Congratulations!  You’ve won a SSHRC or other scholarship from some Canadian entity in order to pursue your education in the U.S… the only problem now is…. your money is worth up to 30% less than its Canadian face value.  Nice!  You didn’t see that coming last year when we were able to solidly out-buy the greenback by 10%.

Well, the good news is… that I’m in your situation too (very reassuring, I know)!  So please do come back here for updates (subscribe to my feed, if you like) on what I’m doing and suggesting.  Feel free to get in touch with me on email as well.

One obvious thing to keep in mind at this point is to stick to buying essentials: the things you need to stay comfortable, healthy and focused on your work. I know, that’s very difficult.  Canadians are wont to overconsume as well.  It wasn’t that long ago that the economy basically felt like it was still rolling along… in fact… even in August we were still able to feel that way.  While the US had already begun a recession, things didn’t get seriously bad globally until the Lehman Brothers fiasco in mid-September.

Also, remember that even this situation will be temporary.  When the US domestic market is done dumping its foreign holdings in order to sit back in cash again, that pressure on the loonie will dissipate.

And as soon as the markets start floating upwards again, the loonie will go with it.  The so-called “commodity currencies” always do better when markets are moving upwards, because funds and individuals (so the theory goes) are more willing to take on the (perceived) risks associated with commodities and resources.

Investing?  I’m starting to think that money markets are your best bet until we see more market stabilization. Income trusts always look good because they’re high-yielding, but some corporations may decide to buy back some units - as Harvest Energy is doing - in order to save money.  This isn’t good for your income.

And of course, fundamentals.  The world has passed peak oil.  Canada has lots of it.  Canada still has most of the world’s potash.  Even if the US manages to become foreign-oil free in ten years as Obama has promised, there’s still a ton of items that need oil to be manufactured.  We could be an electric car society and we’d still be running out of oil.  Not that I’m advocating oil use, but face it, this is a major factor in the Canadian economy.  Soon hyperinflation should finally register on the US balance sheets.  This can’t be good for the greenback.

Why don’t you send me some of your suggestions or complaints?:)  How are you getting around the awful exchange rate?  When do you expect it to turn around, or at least come back up to 95 cents?  This is the first time since the whole “credit crisis” that I’m finally reigning in my own spending as well… that must be a good thing, but it’s not like I have a choice.

Unfortunately for me, since I’m currently in the US, the recent dramatic drop in the Canadian dollar is causing everything to suddenly become almost 20% more expensive.  I’ve been waiting for the dollar to turn around again - even last month’s 10% difference is looking really good now - but I fear it’s going to take longer and I’ll be stuck paying 20% more for stuff.  It seems so unfair, especially when you consider the recently disclosed fact that Canada has the safest banking system in the world (yes, several points higher than Switzerland and Luxembourg).

But commodity and resources drive (much of) the Canadian economy.  And right now, not much growth is predicted across the globe for the next while.  Just yesterday, I think, the Wall Street Journal reported that China has just seen its first quarterly GDP decline since it opened its markets!  So what this means is that there is apparently going to be less demand for Canada’s potash, oil and zinc.

I’m feeling fairly optimistic about the market mess.  Maybe it’s because I knew it was coming and so I am not as surprised and certainly not scared by the media reports, who need to milk a good story for everything it’s got.

Pure fundamentals, though, seem to suggest that there’s no way around it but that the US dollar really has no support and it’s gonna start falling back again when the markets realize the US economic fundamentals (why this hasn’t happened yet is completely baffling!).

Obama’s election might also help prop up the markets, at least for a while.  I have a feeling he’s going to have a bit of a stabilizing effect.  What do you think?  Anything could happen in the next two weeks, but it seems likely we’re going to see Obama’s face in all the 8×10 frames hanging in government offices everywhere.

Don’t worry if you’re invested in the Canadian banks. BNN reports the following figures on the Big 5 in light of the recent collapses in Merrill, Lehman and AIG:

(1) CIBC has the worst exposure to Lehman, at about $25 million, which is apparently not considered much.
(2) TD and Royal have said they have only “nominal” exposure, which is sort of like having “trace” amounts of snow.
(3) BMO’s levels of exposure are “not significant.”
(4) Bank of Nova Scotia had issued a $93 million loan to Lehman, but this was never drawn upon, and so is effectively zero exposure for the bank.

One good thing is that apparently the Royal Bank of Canada had “been working to reduce its risk relative to Lehman wherever possible for several months.”  On the other hand, RBC Capital Markets analyst Andre-Philippe Hardy said that “while all banks have some such exposure, CIBC, followed by Bank of Montreal, would be the most exposed in Canada.”  You can read the full article here.

It’s relatively common knowledge that in Canada, CIBC is one of the riskier banks, taking on more aggressive investment positions, while the Bank of Nova Scotia is considered the most conservative of the Big Five.

So for this sector which is already considered on the conservative side anyway - TD and Scotia have managed to continue to increase their dividends throughout the slump of the last year and a half - Bank of Nova Scotia might be a particularly good investment to look at if you still want some good financials exposure.  And it’s also the most internationally-positioned of all the Canadian banks.