Canadian economy hot topics.
If you're like us, you've probably been following the media frenzy over the drop in our loonie relative to the U.S. dollar. In many industries, this can have dramatic impacts on business, often perceived as a negative. But for other businesses, there are some surprising positives to this shift.
We've gathered some of the recent articles that provide an interesting perspective on this challenging economic time. Polish up the loonie and let opportunity shine.
Canadian Business: Why a low loonie may be good news for Canada’s tech startups
"Canada’s tech sector will likely see a flurry of foreign investment in 2016, as the tumbling dollar turns homegrown startups into absolute bargains for American venture capitalists. The loonie’s plunge below 70¢ against the U.S. dollar in mid-January was bad news for energy companies but will boost the competitiveness of our high-tech firms.
"American venture capital firms have shown mounting interest in Canada, according to Stephen Partridge, who sits on Startup Canada’s board of directors. “It’s been a trend starting as early as 2012, but over the past 12 months, you’re hearing it left, right and centre,” he says. … “The dropping Canadian dollar makes investing in Canada significantly more attractive.” … Last year, Teten’s firm invested in the Better Software Company, an enterprise resource platform based in Ottawa. Meanwhile, Kayne Partners from Los Angeles invested $15 million to You.i TV, an Ottawa-based software company."
"The country is in a tizzy about the falling Canadian dollar. It needn’t be.
"We are not going the way of Zimbabwe.
"Yes, imported cauliflower may now cost $8 a head. But there is relatively simple solution: Don’t buy cauliflower. Eat cabbage instead.
"And when you can, buy Canadian.
"The fact that our dollar is now hovering around 70 cents (U.S.) does not mean we are somehow less virtuous than we were when the two currencies were near parity.
"It means only that foreigners don’t need as many loonies to buy the Canadian exports they want.
"By and large, that’s because the price of oil — a commodity that accounts for a big chunk of Canadian exports — has cratered.
"On the one hand, this is real problem, particularly for those whose jobs depend on a never-ending oil boom.
"On the other, the oil price collapse gives Canada a chance to rebalance its economy."
The Globe and Mail: Plunging loonie could be boon for startups seeking venture capital
"Industry watchers say the tumbling loonie is a blessing in disguise when it comes to Canadian startups and the innovation economy as U.S. venture capitalists look to make their investments go further.
"As the resource boom that helped fuel Canadian growth over the past decade continues to go bust, Canada’s commodity-sensitive currency has lost nearly 40 per cent of its value and now trades at near 13-year lows.
"While that spells trouble for snowbirds looking to travel abroad and for shoppers facing higher prices on imported goods, it presents an opportunity for foreign investors, says Steve McCartney, vice-president at Communitech, a Waterloo, Ont., startup incubator."
"…In theory, of course, nothing prevents the Bank of Canada from setting its rate at minus one per cent and some commentators have said this will likely happen in 2016.
"How then would negative rates work? Essentially, the Bank of Canada offers interest on the deposits of the commercial banks at the central bank, just like commercial banks offer us interest on our deposits with them. With negative rates, commercial banks would now have to pay the central bank to hold deposits with them. By charging interest on bank deposits, the central bank is hoping banks will want to avoid paying interest and instead start lending out their excess funds again, and thus spur the economy back to full employment."
The Motley Fool: How to Profit From the Weak Loonie
"One of the biggest stories as of late has been the massive decline in the Canadian dollar against the U.S. dollar. The loonie is currently sitting slightly off an 11-year low, and is trading at only US$0.76. The implications of this for Canadian stocks can be huge, and Canadian companies with assets in the U.S., or revenues in U.S. dollars will see significant boosts to their earnings and their share price due to the Canadian dollar’s weakness (and in fact, many already have).
"While it is never wise to buy or sell a stock entirely because of exchange rates, buying high-quality companies with the right exposure to the U.S. dollar in this environment can provide a major tailwind to an already solid company."