This Week In Marketnews: It's The Economy, Stupid

Marketnews: Custom Corner: Price Hikes in CE

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One more factor behind Canadian/American price discrepancies

Yet another thread in the web of factors that lead to things costing what they cost.


Yahoo!: Canadian consumers penalized as U.S. retailers protect home market: Retailers

American suppliers who have to cover the impact of the weaker U.S. dollar at home are penalizing Canadian retailers and their customers by failing to reflect the true value of the strong loonie in their pricing, the Retail Council of Canada's president says.
One reason retail prices are higher in Canada than in the United States, even though the two currencies are now almost the same value, is that American suppliers have been cutting prices to maintain their U.S. market share and passing on their costs to higher currency markets like Canada and Europe, Retail Council's Diane Brisebois told the Commons finance committee Wednesday.

It should be no great surprise that Canadian retailers are getting the shaft from American distributors, this happens quite a bit. Put into a larger perspective, which market do you think suppliers are more concerned about, one with 300 million consumers, or one with only 30 million?

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This Week in Marketnews: Custom Integration and the Dollar

Marketnews: Custom Corner: Has the Dollar Affected the Custom Install Business?

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British Columbia's dope growers feel the sting of a weak US$

One industry that is allegedly taking a haircut on the US$/C$ exchange rate is the marijuana growers in BC.

Dealbreaker: The Bernanke Dollar’s Latest Victim: The Kind Northern Bud Trade

So we found ourselves disturbed this morning to learn that the dissolution of the dollar’s value was destroying one of our Northern neighbors export markets—namely, the market in exporting marijuana to eager tokers the United States. The trade flourished for years as black marketeers pocketed the profit from arbitraging the dollar against loonie. Canadian marijuana production costs were paid in Canadian dollars, while profits were taken in dollars.
As the dollar has deteriorated against the loonie, the trade has dried up. Canadian production costs have held steady, while the buying power of the dollar has declined. And, lest you think we’re talking about a small thing, we remind you that the production and export of marijuana is a major contributor to the economy of British Columbia.
“The upshot is that the Canadian marijuana is now less competitive against marijuana grown elsewhere,” Stephen Easton, professor of economics at Simon Fraser University in Vancouver, B.C. has told the grand newspaper of Big Sky territory, the Missoulian. “This is a cost-driven business. With exports no longer viable, the British Columbia marijuana industry has certainly taken a hit, so to speak.”

Doubtless there will be those who call for an aid package from the Federal Government to bail out struggling Grow Op outfits.

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Loonie takes a well deserved dip

If you've been paying attention, you'll notice that every headline this year about the Loonie has been full of superlatives.

Yahoo!: Loonie has biggest one-day drop since 1971

The Canadian dollar fell more than 2.4 percent against the U.S dollar on Monday, in its biggest one-day decline since 1971, as risk aversion and lower commodity prices encouraged profit-taking after its record peaks last week.
At 1:20 p.m. (1820 GMT), the Canadian dollar was at US$1.0373, valuing each U.S. dollar at 96.40 Canadian cents, down 2.2 percent from Friday's close of US$1.0606, or 94.28 Canadian cents. The Canadian unit had earlier fallen as much as 2.47 percent to US$1.0344 against the U.S. dollar.

It's nice to know that even when there's a dip (and I suspect that the United States isn't finished playing silly buggers with their currency, so the C$ is far from done its rise), that business writers can still be all breathless in their reporting.

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Loonie making a spectacle of itself?*

This just in from the Department Of Pointing Out The Obvious:

Yahoo!: Government says C$ rise may be speculative

OTTAWA (Reuters) - The Canadian dollar's recent surge may be based more on speculation than on economic fundamentals, the Canadiangovernment said on Tuesday.
"Recent increases of the dollar may reflect generalized U.S.-dollar weakness and speculative sentiment toward the Canadian dollar rather than domestic fundamentals," Finance Minister Jim Flaherty said in his fiscal and economic update.
That is the sort of language the Bank of Canada has recently used to suggest that, if the currency did not retreat somewhat, it might have to step in to cut interest rates.

A big tip of the hat to Jim, for parroting what Bank of Canada Governor David Dodge was just saying last week. Thanks for that.

In the meantime, it is what it is, so lets's make hay while the sun shines.

* I tried to come up with a pun combining "spectacle" and "speculation" and failed miserably.

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New hope for the Loonie returning to sanity

Yahoo!: Loonie sinks, world stock markets lose ground

The Canadian dollar retreated sharply in foreign currency trading Monday while global stock markets continued the hemorrhaging that started Friday.
The loonie, which closed Friday at $1.0355 US, dropped more than 1.5 cents to open at $1.0204 US on Monday.
Over the weekend, Bank of Canada governor David Dodge told a group of bankers at an International Monetary Fund meeting that the loonie's recent rise was "abnormally quick and doesn't seem to be related to the domestic factors, which would normally lead to that sort of appreciation."
The U.S. dollar was also staging a bit of a rebound after hitting a fresh record low against the euro.

All I have to say about this is that even a slide to 97-cents US would have a positive impact on both the macro (Canadian Economy) and the micro (individual currency plays). Bring it on.

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More Bad News: Canada's Unemployment Rate Down, and Dollar Up (again!)

I, for one, am tired of low unemployment and a surging loonie.

Canada's unemployment rate below six per cent, loonie leaps 1.55 cents US

Canada's unemployment rate dipped below six per cent in September for the first time in 33 years, energizing the Canadian dollar, which steamed up 1.55 cents to 101.81 cents US.

Why, you ask?

Because when unemployment is this low, it really sucks to be an employer. Everyone I talk to tells me that business is great, but would be even better if they could find skilled people to fill slots needed to take on even more of the business that's being thrown at them.

And when the dollar is this high, it really sucks to be an exporter, which is what most of us in the country are, one way or another.

Ah well, what goes up must come down. On the bright side, I've recently made some large purchases out of the US, where even with freight and duty it still came out cheaper than buying locally, and I'm pretty much parking my cheques from US companies in my US$ account, until I can arbitrage (that's fancy talk for "take advantage of") a better exchange rate.

Now lets just hope that the US$ doesn't do what the Ruble did in 1998.

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Unfortunately, Loonie continues to surge

If I had a loonie for every headline in the past five months that delcared "Loonie hits 30 year record" I would have, um, thirty-five dollars, I think.

Canada.com: Loonie jumps on 'blowout'
News of a stunning surge in spending by Canadian consumers sent the loonie soaring more than one cent yesterday to a new three-decade high of more than 96.5 cents U.S. and set the stage for more interest rate increases.
The near three-per-cent jump in retail sales in May, reported by Statistics Canada, was almost six times the 0.5 per cent expected - and the steepest monthly gain in a decade.AC"While a good month was anticipated, this was a blowout," CIBC World Markets economist Avery Shenfeld said.

No, this is not good news:

But the good news on the economy was bad news for manufacturers, hammered by the high dollar.
It might spell bad news for borrowers, too, as the evidence of surprising economic strength added to expectations of more interest rate increases.
"This clearly puts additional Bank of Canada tightening in play, above and beyond a second quarter-point rate hike in September," BMO Capital Markets economist Douglas Porter said.

I've been saying this all along. A strong Canadian dollar has hugely negative repercussions for manufacturing industries in terms of percieved lower cost of goods to buyers abroad, not to mention all the companies that used to book nice easy profits on the USD/CAD conversion from foreign business branches.

I'm not saying that the sky is falling, but it's definetely a hassle in the short term.

Hat tip to Dealbreaker.com for beating me to this. I slept in today.

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