Wednesday, April 14, 2010

Trudeau was Right!

Years ago Prime Minister Pierre Elliott Trudeau said the twentieth century belonged to the USA and the twenty-first century belonged to Canada.

And now, as the Canadian Dollar (CD$) flirts with the US Dollar (US$) on equal terms, it looks like his prophecy is coming true. Canadians have become economically smug these days. Here’s why:
1. Our banking system has held up better than the American’s.
2. Our economy suffered less in the down turn and has expanded more in the up turn.
3. Our real estate market is still in an up trend; theirs is in a hopeless down trend.

Canadians are not used to being smug. In international circles our citizens are know as polite and unassuming people. Our soldiers are well trained and fierce fighters. We have a good reputation. But, if Mr. Trudeau was right, Canada will soon be stepping up to the plate as a world leader.

Could this be real?

Are the reasons I listed above as to why Canadians are economically smug be the same reasons foreigners are willing to pay the same price for a Canadian Dollar as they are for a US Dollar? The sceptics are saying the high CD$ is temporary, caused by a short term surge in oil and metals prices, and it will cool back down once the current commodities boom is over.

In my book, Beyond the Bull, I discuss the idea of over-analysis. Sometimes we ramble on about what we think we know; we use the same tired old thinking patterns that worked in the past, to sort out what might happen in the future. And, if the rules change, as Mr. Trudeau prophesied, the old ideas don’t help us. If this is Canada’s century, we’ll have to learn to think Canadian instead of American.

Beyond the Bull encourages us to “feel” as well and think. Rather than run in mental circles of out dated logic, just kick back and say: “How does this feel?” Lets try it.

Review: CD$ came into the twenty first century in a down trend. It hit the bottom in the winter of 2002 at 72 US cents. By autumn 2007, it ripped upwards through par to $11.1 – then reversed and dropped back to par within only a few weeks. It fluctuated between $1.00 US and $1.05 US for four months before dropping to 77 cents again, one short year after our glorious run to $1.11.
We Canadians weren’t used to having such a strong currency. Somehow, we felt relieved that CD$ had returned to normal; a CD$ selling at a huge discount to the US$.

But now CD$ has crept back up to par against the US$ again, it somehow feels different. Last time, in early 2008, there was a flurry of Canadian buying of US cars with their high priced CD$. It was as if they wanted to cash in on their short term good luck and buy up those cheap US cars. This time there is no feeling of “temporary” or “short term” around a Loonie at par with a US Green-back. This time it feels different.

What should we do?

Well, let’s do the typical Canadian thing: doubt our new found prowess as world economic leaders and buy a cheap US car with our high priced Canadian dollars… just in case. Feels right, eh?

The Financial Philosopher
Ken Norquay, CMT
President, Market Street Investment House

To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit (Bullmanship Code = SS32). Contact Ken directly at

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