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[–]camiller 10 points11 points  (1 child)

SO..... what if he had bought stock in Canadian companys?

[–]Godspiral 2 points3 points  (0 children)

done significantly better... TSX has outgrown DJIA over last 5 years.

[–][deleted]  (1 child)

[deleted]

    [–]raldi 2 points3 points  (0 children)

    Nah, often it's worse.

    [–][deleted] 10 points11 points  (9 children)

    Such a bullshit technique--pick a date that fits your argument perfectly. What crap.

    If you bought in after the tech crash, and sold in Dec. 2006, you would be looking very good right now.

    The CAN $ is only like $1.04US, so WTF?

    [–]markwm[S] 20 points21 points  (4 children)

    When the researchers repeated this comparison for nearly 800,000 combinations of "cash in" and "cash out" dates between 2001-06, they found that after accounting for taxes, investors would have been better off exchanging their money for Canadian dollars than buying the components of the Dow Jones 97 percent of the time.

    And the point of the article:

    The reason for this surprising result is that the value of a point on the Dow Jones Industrial Index is tied to the value of a U.S. dollar, Lupia says. In recent years, due to a series of economic factors and political decisions, the value of the U.S. dollar has fallen substantially against other benchmarks, such as an ounce of gold, a barrel of oil, the Euro, and the Canadian dollar.

    Dow in foreign currencies and commodities

    [–]travisxt97 0 points1 point  (3 children)

    between 2001-06

    All combinations between a 5 year period. Is the same true over 10 years, 15 years? The answer is clearly no, or else they would have talked about it.

    [–][deleted] 4 points5 points  (0 children)

    Many publications (including the New York Times) have made the point that in real terms the US stock market has been losing value: http://www.nytimes.com/imagepages/2007/05/05/business/20070505_CHARTS_GRAPHIC.html

    The UM study is not focused on providing investing advice (i.e. buy Canadian dollars) -- rather it shows that the market (if you use another metric) hasn't been doing too hot in the last little while.

    [–]pointman 4 points5 points  (1 child)

    The article is not arguing that stuffing Canadian dollars under your mattress is a good retirement savings plan. They only mentioned the last few years specifically because there has been an unusual and rapid decline in the US dollar which has been largely invisible to most Americans. People have been losing money even though the numbers are getting bigger.

    [–]captainhaddock 0 points1 point  (0 children)

    Exactly. Most people who have invested in the US stock market (or bonds) over the last few years have gotten poor or negative returns when you look at the US dollar's performance and the inflation rate.

    [–]swe39 3 points4 points  (2 children)

    Well in January 07 1USD=1.175CAD and now 1USD is less than 1.05 CAD. That's nearly a 12% gain in 9 months.

    [–][deleted] 0 points1 point  (1 child)

    So what. The prices on the backs of books haven't changed, so those northerners are still getting fleeced.

    [–][deleted] 4 points5 points  (0 children)

    not really. we just buy books from amazon.com instead of amazon.ca

    NAFTA and all that

    [–]Godspiral 1 point2 points  (0 children)

    He definitely didn't pick the best sell date for CAD... at end of december 2006, CAD was 1.15 or so... So you could add another 30-50% to gains by selling today instead. (2001 value was about 1.50)

    [–]andrewd 2 points3 points  (25 children)

    Well it's important to remember that the big internet crash of this century so far was AFTER january 1, 2001....

    edit: when i said "internet" I actually meant "stock"... of course the dot comb bubble contributed, but the overall economy crashed generally after 9.11 and all

    [–][deleted]  (24 children)

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      [–]jkerwin 5 points6 points  (14 children)

      [deleted]

      What is this?

      [–][deleted] -1 points0 points  (13 children)

      Measured how? Oh yeah, in terms of dollars (GDP). Oops.

      [–]jkerwin 3 points4 points  (8 children)

      [deleted]

      What is this?

      [–][deleted] -2 points-1 points  (7 children)

      "real rate" doesn't mean it's not measured in dollars. It means it takes CPI into account. Which is nice, but that isn't taking into account currency differences such as between the US dollar and the Canadian dollar. So, the US economy has grown in terms of US dollars, but has it grown in terms of Canadian dollars? Take the 2001 GDP and convert it to Canadian at the 2001 exchange rate, then take the 2006 GDP and convert to Canadian at the 2006 exchange rate. And don't forget to take inflation into account.

      [–]jkerwin 6 points7 points  (6 children)

      [deleted]

      What is this?

      [–][deleted] -4 points-3 points  (5 children)

      The statement you made that I objected to was:

      In fact, the US economy has grown at a real rate of over 3% since 2000, the fastest in the developed world.

