Dennis Gartman has Canada on his mind this week.
The popular U.S. market commentator and newsletter publisher is flying into Toronto Tuesday evening and plans on hanging around for the rest of the week, doing a financial Cook's tour of sorts. He's scheduled to ring the opening bell at the Toronto Stock Exchange Wednesday, to celebrate the public listing of the Horizon AlphaPro Gartman exchange-traded fund. He also has a date with our sister station, BNN, for a TV interview, and is speaking at the Toronto CFA dinner on Wednesday evening. (Beyond that, we imagine he'll mostly be shopping for thermal underwear and trying to find ways to stay warm in a frosty Canadian fall week here in southern Ontario. Honest, Dennis, it usually isn't this cold here in mid-October.)
So, with so much Canada occupying his thoughts, what's Mr. Gartman saying about our country this morning? No big surprise, his daily newsletter tackles the Canadian dollar, which topped 97 cents (U.S.) for the first time in 13 months and is re-awakening the parity parrots. When it comes to comparing the loonie to the U.S. greenback, Mr. Gartman thinks it's about as fair a fight as Lennox Lewis versus, say, me. (For the record, I'm a cruiserweight.)
"In the current environment, it seems unfair to pit the US$ vs. its Canadian alternative, for the latter has too many things going for it and the former seems at the moment to have none. 'Par' is a foregone conclusion; how far past par can things go is the only real question," he wrote.
Indeed, while the massive U.S. budget deficit remains an albatross around the greenback's neck, and the U.S. government seems more than happy to let the currency deflate, forex traders just keep finding new reasons to buy the Canadian dollar. Canada's solid employment numbers last week have buoyed optimism about the domestic economy; but probably an even bigger deal was Australia's recent interest-rate increase, which has focused traders' attention on the relatively healthy situation for other resource-based economies, with Canada being near the top of that list.
Even though the situations of the two countries are quite different (Australia's chief export markets are strong-growing China and other Asian economies; Canada is stuck with the anemic U.S. market), forex traders nevertheless are already eyeing the Bank of Canada as another potential source for rate increases.
Mr. Gartman suggested a test of the loonie's 2007 highs in the $1.10 (U.S.) range could be "but a matter of time."
"Canadian manufacturers will wail and gnash their teeth at this prospect, and even the Canadian government will metaphorically rend its clothes and bemoan the strong and stronger Canadian dollar, but they will be powerless to stem the tide," he said.
David Parkinson