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.

Today the Canadian dollar has fallen to 25% below the Greenback.  Analysts think they could see a 30% differential in one week.  Who could have foreseen this a year ago (October-November 2007), when the Canadian dollar was 10% stronger than the US dollar (at the all-time high, one Canadian dollar bought $1.10 American)?

The latest central bank rate cut aside, it isn’t the Canadian economy causing the loonie to fall.  We know the Canadian fundamentals are in better shape than the U.S.

It’s because all around the world, foreign currencies are returning to their homelands as US investors dump their foreign investments in order to hold cash, i.e., Greenbacks.  This causes the nominal value of the Greenback to rise, since there’s less of it in circulation and more demand for it.

If this is correct, then as soon as we see the markets improve and foreign investments looking more desirable, the Canadian dollar should find its way right back up again like a cork jumping to the surface of the water.  There might even be some pent up demand caused by this extended pseudo-moratorium on loonie-buying.  I mean c’mon, I’ll repeat that the Canadian banks have recently been declared the safest in the world (above Luxembourg and Switzerland).  We still hold the most potash, we provide the safest supply of oil to the US, and we had no real estate sub-prime problems (as some European countries even did).

In the meantime, I’m thinking of strategies for getting around this insane currency rate business.  One strategy, obviously, is to be paid in US dollars.  I can do this by buying dividend-paying US stocks (a much slower way to build up those dollars), or just by finding an extra source of employment income in the US.  If you’re a Canadian also currently living in the US, I’d love to hear more from you about the strategies you’re using.  If anyone else has ideas too, feel free to chip in.  Until then I’m spending 25% more for everything from public transit to groceries.  Now is not a good time to buy larger ticket items if you’re working from the loonie.

Here are the stocks I’m watching lately, supported by votes of confidence from the guest analysts brought in lately on BNN:

Arc Energy Trust - (AET.UN-T): $28-29
Crescent Point Energy - (CPU.UN-T): $33-34
Husky Energy - (HSE-T): $43-44
Freehold Royalty Trust - (FRU.UN-T): $21-22
Diana Shipping - (DSX-N): $28-29

Interesting that most of them are oil plays. Oil per barrel is really cheap right now, and that means all the oil stocks are on sale. I really want to take the opportunity to buy some up, but with limited cash, I can either do this or put some more money in US stocks for increasing my US cashflow (since most US stocks are superbly on sale right now, too). Not sure which decision to take.

The Loonie could be falling again if oil stays low. In that case I’d better buy my US stocks now while I don’t lose money in the exchange rate. On the other hand, because oil is low right now, all the great Canadian energy plays are on sale too.

Hmmm…. what would you do? If you’re Canadian, or living/working in Canada, how are you planning to take advantage or protect the recent highs of the Loonie?