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Is now the time to be investing in Canadian Dollars?

Thursday, September 17, 2009

Is now the time to be investing in Canadian Dollars?

This question should probably be rephrased, ‘is now the time to invest in assets that the world demands more and more, whether there is or is not a recession?
According to the Canadian Press, “Canada has the potential to attract billions of dollars in investment from Chinese companies.” It is no surprise that one of the top priorities of Export Development Canada has been on the emerging windfall trade relationship between the two countries. Let’s think about this…hmmm…who wants to gain exposure to an over 1 billion person consumer base? Also, a Country expanding at as rapid a pace as China needs commodities to grow, so where is a stable source of such commodities as Oil, Coal, Metals, Wood Products, etc.?

In a recent report, The Asia Pacific Foundation of Canada concluded that while the scale is relatively small, the outward investment by Chinese companies is still “in its infancy.” There have been many recent announcements of major Chinese companies looking to invest in Canada, especially in oil and key metals.

According to the University of Alberta, a vital piece of China’s plan for energy security is dependent on Canada’s oil sands. Petro China recently agreed to buy a 60% stake in two Canadian oil sands projects owned by Athabasca Oil Sands for $1.9 billion. This is not the first major Chinese investment in Canada nor will it be the last.

If you would like to here this bullish sentiment on the Canada Dollar from a recognized expert, look no further than Dennis Gartman, Virginia based investment author of the highly subscribed Gartman Letter. He finds many more reasons to remain bullish on the Loonie than the current United States / China Trade disputes. Mr. Gartman believes Canada stands to benefit immensely because the economy in Canada is in better shape than most economies in the world, the exports are viable, the propensity of foreign nations to buy Canadian seems to be rising at the expense of American goods, and relations between Beijing and Ottawa are good.

Word for word from the Gartman Letter, “The world needs energy; Canada has energy to go. The world needs food; Canada's got food; The world needs base metals; they can been found in Canada …and Canada has the ports to ship those needs; it has the laws to protect contracts signed, and it has favourable and friendly relations with everyone.”

So, now you are thinking I should buy Canadian dollars, but then what, or I am Canadian so I already have Canadian dollars, so then what?

Well, if you are going to be earning more money than others just based on the appreciating value of the Canadian Dollar maybe you should by Government of Canada Bonds that are guaranteed and pay next to nothing in interest right? Forget that…if you are investing in Canada, then you need to be putting your dollars to work. You are trying to reach a state of financial independence aren’t you?

Just take a quick minute and think about what the Chinese companies will be investing in and couple that with the fact that the Canadian dollar is likely to appreciate over the coming years against the Greenback. The only problem I have is narrowing the field down. There are so many companies that produce products that will be in great demand. Start by picking which commodities make the most sense to you: oil, natural gas, coal, uranium, gold, copper, etc. From there you can narrow your search for the right companies to invest in. I prefer to pick companies that have lots of coverage so that you can always find out what is happening, what others think, and for the most part the volume will be high enough to make large trades.

For some great ideas about investment advice, take a look at any of the great investment blogs from Canada. If you like what one of the authors has to say, but you want to know what they think about something they have not covered yet, send them an email. Most, including myself are happy to do the research and provide an opinion in a new blog posting.

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