural hedge against a depreciation in the US dollar ie- US dollar goes down, but because they report in US dollars 60% of their revenues have to be converted back into US dollars which would inflate their earning, which will hopefully offset all (or some) of the losses you would incur from a depreciating US dollar.