Tuesday, June 02, 2009

US Dollar's fall making that trip to Canada a little pricey

In March the global equity meltdown led to a flight to quality (or perceived quality) that pushed the US dollar to heights not seen in a few years. In fact, the US to Canadian dollar exchange rate had jumped to $1 : $1.26 in March it's highest level since 2004. However, as equities have rallied around the globe it has pulled money out of safer investments and that has sharply reduced the value of the greenback. Today, our dollar buys just $1.08 Canadian - coupled with the new border crossing requirements it makes that trip to Kingston a little less appealing :)

In perhaps the least surprising bit of news of the day: "Congress Helped Banks Defang Key Rule".

"Not long after the bottom fell out of the market for mortgage securities last fall, a group of financial firms took aim at an accounting rule that forced them to report billions of dollars of losses on those assets.

Marshalling a multimillion-dollar lobbying campaign, these firms persuaded key members of Congress to pressure the accounting industry to change the rule in April. The payoff is likely to be fatter bottom lines in the second quarter."

Not surprising - banks pay lobbyists to convince lawmakers that confusing financial rules need to be tweaked. The lawmakers can barely grasp the concept of debits and credits let alone the intricacies of mark-to-market accounting, so they take the lobbyist's word for it. I'm sure that will end well.

"Earlier this year, financial-services organizations put their lobbyists on the case. Thirty-one financial firms and trade groups formed a coalition and spent $27.6 million in the first quarter lobbying Washington about the rule and other issues, according to a Wall Street Journal analysis of public filings. They also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change, the filings indicate."

Finally, auto sales for May came out today. They were generally quite miserable, but there were some interesting data points in there.....

1) GM & Ford actually outperformed many of the big foreign firms.

Toyota plunged 41%
Honda down 42%
Nissan lost 33%
BMW fell 27.7%
Volkswagen fell 12.4%
Mercedes-Benz down 33%
Porsche Sales Down 29%
Hyundai lost 15%
General Motors fell 30%
Ford Motor 24%
Chrysler dropped 47%

Again, sales falling 25-30% is nothing to write home about but somehow Ford and GM seemed to post slightly better numbers than Honda and Toyota. There could be some seasonal truck buying in there (Chevy/Ford still dominate that segment) and that could have led to their relative outperformance. Also, all of the talk about the difficulties facing the domestic brands might have driven more foot traffic to the showrooms as people sought deals.

2) Despite the slight improvement in auto sales in May, the total domestic US Auto sales are now projected to come in at just 9.2 million units. This would be the worst year since the mid 70's when our population was 2/3rds of what it is today. Staggering.

3) Finally, I remain concerned that GM and Ford's performance indicates that they are pulling forward demand. 2010 and 2011 may prove to be increasingly difficult for the domestic carmakers if they pull their limited demand into 2009.

Quote of the day: "Dumb is the new smart on Wall Street". That's priceless.

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