Economies of U..S.A. and Canada on divergent paths!

According to the U.S. National Bureau of Economic Research, U.S. and Canadian job markets have struck a divergent path since December of 2007 when the recession in the USA began.  This chart explains how divergent those paths have been in graphic terms.

At this writing, Canada has reproduced all of it's recession job losses and, in fact, has increased that number by 2%.

When the Canadian dollar was trading at .77 cents I wrote an article that basically told you to "hold on to your loonies".  I reiteratted that sentiment over a year later when the loonie was trading at .97 cents to the usd again telling you to hold on to your loonies.  Now, even with the Cannuck buck trading at over $1.04 usd I am reiterrating that same sentiment. Hold on to your loonies!

In the 1950's the Cannuck buck traded around $1.08 to $1.10 to the usd.  I believe those levels will be reached again and will hold true for the forseeable future. There are many reasons for this opinion, not the least of which is the massive debt load of the U.S. and a number of it's states.  The U.S. bond market is in for a financial tsunami at some point beyond when quantitative easing ends, and maybe before that time.

The U.S. has been, for the past year, buying up to two thirds (2/3) of all of it's own debt on the bond market. As that giant Kenseyian experiment ends, listen carefully for the underwater earthquake that could eventually spawn a Tsunami called hyper inflation.

Markets usually like inflation. Commodities like inflation. Even housing likes inflation and remember, the U.S. Federal Reserve always errs on the side of inflation. The problem is, once this Genie is out of the bottle, no one really knows where it will go, but it does not bode well for the usd.

Since commodities love inflation, and Canada is a country rich in almost every single commoditiy from water, to wheat, grains, cattle, oil, gas, gold, silver, lithium, diamonds, gypsum, lumber, seafood, coal, etc. etc  look for the cad to strengthen, even from these levels.  As two billion more people from China to India, Brazil, Russia and Indonesia join the middle class, the demand for all commodities will climb, and climb and climb.

Anyone who thinks the commodities bull market is over will miss out on huge upside. This lull is a buying opportunity and when everyone gets extremely negative over the next month or so, it will be even a better buying opportunity.

Look for Canadian interest rates to remain above U.S. rates, to rise slowly and strengthen the Cannuck buck.

Now remember, "hold on to your loonies"!

Happy investing.

HP

Related articles

• Loonie falls amid fears of China slowdown (thestar.com)
• Pros and Cons of Investing in Canada (mint.com)
• Loonie makes strides past 105 cents U.S. (ctv.ca)
• Loonie rises as trade surplus improves (thestar.com)
• A recession is coming but not yet (theglobeandmail.com)
• Loonie keeps soaring against U.S. greenback (ctv.ca)

The pain in Grain is mainly on the Brain!

Image via WikipediaThis week, CNBC commentators were asking if "Wheat is the new oil"! Of course they were referring to the troubles in the Russian Wheat pool and a possible 20% reduction in Canada's wheat crop this year and the impact of these two, otherwise unrelated events, on the price of grain, specifically Wheat. They were also wondering is "Potash the new oil". (the hostile bid on Potash Corp by BP Billiton)
My Deja Vu senses awakened when I heard the comments.  It took me back a year when the same CNBC pundits were asking, "Is Lithium the new oil" (electric car batteries) and two years ago when they asked "Is natural gas the new oil".  (new shale gas discoveries) It even took me back to the turn of the century (this century of course) when the same pundits were asking "Is hydrogen the new oil"! (hydrogen fuel cell vehicles)