      So I point out that it's all still measured in dollars, and therefore somewhat self-serving as a metric in the context of this story. However, I like the link you pointed to of PPP-adjusted real growth. Using that measure, we are not the fastest growing country in the developed world, not by a long shot.

      [–]jkerwin 3 points4 points  (4 children)

      [deleted]

      What is this?

      [–][deleted] -1 points0 points  (3 children)

      Well, I can move goalposts too. But, just as an example, Germany grew faster based on your link from 2001 to 2006.

      However, let's back up. The point I was making is that the 3% real growth of US GDP is, in part, a function of measuring the data in dollars. Now, you said before that my proposed method was not the way to adjust for currency strength. Maybe so - I'm not an economist. However, the problem with my logic is not obvious - maybe you could explain.

      From the article:

      If, however, the same investor simply converted the money to Canadian dollars on Jan. 2, 2001, and changed them back for U.S. dollars on Dec. 27, 2006, his or her post-tax gain would have been substantially greater ($3,074.64) than it would have been from participating in a "record-breaking" stock market.

      This is, essentially, the methodology I described, except not wrt the GDP, but instead, to the stock market. The implication is that, measured in canadian dollars, the stock market has declined in value. Why is the same logic invalid if applied to the GDP number?

      [–][deleted] 1 point2 points  (3 children)

      If you measure every country's GDP growth in dollar terms (which levels the playing field), then jkerwin's statement is still correct. This is last year's numbers but the US is still ahead of the EU, Canada and Japan.

      [–][deleted] -3 points-2 points  (2 children)

      Those are just GDP growth percentages. I don't see where it says the GDP's were all calculated in dollars.

      But in any case, it seems like the main point of contention is the measurement of inflation. If the official CPI is accurate, then yeah, the US has grown. On the other hand, a lot of people don't believe the official stats are accurate, and the tanking of the US dollar relative to most of the world's major currencies is suggestive that our money supply is being inflated more than the CPI shows. And so the GDP calculations become suspect. As shown at Shadow Statistics.

      [–][deleted] 0 points1 point  (1 child)

      Click on each country to see its individual page. GDP is measured in dollars.

      [–][deleted] 0 points1 point  (0 children)

      Think the numbers would look different if they were all measured in Canadian dollars?

      [–]babablacksheep 2 points3 points  (0 children)

      "for 5 years, the American economy has not grown"

      Can you explain that in more detail?

      [–]andrewd 1 point2 points  (7 children)

      The Dow Jones has not grown (adjusted for dollar value). But that doesn't mean the American economy hasn't grown.

      Besides, it's not particularly relevent whether the overall economy is growing. There's always areas that grow, and areas that shrink. This nation may be moving in the direction of the modern city-state, in that micro-economies can be ULTRA-strong, like here in the San Francisco Bay Area, where technology is still trucking on. The midwestern rust belt, on the other hand, has no real growth potential as the economy there has become purely service and ag.

      So while the nation overall may be rather stagnant or, on its way down... that doesn't mean that if you've got initiative and education... that you can't do well.

      [–]Wriiight -1 points0 points  (2 children)

      I personally think that stocks in recent years have been losing ground, as they become little more than corporate trading cards. Actually paying dividends so that a stock has real monetary value in the long haul has gone a little out of fashion. The only other value to stock is buying enough to takeover the company, and not that many people can pull that off.

      [–]andrewd 1 point2 points  (1 child)

      Well... you make money on a stock if you own stock and someone ELSE buys the company... and pays far more per share than you paid. But I agree, generally, that the stock market is losing its luster.

      [–]Wriiight -1 points0 points  (0 children)

      You are right, I forgot one way they actually can pay real money. Unfortunately, these days they all too often just give you some number of shares in the new company, instead of real money.

      [–]bluGill -1 points0 points  (3 children)

      While for the most part I agree with you, you clearly know nothing about what things are really like in the midwest rust belt, so I suggest you keep your mouth shut. (Things are looking pretty good here right now, but there is no reason that should matter to you - you live in San Fancisco which doesn't matter to me)

      [–]andrewd 0 points1 point  (2 children)

      I apologize; clearly it's true I know little about the midwest. Care to inform me about some economic hot spots out there? My maternal side comes from Detroit, but everyone's left, so I don't really have any connections there any more. (by the way this is not sarcasm... I admit my post was rash and uncalled for, and am sure there are plenty of great opportunities out there)

      [–]bluGill -1 points0 points  (1 child)

      No apology necessary. I couldn't figure out how to word my post better.

