The Big Picture on Canada's Falling Dollar
Why is the Canadian Dollar dropping? The value of much of what Canada exports has been dropping. Jeff Rubin's Why the loonie’s fortunes are still tied to oil sums up the energy situation nicely. Thanks to George P. Mitchell, producers in the critically important energy sector are trying to find ways to export beyond the North American continent.
Unfortunately for Canadians, the Canadian Dollar is not just tied to energy. With the exception of lumber, most of our other commodity exports (metals and agriculture) are falling in value as well. In my talk at the Vancouver Resource Investment Conference I pointed out Canada's relative lack of economic diversification. Canadian investors will start being more open to investments in technology over the next few years.
Meanwhile many of the speakers at the conference reminded me of this quote from Bob Lefsetz:
But you can’t speak this truth in the music business, oh no, because that’s undercutting the game!
The TSX Venture has been on a 3 year slide. It is currently at some key technical levels so maybe we'll get a bit of a run up but until commodity prices turn, I'd consider it a bounce, more than a longer term reversal.