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Old
10-25-2004, 11:44 PM
  #1
loadie
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Canadian Dollar

With the rise of the Canadian Dollar to almost 82 cents American, I was wondering if there is a time when Canadian clubs decide when they should purchase American dollars. The higher our dollar goes, the less financial burden the teams have to endure with the exchange rate. It must be like playing the markets, with hundreds of thousands of dollars at risk with the loonie dropping just a cent or two.

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Old
10-26-2004, 12:07 AM
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Habbadasher
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All indications are that the dollar will go much higher, so now is not the time to buy the greenback.

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10-26-2004, 08:16 AM
  #3
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This may be food for the Canadian teams, but man is this ever gona hit us hard as an economy. Trading may eventually stop with the us, inflation will rise, probably not hyperinflation, but inflation non the less, that will eventually bloom into a recession.......This is all normal however for a growing economy. You have to go through a recession to increase on a large scale. Look at Japan for example, after their recession, there economy is booming like nuts......

Anyways, enjoy purchasing products from the us while the exchange rate is low......

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10-26-2004, 09:59 AM
  #4
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Quote:
Originally Posted by Mooch
This may be food for the Canadian teams, but man is this ever gona hit us hard as an economy. Trading may eventually stop with the us, inflation will rise, probably not hyperinflation, but inflation non the less, that will eventually bloom into a recession.......This is all normal however for a growing economy. You have to go through a recession to increase on a large scale. Look at Japan for example, after their recession, there economy is booming like nuts......

Anyways, enjoy purchasing products from the us while the exchange rate is low......
Man you would really need an extanded economy course because your explanation is really flawed.

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Old
10-26-2004, 10:03 AM
  #5
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Quote:
Originally Posted by Marmax
Man you would really need an extanded economy course because your explanation is really flawed.
Agree 100%. A low $, It's like a pay cut for everyone, it may make us more competitive but it also make us much poorer.

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10-26-2004, 10:13 AM
  #6
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Originally Posted by Beatnik
Agree 100%. A low $, It's like a pay cut for everyone, it may make us more competitive but it also make us much poorer.
Agreed. I can't think of one country that ever devalued its way to prosperity.

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10-26-2004, 10:21 AM
  #7
Frank Drebin
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Quote:
Originally Posted by Freebooter
Agreed. I can't think of one country that ever devalued its way to prosperity.

A question.....doesn't the rising dollar have more to do with the weak American dollar than what is happening with our economy? Are other currencies not going up as well when being compared to the American dollar?

I would guess that the Euro is going up as well...that shouldn't hurt us as far as exporting goes, would it?

I don't know much about this stuff, help me out please.

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Old
10-26-2004, 10:23 AM
  #8
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Quote:
Originally Posted by loadie
With the rise of the Canadian Dollar to almost 82 cents American, I was wondering if there is a time when Canadian clubs decide when they should purchase American dollars. The higher our dollar goes, the less financial burden the teams have to endure with the exchange rate. It must be like playing the markets, with hundreds of thousands of dollars at risk with the loonie dropping just a cent or two.
You have to pay more tax when you trade the US money to Canadian. Its considered a capital gain. By adjusting the Canadian dollar through corporate taxes, you pay much less.

Gillette can write off a percentage of the players' salaries, with respect to the difference in currency prices.

Simply put :

Its cheaper to take the hit on the employee dollar difference when the loonie is sagging, than to trade currency.

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10-26-2004, 10:26 AM
  #9
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Quote:
Originally Posted by Marmax
Man you would really need an extanded economy course because your explanation is really flawed.
Nobody deserves that, especially not our little Mooch. Cruel and unusual punishment has been outlawed, you know.

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10-26-2004, 10:45 AM
  #10
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Quote:
Originally Posted by Officer Jim Lahey
A question.....doesn't the rising dollar have more to do with the weak American dollar than what is happening with our economy? Are other currencies not going up as well when being compared to the American dollar?

I would guess that the Euro is going up as well...that shouldn't hurt us as far as exporting goes, would it?

I don't know much about this stuff, help me out please.
It will hurt us in exporting because over 75% of our exports are to the U.S.

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Old
10-26-2004, 11:16 AM
  #11
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Quote:
Originally Posted by Marmax
Man you would really need an extanded economy course because your explanation is really flawed.
Your absolutely right, my bad......

