Wednesday, February 04, 2009

Vancouver Sun, Opposite Land Edition

Vancouver Sun: Loan for Olympic Village must be repaid in U.S. dollars bought when the loonie was aloft: Exchange risk could cost city $60 million

This article makes me feel like a financial wizard. Quote:

That $750-million line of credit was to be borrowed in U.S. dollars, then swapped into loonies, to pay contractors.

That probably seemed swell at the time. Our loonie was flying high back then. For a period it was even at par, or above the U.S. greenback, and seemed destined to float there. U.S. dollars actually seemed cheap.

Hmmmm... U.S. dollars actually seemed cheap, eh? What do you do when something seems cheap? YOU BUY IT. Yes, when the loonie was flying high, the smart thing to do would have been to use some loonies and buy some U.S. greenbacks. That is, maybe borrow some Canadian dollars and swap it into U.S. dollars. Yes: the exact opposite of what is described above.
But supposing Millennium made its draw when the loonie was at par, or so. Millennium would have roughly gotten a one-to-one deal on its loan. That is: $1 Canadian = $1 US.

Not bad. How can you go wrong with a deal like that?

Hmmmm... how could you go wrong by betting that the Canadian dollar would rise against the U.S. dollar, at a time when the Canadian dollar was at something like a THIRTY YEAR HIGH against the U.S. dollar. Yes, how could you go wrong making a bet like that?


Blogger Vancity Buzz said...

lol, good stuff. I myself bought a boatload of US dollars when our dollar was at or near par. I made 25% without doing anything ha ha ha.

10 March, 2009 12:53  

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