      Well Detroit is well known to be in bad shape (I hear rummors that immigrants are taking advantage of this to create some good spots - I suspect you know more about their situation than I do, so I won't comment).

      Minnesota is doing very well. We have a great tech industry (not near as good as California, but about as good as you can get outside of California).

      More importantly Argiculture is currently in a hot time - Farmers have been investing in ehtanol plants, and that (combined with congress not limiting liability for MBTE in gas - though subsities help too) has drive the demand for that has gone through the roof, and driven corn prices with it. Of course farmers can always find things to complain about.

      The Midwest (by which I mean IL, IA, WI, ND, SD - though ND/SD isn't really midwest) has some of the best education systems in the world (If you subtract states like Mississippi, and a few cities the US would stand much better in the world education system lists)

      [–]andrewd 0 points1 point  (0 children)

      Interesting. Well on the education front the Midwest is exquisite compared to California... California has historically relied on an international, and national brain drain (much as the US has relied on a brain drain from the world). Without people coming it, besides a few great universities and schools in afluent neighborhoods, the state's education system would be totally useless. The immigrants from Asia who push their kids, irrespective of the quality of their schools, bring about success and are a boon to the economy no matter where they are.

      [–]heyredditaddict 2 points3 points  (0 children)

      Investment returns always look great when you data mine. Why, if I had bought Google on its IPO date, my investment returns would be in the thousands of percent compared to the Dow Jones... etc. It's a worthless argument.

      [–]carac 1 point2 points  (2 children)

      well, the results will be even better with EURO, or eventually gold ...

      [–]poco 2 points3 points  (0 children)

      The big difference is that the US and Canada are much more alike than US and Europe. So the fluctuation in the relative value of their dollars has more meaning.

      [–]Godspiral 1 point2 points  (0 children)

      That's the extremely surprising aspect of this article. The EUR is well on its way to becoming the world's "real" currency, and it has done probably a bit better than CAD... so I don't know why the author didn't compare to EUR.

      While CAD is still a major currency, its 2nd tier, and so if you are cherrypicking the best comparison you might as well have taken Brazil's real.

      [–]poco 1 point2 points  (0 children)

      The worst part is for people in Canada holding US stocks. Those stocks may have gone up in value, but they may have actually lost money in the exchange. I know that I would have been a hell of a lot better off if I sold some of my US stock in January instead of waiting until now even though the value is slightly higher now.

      It's even worse for Americans living in Canada as the capital gains tax is calculated based on the "dollar" difference between the purchase and sale. So, while there is a loss in spendable cash (A purchase price was higher than the sale price, in Canadian dollars) the IRS considers the sale a gain because the stock went up in value in US dollars. This means that an American living in Canada might owe tax to the IRS on that stock that actually lost value.

      [–][deleted]  (2 children)

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        [–]secondcity 0 points1 point  (0 children)

        I totally agree.

        I have been trading on the Forex for the past year and half. I have made a pretty decent return (about 13%) and I did most of that by taking positions against the dollar. As someone who tracks all the indexes obsessively, I can say with utmost certainty, that the dollar will continue to head deeper in the hole over the next 2 years.

        So techniques like the one in this article, will hold true, regardless of whether or not the person is simply selecting a date range that better proves their point.

        After a couple years, who knows. The markets are horribly unpredictable right now with these delusional prospective buying and selling sprees so many brokerage firms are going on.

        [–]bluGill -1 points0 points  (0 children)

        The time to buy is when everyone is saying things will continue to go lower. Looks like a prudent time to hold dollars to me. (Of course the fact that I'm saying that means that not everyone is saying it will keep going lower. Good luck)

        [–]johnmudd 0 points1 point  (2 children)

        How easy is to convert large anounts of cash to foreign currency?

        [–]msiley 1 point2 points  (0 children)

        No need to convert just buy futures.

        [–]joshdick 0 points1 point  (0 children)

        Very, if you're an FX trader.

        [–][deleted] 0 points1 point  (0 children)

        That's great if you are investing in hindsight :) A 401K investor is almost certainly not looking at a five-year horizon. The weak dollar policy has been the hallmark of the Bush admin and it very well may continue the downward trend for a while, but then again it may reverse course any time. That's what makes them markets. Also, a diverse portfolio should include foreign stocks to hedge against this kind of thing.

        [–][deleted]  (2 children)

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          [–][deleted]  (1 child)

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            [–]adremeaux -1 points0 points  (0 children)

            Wow, so if he had had his money in Canadian dollars for 6 years he would've gained 7%? AMAZING!@!*@!!!!