Jeez, and i just took a Economics exam

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Old
10-26-2004, 11:18 AM
  #12
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Quote:
Originally Posted by Gros Bill
Nobody deserves that, especially not our little Mooch. Cruel and unusual punishment has been outlawed, you know.
You the man Bill, even though im wrong you stick up for me. Ya oldies aint so bad after all

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Old
10-26-2004, 12:19 PM
  #13
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Originally Posted by Mooch
You the man Bill, even though im wrong you stick up for me. Ya oldies aint so bad after all
How do you know you're wrong? Put enough economists in a room and some of them are bound to come up with your theory. Heck, the only thing they'll agree on is "ceteris paribus".

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Old
10-26-2004, 12:20 PM
  #14
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Quote:
Originally Posted by Machiavelli
All indications are that the dollar will go much higher, so now is not the time to buy the greenback.
Too late, I just passed the entire day downtown buying American dollars

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Old
10-26-2004, 04:36 PM
  #15
loadie
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Quote:
Originally Posted by Habs
You have to pay more tax when you trade the US money to Canadian. Its considered a capital gain. By adjusting the Canadian dollar through corporate taxes, you pay much less.

Gillette can write off a percentage of the players' salaries, with respect to the difference in currency prices.

Simply put :

Its cheaper to take the hit on the employee dollar difference when the loonie is sagging, than to trade currency.
I don't quite understand. If you have a 65 cent dollar and your paying you players, which is the highest expenditure you have, in US funds, you have to have a very high write off to make up the difference. I was watching TV quite a time ago, and the Canucks were purchasing US funds when the dollar was around 75 cents, so there must be a benefit to it, or so it would seem.

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Old
10-26-2004, 04:55 PM
  #16
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Quote:
Originally Posted by loadie
I don't quite understand. If you have a 65 cent dollar and your paying you players, which is the highest expenditure you have, in US funds, you have to have a very high write off to make up the difference. I was watching TV quite a time ago, and the Canucks were purchasing US funds when the dollar was around 75 cents, so there must be a benefit to it, or so it would seem.
There are some economic indicators that the Canadian teams have thrown around in the past that there is a huge impact for each cent the Canadian dollars gains versus its southern counterpart (I remember hearing in the $1M range, but I can't find a source so please just take this as an anectdotal amount rather than a confirmed figure). Very simply, the exchange gains do benefit when your major revenue is in Canadian dollars and your major expense is in US bucks, as you point out. To counter big exchange fluctuations, the teams do some exchange hedging throughout the season, so the effect is flattened out through the season. However, if the Canuck buck remains this high when hockey resumes and payrolls start flowing again, the bottom line will be much more favourable for the Canadian owners versus the older levels in the mid to high 70 cent range, all else being equal.

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Old
10-26-2004, 06:48 PM
  #17
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What your missing is that in the business world when dealing with outside currency, you would likley purchase currency options or futures contracts to offset the currency risk (rising or falling currency) or try and lock in a risk free rate (which is done in theory only) If you get say 1000 US currency option contracts, this will lower your risk if your a Canadien team earning Canadien dolllars but paying salaries in the US dollar. I'm not saying the Habs finance department does this cause I don't know what they do, but I spent 5 years getting a degree in Finance and I trade stock options for a side business.

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Old
10-26-2004, 06:49 PM
  #18
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Quote:
Originally Posted by montreal
What your missing is that in the business world when dealing with outside currency, you would likley purchase currency options or futures contracts to offset the currency risk (rising or falling currency) or try and lock in a risk free rate (which is done in theory only) If you get say 1000 US currency option contracts, this will lower your risk if your a Canadien team earning Canadien dolllars but paying salaries in the US dollar. I'm not saying the Habs finance department does this cause I don't know what they do, but I spent 5 years getting a degree in Finance and I trade stock options for a side business.
ewww, finance *barf*

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Old
10-26-2004, 07:17 PM
  #19
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Quote:
Originally Posted by montreal
What your missing is that in the business world when dealing with outside currency, you would likley purchase currency options or futures contracts to offset the currency risk (rising or falling currency) or try and lock in a risk free rate (which is done in theory only) If you get say 1000 US currency option contracts, this will lower your risk if your a Canadien team earning Canadien dolllars but paying salaries in the US dollar. I'm not saying the Habs finance department does this cause I don't know what they do, but I spent 5 years getting a degree in Finance and I trade stock options for a side business.
I believe George Gillett stated that the Habs hedge currencies in an effort to achieve, ahem, cost certainty. Any company with sales or expenditures in more than one currency does or should be doing this.

