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Posts Tagged ‘2002’

History shows that when the CAD was in the low 60-cent USD range in 2002, it was a great time for those holding USDs to convert some of them into CADs, as in just five years, the CAD reached parity with the USD, for an annualized gain of over 12%.

Then there was the 20% drop in the CAD in less than a full month from September to October 2008, which made it another great buying opportunity.

However, given a CAD in the mid 90-cent USD range, I don’t see many gains coming from the CAD in the medium or long-term, and the reason is the historical policy of the Bank of Canada in intentionally keeping it below parity with the USD.

Here is an article from January about the Bank’s current governor, Mark Carney, chiding a reporter expressing comfort with a 96 cent CAD. The Bank governors, prime ministers, and unfortunately, most Canadians, have this unfortunate notion that the CAD should stay below the USD in value, since it “hurts exports,” despite the fact that exports account for less than half of Canada’s total GDP.

For short-term hedging, it’s possible for the CAD to go on a tear, up to $1.10 USD, as it reached in November 2007, but personally, I wouldn’t count on getting many gains from that versus other investments, until the CAD is down into the 80-cent and low 90-cent USD range.

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Since 2009, I have heard two prominent financial analysts repeatedly make the claim on multiple programs, including two major ones with over a million weekly listeners, that gold and silver are all you can rely on. But what about platinum?

How much can you really rely on gold and silver, when gold was confiscated by the U.S. government in 1933 at the height of the Great Depression, and silver in 1934. And how can you specifically rely on gold when it’s the commodity most controlled by the international bankers, and a reserve currency for national and international banks?

Unlike gold and silver, a confiscation of platinum is unlikely for several reasons:
1) It’s not a reserve currency for national and international banks like gold is.
2) It isn’t as widely held as gold and silver.
3) Its historical investment and currency use is shorter than gold and silver.
4) Its decreased demand relative to gold and silver in a recession, due to its overwhelming industrial demand, leading to better performance during the subsequent recovery.

When I mention platinum as an investment comparable to gold and silver, I’ve been told that platinum has little to no historical use as a currency. As I wrote previously, platinum has an international currency code along with gold, silver and palladium. Since 1988, one ounce platinum coins from the Royal Canadian Mint have a legal tender value of $50. Since 1997, American Platinum Eagles from the United States Mint have a legal tender value of $100.

From 1967-1978, the first and only regularly minted gold coin available for the masses was the South African Krugerrand. However, due to trade sanctions imposed by many Western countries on South Africa for their policy of apartheid, the Krugerrand’s availability was severely limited from the 1970s until 1994.

It got some serious competition in 1979, when the Royal Canadian Mint began minting Canadian Gold Maple Leaf coins. Just nine years later, at the height of sanctions on the import of Krugerrands, one ounce platinum coins were minted by the Royal Canadian Mint between 1988, and continued to be minted until 2002, and were reintroduced in 2009.

Not only can you rely on platinum as a historically non-confiscatable metal, you can also rely on it historically trading at a substantial premium over gold. Over most of the past decade, platinum has traded at a 50 to 100% premium over gold. At a 38% premium over gold at the end of January 2010, it still has plenty of room to appreciate to its historical trading premium relative to gold.

Recently, platinum outperformed gold in 2009, and for the first month of 2010.

Now ask yourself why you’re being told that gold and silver, and not platinum, are the only things you can rely on, why gold and silver are being pushed so much, and not platinum, and why most of you haven’t heard these things about platinum before.

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This October 9, 2009 article shows a U.S. Customs form with an SDR (Special Drawing Right) value.

This isn’t a recent phenomenon. The use of SDRs by U.S.  federal government institutions goes further back than 2009. According to the United States Postal Service 2003 Annual Report, “The majority of our international accounts are denominated in Special Drawing Rights (SDRs).

According to the IMF Factsheet on SDRs, “The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies (U.S. dollar, Euro, Japanese yen and pound sterling), and SDRs can be exchanged for freely usable currencies.

How much have SDRs benefited the U.S. Postal Service at the expense of the U.S. dollar?

On December 31, 2002, 1 USD = 0.7382 SDR
On October 18, 2009, 1 USD = 0.6280 SDR

There was a 15% decline in the USD from December 31, 2002 to October 18, 2009.

It’s not just the illegal Federal Reserve that’s been undercutting the U.S. dollar. The constitutional U.S. Postal Service and U.S. Customs are also in on the act.

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