Why I like the Canadian Dollar

Canada has escaped the subprime crisis. There are no TARPs and bailout for banks.
There are no Fannie Mae and Freddie Mac and all the mess. Three of the largest Canadian banks voluntarily cut their own pay in response to the global crisis. Unlike Merrill Lynch, whose CEO spent $1.4m on office-renovations & pay bonuses just before announcing disastrous results.

Canadian Banks are currently the strongest banks on the planet. They are under-leveraged. They are very conservative. ALL US banks are over-leveraged and many of them are technically bankrupt.

Canadian corporate tax is currently around 18.5% going down to 15% in 2012. It is the lowest among the G7. This is very good for business. US' corporate rate is currently 35%.

Canada operates on a long term budget surplus. US has an unimaginable deficit and a debt that will take generations to repay. They are printing money to spend on stimulus projects. With the increased money supply, US dollar will have to come down. Currently, it is strong because the economic situation is less ugly than what it is in Europe. But there are no real reasons for US$ to be stronger than C$.

It is a matter of time that gold and oil will go up. Canada stands to benefit greatly from the bull cycle.

Thus, I will be changing US$ and S$ to Canadian dollars in the next few weeks. I expect the C$ to be one of the strongest currencies in the world. Shorter term, it may be down a bit more but it is certainly over-extended.

When there is a bottom in the market, Canadian banks will be the first to recover. Right now, the Canadian banks are selling at incredible bargains. With operating margins exceeding 30%, and dividend yields between 6% and 8%, Canadian banks are selling at only around eight times earnings. Bank of Montreal is my favorite - it's selling for only six times this year's expected earnings and is yielding 10%. It is still too early to buy. But when the bottom is near, buy Canadian banks.