** The Irritating Status Quo and the Swooning Loonie– by Inya Ivkovic, MA - Profit Confidential
So, Thursday last week, Canada’s Governor General — or, in plain English, the Queen of England’s representative on this side of the Atlantic — Michaëlle Jean, granted Prime Minister Stephen Harper prorogation of the current Parliament, suspending it until January 26th and effectively postponing the confidence vote on Harper’s proposed budget plan. Why did the parliamentary opposition push for the confidence vote? Aside from the obvious — their own stake in the country’s top political echelon — Harper’s irritating hesitancy to go public with concrete economic stimulus package. Bravo! Now Canada gets to do nothing for almost two months before doing anything to help the economy.
The moment the decision hit the media, the loonie nosedived another US$0.0154, closing at US$78.29. Darn; but this is what happens when uncertainty swirls while politicians engage in a poorly timed and economically irresponsible pissing contest. Foreign investors don’t have time to appreciate all the nuances and background story of this debate. Instead, they’ll just go somewhere else where political scene is more stable. I mean, sure, I would expect a third-world country to be deemed politically unstable…but Canada?
What is likely to happen next, as the Canadian economy remains on track to go off the brink? The minority Conservative government will likely try to find allies and hopefully work on a budget that will be all about economic stimuli. There might even be some time and energy left to try to swoon over the public, too. In the meantime, that same public will remain extremely nervous watching shrinking investment portfolios, trading with less valuable money, and hoping that a pink slip will not come their way. Wow, this really builds towards a cheerful holiday season, huh?
Speaking of having to trade with less valuable money, unfortunately political uncertainties are not the only factor having an adverse impact on the Canadian dollar. Among other things, commodities are still weak, as oil plummeted below $44.00 per barrel to a four-year low. Additionally, the TSX is still hemorrhaging market cap, and most of the macroeconomic data is still soft. In other words, the loonie is running out of positive spin, or any kind of spin at all, for that matter.
What has kept Canada’s economy safely afloat is slipping through its inept minority government’s hesitant fingers. Canadian banks were prudent enough not to get too entangled with the creative asset-backed securities fiasco. Unfortunately, it was all for naught. Canada’s economy is heavily dependent on foreign trade. That means there is not much it can do about importing global recessionary factors. And, now, thanks to Prime Minister Harper, Canada will keep on facing headwinds until January 26 next year. I don’t know about you, but it seems to me a long way until then, given what has already happened, current circumstances, and what may still come our way down the road.
Profit Confidential
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About the author
Financial, is the editor of Explosive Mine Stocks, Bio-Tech Breakthroughs and Payload Stocks.
Inya is co-author of The Revenge to Riches Strategy: How
You Can Profit from the Secret Greenspan Plan. Prior
to joining Lombardi, Inya held several positions with large
North American financial institutions, and has been an academic
specialist for a securities institute, a trader, and an investment
advisor. Inya’s diverse market background, coupled with
a passion for stocks, delivers an institutional perspective
to Lombardi Financial readers.
Tags: adverse impact, background story, budget plan, canadian economy, confidence vote, conservative government, economic stimulus package, foreign investors, hesitancy, investment portfolios, loonie, michale, parliamentary opposition, pink slip, plain english, political uncertainties, prime minister stephen harper, queen of england, stephen harper, third world country