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Old
10-26-2004, 07:25 PM
  #20
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Quote:
Originally Posted by Officer Jim Lahey
A question.....doesn't the rising dollar have more to do with the weak American dollar than what is happening with our economy? Are other currencies not going up as well when being compared to the American dollar?

I would guess that the Euro is going up as well...that shouldn't hurt us as far as exporting goes, would it?

I don't know much about this stuff, help me out please.
Officer, you are right in that the Canadian currency has appreciated in tandem with the U.S. dollar depreciating. This has been the case for most world currencies against the U,S. The Canadian, Australian, and New Zealand currencies have been particularly strong as they are so-called commodity based currencies, meaning that they are traded as a result of demand for commodities produced and sold by those countries. When demand for commodities produced by these countries is strong and prices high, the volume and demand for their currencies appreciates. This is only partially related to the performance of the U.S. economy. Many have felt that the U.S. currency was significantly overvalued, especially given the the U.S. trade deficit. That trade deficit is coming home to roost as demand for U.S. products drops while the U.S. imports more relative to its trading partners.

I don't know if that helps. Bottom line: The appreciation of the Canadian dollar is only partially related to the decline in the U.S. dollar, IMO. This will continue for some time as there is strong interest in the U.S. in "talking down" the value of their currency.

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Old
10-26-2004, 08:06 PM
  #21
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Quote:
Originally Posted by loadie
I don't quite understand. If you have a 65 cent dollar and your paying you players, which is the highest expenditure you have, in US funds, you have to have a very high write off to make up the difference. I was watching TV quite a time ago, and the Canucks were purchasing US funds when the dollar was around 75 cents, so there must be a benefit to it, or so it would seem.
As stated by Montreal, you would have to be purchasing options. You still have to pay capital gains ... 50% .. and you are talking large dollar amounts to make it worthwhile.

Someone like Gillette probably purchases options in his other holdings.

Not many pro franchises have the liquid cash available to purchase these options. Plus, they would be purchasing mid-long term options, which wouldn't expire for a looong time (ie 6-9 months)

Seems like a big risk to me.

However, on an individual level... purchasing options on the US dollar may be a great investment in the upcoming months!

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Old
10-26-2004, 08:15 PM
  #22
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Quote:
Originally Posted by Mooch
This may be food for the Canadian teams, but man is this ever gona hit us hard as an economy. Trading may eventually stop with the us, inflation will rise, probably not hyperinflation, but inflation non the less, that will eventually bloom into a recession.......This is all normal however for a growing economy. You have to go through a recession to increase on a large scale. Look at Japan for example, after their recession, there economy is booming like nuts......

Anyways, enjoy purchasing products from the us while the exchange rate is low......

America is devaluing their dollar on purpose to get their economy started up again.... I wouldn't be surprised if the CDN dollar gets up to par with the americans in a couple years

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Old
10-26-2004, 08:28 PM
  #23
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Right now, I can't see any advantage to the Habs from the appreciation of the Canadian dollar vs. the U.S. because they're not paying players' salaries during the lockout. Maybe some banker or economist can show me the error of my ways.

I could see the US$ sagging a bit more because George Bush is asking for another $75B to cover the costs of the war in Iraq. Seems the election in Iraq is threatened by the insurrection, so more troops have to be sent in and more money spent on materials.


Last edited by Corey: 10-26-2004 at 08:31 PM.
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Old
10-26-2004, 09:35 PM
  #24
loadie
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Quote:
Originally Posted by Habs
As stated by Montreal, you would have to be purchasing options. You still have to pay capital gains ... 50% .. and you are talking large dollar amounts to make it worthwhile.

Someone like Gillette probably purchases options in his other holdings.

Not many pro franchises have the liquid cash available to purchase these options. Plus, they would be purchasing mid-long term options, which wouldn't expire for a looong time (ie 6-9 months)

Seems like a big risk to me.

However, on an individual level... purchasing options on the US dollar may be a great investment in the upcoming months!
Ok, I understand how it works, Thanks. It does seem to be a big risk.

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Old
10-26-2004, 10:05 PM
  #25
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Freebooter, I agree with what you said completely except I would add one other factor, the budget deficit. The U.S. deficit, combined with Canada's lack thereof, is another factor to throw in the mix.

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