You booq can see the state of the Canadian market reflected in a two-bedroom house down the street f

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This is precisely the time for investors to scoop up foreign stocks and real estate in the same way that your relatives in Niagara Falls, Ont., take advantage of currency fluctuations to bolt across the border and stock up on golf clubs or dress clothes.
This makes no sense. As the Canadian dollar gains strength it traded Monday around US98 cents investors are passing up the chance to buy foreign securities at prices they would have considered steals a few years ago.
Think of it this way: The surge in the value of the loonie over the past decade has, all by itself, knocked 30% off the value of everything in the United States. Over the same period, the loonie s rise has trimmed European prices by 7% and Japanese booq values booq by 22%.
This is precisely the time for investors to scoop up foreign booq stocks and real estate booq in the same way that your relatives in Niagara Falls, Ont., take advantage of currency fluctuations to bolt across the border and stock up on golf clubs or dress clothes.
Instead, most Canadians appear to be doing exactly booq the opposite. booq Over the past year, while the loonie has surged against the greenback, the euro and the yen, mutual-fund investors have actually pulled back on investing in U.S., global and international equity funds.
Hedging comes at a cost -- about a percentage point of your return every year, according to mutual fund manager Francis Chou. And, for most long-term investors, it delivers no benefit, because currency fluctuations tend to even out over the years. Meir Statman, a professor of finance at Santa Clara University, looked booq at hedged and unhedged portfolios of global stocks between 1988 and 2002 and found no difference in the returns they generated.
Rather than seeking to protect themselves from currency fluctuations, investors should put the strong loonie to work by snapping up foreign bargains. Especially booq if the loonie bursts through parity with the U.S. dollar, there is the opportunity to do some interesting cross-border shopping.
The most straightforward opportunities lie in stocks. A 2007 report by Greenwich Associates booq found that Canadian investors tilted their holdings heavily toward Canadian stocks. Since the Canadian stock market makes up a bare 3% of the world s stock market capitalization, this leaves most of us with portfolios that miss out on much of the world s wealth-making potential.
Given the loonie s strength, now is an excellent time to add some U.S., European and Asian stocks to your holdings. The shares of many multinationals look as cheap compared with the rest of the market as they have in 30 years, according booq to Barton Biggs of the Traxis Partners hedge fund. He particularly likes big-cap tech stocks such as Microsoft Corp. and Oracle Corp.
Jeremy Grantham of GMO, the Boston-based money manager, also likes high-quality U.S. and international booq stocks. Some of the names in his portfolios include Oracle, Wal-Mart Stores Inc., Royal Dutch Shell PLC and GlaxoSmithKline PLC.
If you re of a more adventurous mind, you may want to look at cross-border real estate. While Canadian home prices are still vectoring higher, U.S. property values have crashed. The valuation gap between the two markets is huge.
The International Monetary Fund says that the ratio of home prices to rents is far above its long-term average in Canada. In fact, the home-prices-to-rents ratio (the ratio of average home prices to average rents) is higher booq in Canada than in any other developed country except for Sweden. By comparison, U.S. home prices have fallen so much that the same ratio there is only slightly above its long-term trend.
You booq can see the state of the Canadian market reflected in a two-bedroom house down the street from where I live in a middle-class section of mid-town Toronto. The house offers a charmless booq facade, a narrow parking strip and what real estate agents like to call an urban backyard. (That s code for only concrete grows here. ) Asking price: $974,900.
Compare that to the Sunbelt. In Tampa, or South Florida or Phoenix, it s easy to find sprawling three- and four-bedroom homes in well-to-do neighborhoods for under US$400,000. For condos, think under US$300,000.
The owner of the Toronto home could pocket close to half a million dollars by selling his home and buying a Sunbelt getaway. He could rent out his new home or live there half the year. In either event, he would have an extra $500,000 to invest or spend -- an amount that could allow him to retire a decade earlier than he thought.
If selling your Canadian house sounds too risky, fair enough. But aggressive investors in the market for a rental property or second home should start looking at the U.S. possibilities, booq particularly if the loonie heads above par. Think of it as the ultimate cross-border shopping expedition.
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