"Real Estate Bits - 2"

Scotia Economics cites three main conditions that will support the Loonie:

High Oil Prices: Canada is benefiting nicely from being a producer of oil, natural gas, and other commodities. Booming demand for these resources from China and other emerging economies is creating huge demand for our dollar.

Solid Economic Fundamentals: Canada’s economy retains comparatively strong momentum. Jobs are being created, inflation is low, and consumers are spending. In addition, our fiscal position is strong, with federal and provincial surpluses and positive trade balances. This is in contrast to the U.S., which is running trade and fiscal deficits. The "twin deficits," as they are called, make investors nervous about holding U.S. dollars.

Interest Rates Are Higher In Canada: Last, Scotia Economics believes that U.S. interest rates are likely to be cut further in 2008, to help stimulate the slumping U.S. economy and housing market. If U.S. rates are reduced significantly, global investors may choose to invest more of their savings in Canada, where they can earn higher rates of interest in Canadian dollars.

Consumer Tip: If you subscribe to U.S. magazines or online publications, consider renewing your subscriptions for a longer term to save some cash.

More Purchasing Power: Retailers in Canada have been forced to cut prices to keep consumers from crossing the border. Indeed, the stronger dollar is helping to keep prices low for all manner of goods. When you factor in recent cuts to income taxes and the GST, Canadian consumers may find they have more money in their pockets this year.

Financial Tip: Use some of your newly discovered cash to increase your savings, boost your RSP contributions, or pay down high-interest debt. Think of it this way: If you saved just $5 more per week and put that cash in an RSP earning a 6% annual rate of return, you’d have almost $10,000 in 20 years.

Consider A U.S. Dollar Account: If you travel frequently to the U.S., or make or receive payments in U.S. dollars, exchange rates and commissions can affect your currency transactions. Snowbirds, frequent business travelers, or investors looking to diversify their short-term savings can benefit by opening a U.S. dollar savings account. Some accounts may allow you commission-free transactions in U.S. dollars. And when you’re not using those greenbacks, they collect interest for you.

Your Investment Portfolio: Investors may be wondering if they should make changes to their portfolios based on currency movements. For most of us the answer is no. Over the longer term, currency moves tend to even out. That means that the principles of successful investing, such as diversification and keeping a long-term perspective, will always apply.

Diversify Abroad: Diversifying your investments internationally - outside of Canada and the U.S. - is good advice in any investment climate. A global mutual fund, for instance, will invest in a number of countries and gain exposure to a basket of currencies. This can help to protect your portfolio against currency fluctuations.

Now may be a good time to review the role that foreign investments, including U.S. stocks and mutual funds, can play in your portfolio. Your financial advisor can help you decide on what’s right for you, based on your investment objectives and risk tolerance.

Regards,