Playing the USA/Canadian dollar currency game.

[87112]

This is my game plan

1. Borrow 18 grand at 3.25%
2. Buy 18 Grand of Canadian dollars.
3. My goal is to get a rate of 1.25 Canadian for every US dollar plus whatever fees are involved.

4. Going Downtown to see which money firms can handle this.
5. Sell when the USA/Canada currency is at par.


Does this sound like a halfway decent idea?

 

[wess]

This is my game plan

1. Borrow 18 grand at 3.25%
2. Buy 18 Grand of Canadian dollars.
3. My goal is to get a rate of 1.25 Canadian for every US dollar plus whatever fees are involved.

4. Going Downtown to see which money firms can handle this.
5. Sell when the USA/Canada currency is at par.


Does this sound like a halfway decent idea?

This would be a great idea if we were dealing with a more normal environment. We are in fuct up times man.Even Warren Buffet has been burnt hard. The US dollar will go down but we dont know what the CAD $ will do. It might not follow the same old pattern.

Atleast wait to see what the price of oil does and wait to see if the canadian banks cut dividends for the first time in history. If the canadian banks cut dividends then all hell will break loose. WAIT WAIT WAIT

 

[vanmike604]

why not look into forex?
I believe with $1000 you can play the market as if you had $20,000
This way, the most you can lose is $1000 but you can make the profit if you had invested the $18k
Lots of info about forex, just search google or sites like www.oanda.com etc

 

[Krustee]

A better bet would be the Swedish krona but you actually have to know something about the economy were in & currency trading to understand why so ...

 

[Lady Companion]

While nothing is ever guaranteed, I am quite certain that by the end of the year, the USD and CAD will close in price again.

However, if this decade has taught us nothing other than 'there are no longer any rules, and graphs, charts and history are no predicter of future movement' we will have learned well.

You will most likely make money on that transaction by the end of the year - but it may not be quite as lucrative as you hope. You also have to factor in the margins in currency conversion which take away from your profits.

I do tend to agree with Krustee on this one. There are currencies to trade which will likely yield better returns. However, you should definatley stick with what you know and understand - and if that is CAD/USD then I think you will end up ahead within a few months to a year.

Just remember that the world (and especially Canada) intentionally devalues our currency agains the USD to remain lucrative trading partners. So in all honesty, I don't see long term value of the Canadian dollar being at par with the USD (though it's inherent value is actually stronger).

The danger you face with playing the two currencies is not selling while you are ahead. It could very well go back to being at par - but it also may not fall below 1.15 or 1.10 before heading back up.

Sadly - the old adage is true. The only guarantees in life are death and taxes

Best wishes!

 

[vicgfelover]

I am a big believer in dollar cost averaging. I guess it means that I don't get all the advantages of the currency being up ...but at the same time, don't suffer when it goes down. Since I am a semi regular visitor to the USA I find having regularly scheduled transfers of CDN bucks into US bucks to work out for me. Ocassionally I will buy some additional ones when the ratio seems particularly attractive though I do this to just help average out my travel/expense costs and not as an investment instrument...

 

[Krustee]

I posted on the parity possibilities a few days ago in this thread:
https://perb.cc/vbulletin/showthread.php?t=102694


I do think we will reach parity but let me explain why & as Angel has eluded to, it is not really a good thing.

We are unfortunately just at the tip of the iceberg in this economic meltdown.

The reason I say that we will see parity in the two currencies is that the US has another wave of loans which are going to hit the market & default when the rate resets per the mortgage terms.

These are called Alt-A loans & they are the ones that buried Lehman Brothers in one fell swoop.

There also is Option adjustable loans to consider which are pervasive in the market.

Take a look at this chart:

http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg

Although many of the homeowners in the 2009 to 2011 reset periods will refinance (if they can), this shows that the problems in housing will linger for several years. What is especially concerning is all these Option ARM resets in 2010 and 2011. Most of these homeowners are selecting the minimum payments (negatively amortizing) and many homeowners will be upside down when the ARM resets.

The Obama stimulus plan is sending billions of dollars to try & head off stagflation & assist these holders of the "creative financing" that was the brainchild of Greenspan & the Clinton gang back at the end of the 90`s & turn of the millennium.
-------------------------------------------------
Greenspan stated his beliefs on this back in 2004:
http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm

Read this for more background:
http://www.bankrate.com/brm/story_content.asp?story_uid=24201&prodtype=mtg
--------------------------------------------------
back to my original points;

So, what all this means is that we are in for wave after wave of rate resets that will result in homeowners not being able to pay their mortgage.

This on top of massive numbers of unemployed & consumerism spiraling the drain.

Once the attempts to throw money at this black hole fail we will see the desperation of the Obama administration & the rest of the world will lose faith in Obama with America on his shoulders, then the beleaguered Dollar will wane.

When that happens Canada will enjoy relative strength with the Loonie.

This will be a temporary celebration though as the effects of a high Loonie will make trade with Canada unattractive & let`s face it, we depend on the sale of our goods & services to America & the rest of the world for our survival.

Harper & Jim Flaherty our Finance Minister will, if they are smart, do everything they can to reduce the value of the loon against the Buck, Peso & Yuan.

We would do best to have a 83 cent Loonie. (1.205 for a Buck)



Try Gold before it gets to $1100 or better yet copper & other precious metals.

 

[MaxBoner]

Classy Angel, very well thought out. I'm actually getting pretty turned on...

 

[felix29]

why not look into forex?
I believe with $1000 you can play the market as if you had $20,000
This way, the most you can lose is $1000 but you can make the profit if you had invested the $18k
Lots of info about forex, just search google or sites like www.oanda.com etc

You are talking about using "margin"

And you can lose far far more then just $1000

Lets say we did what you suggested, and used $1000 to borrow (that is what you are doing) $20000, if the value of your investment drops below $19000, your broker is going to give you a margin call, basically you have to pony up more money or lose your investment. If it drops to $15000 before it is sold you are on the hook for $4000 more then your original investment

 

[trackstar]

why not look into forex?
I believe with $1000 you can play the market as if you had $20,000
This way, the most you can lose is $1000 but you can make the profit if you had invested the $18k
Lots of info about forex, just search google or sites like www.oanda.com etc

lol, you really thought that's all there was to it?

 

[sonoman]

The danger you face with playing the two currencies is not selling while you are ahead.

True. It's called arbitrage; if you can invest at a known, forward exchange rate, then you can earn riskless profit.


(btw LC, you sound like one smart lady )

 

[Thatotherguy]

Does this sound like a halfway decent idea?

The part where you borrow the money to do it is a big red flag. Any time you're borrowing money to play the market (and what you're talking about is playing the market - just the currency market rather than the stock market), you need to think about the situation you'd be in if the market doesn't go the way you thought, and if you end up losing most of your borrowed money (keeping in mind that you have to pay it back even if you lose it). If you look at that situation and think "hey, no big deal," then you're probably OK to do it. If you look at that situation and think "oh shit, I'd be screwed," then change your plans immediately.