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Before we took this decision, we tried to outsource all product fulfillment south of the border but felt strongly that this would impact our ability to service our customers. We started when the CAD was at 62 cents, sold when it was 76 cents. 85 cents is fast approaching.
Hopefully your product has enough wiggle room as far as price is concerned that will allow you to raise pricing without impacting volume. I feel for you mate, its a tough problem to deal with as the trend seems to be that the US is comfortable with a weak dollar so I would expect margins to be squeezed futher as the CAD makes gains.
If you are selling in USD and get 100, then convert to CAD and only get 80 CAD (just a guess, I don't have the rate handy) then spending that 80 CAD on expenses to buy your product wholesale etc, then 100% of your revenue (the $100) is exposed to the currency exchange. If on the other hand, you buy your product in USD (lets say $50 of the $100 is product cost), then those dollars are not even affected by the exchange.
The more costs you can move to USD, the less you are exposed to the rate. If you initially receive you money in a US account, then it will be simple to shop US and use those funds.
But this begs the question: will the US dollar grow strong again and if so, when? Any economics wizzes here who could offer some advice?
I could go on about the nefarious schemes of Central Bankers, but suffice to say they do not have our interests at heart. America is in debt up to its' eyballs in all three levels: Private, Corporate and Public. The only way to wiggle out of this jam is to make all that debt less onerous by debasing the currency. So also don't look for too many more rate hikes.
Just to finish off my previous thoughts: The bull market in financial assets is over and that most likely means common stocks, esp US stocks. On the other hand stocks are probably better than straight cash, as at least a partial hedge against a falling currency. Stock market will also protect in times of hyperinflation which is my prediction for the future. We may also see a short-lived deflationary blowout if things line up wrong.
Nevetheless, US dollar is nothing but an IOU from Uncle Sam and the world is starting to realize America might not be able to pay us all back.
I like tangible investments myself and I am sinking it all into Krugerands. Approx. a troy ounce of gold and legal currency to boot.
There does seem to be a lot of news coverage on both national debt, deficit and the sinking dollar - which might create a more public outcry in the US. The Bush admin will feel the pressure when the T Bill interest rates have to move up. Right now, they have no incentive to stop the dollar's slide as the retail lobbyists (exporters) have got Bush dancing the way they want him to.
Although there's a slide in the dollar and the deficit is awful, one thing to keep in mind is the US economy is doing well right now. It's the government that's in trouble, not business - which was more the case in 1929.
Just some thoughts. Take it or leave it.
As a previous SA resident I wish you luck eith this strategy!
The USD currently sucks! If you can switch fast, then I would do so.
I'm stuck for a reasonable peoriod with USD funds. Damn it hurts!
Over the longhaul it is what I chose, for right or for wrong!
The USD will bouce back, it's failing will cost a lot of US money.......but probably not a vote!