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Post by jmt21 on Apr 19, 2011 16:41:39 GMT -5
I'm no finance whiz but there is something I've wondered about. It's no secret that the biggest detriment for Canadian teams would be if the CDN dollar fell seriously below the Greenback as it did throughout the 90's. With player and coaches salaries paid in USD what is the best way to hedge against a low CDN dollar which hurt many CDN teams so severely in days gone by? Today... a 50 million dollar payroll would only cost 48M CDN funds. Great deal! Of course as time passes that 50M could easily go back to costing anywhere from 60 - 70M CDN. The layman in me says that purchasing vast quantities of USD today would be a good hedge if our currency falls dramatically again. There would surely be a downside to this I don't see right now. Our silent partner could easily procure a serious amount of USD to prevent a currency shift down the line. Is my thinking on the right track or am I delusional. I've placed this thread here to garner feedback. If the mods see fit please move. Thanks.
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Post by Pokey on Apr 19, 2011 16:44:17 GMT -5
I have a feeling the US dollar may be devalued for a long time. The US is in ridiculous debt (14 trillion), and it's been said they want their own dollar to be weak in order to devalue the debt. Although I'm not fully behind this theory, it makes some sense.
In fact I can see the Loonie gain even more on the US dollar in the future.
But I do laugh when I hear people say 'Well, what's gonna happen when the CDN$ goes back to 60 cents American??" That kind of thing won't ever happen again, IMO.
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Post by WavyGravy on Apr 19, 2011 16:45:25 GMT -5
Investing in USD today would be a horrible decision IMO. Currently the USD is free falling as more and more investors are abandoning the USD. There is a lot of serious talk that the USD will be losing its place as the world's reserve currency. Its the reason why gold is upwards of $1,500 an ounce and silver has skyrocketed from $16 an ounce last year to over $40 an ounce presently.
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Post by The Unknown Poster on Apr 19, 2011 16:47:04 GMT -5
I believe business do this on a regular basis, buying up USD for a rainy day. They'd certainly have a lot of notice that the dollar was dropping, so I'm not sure it's a huge concern.
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Post by wagner3 on Apr 19, 2011 16:47:32 GMT -5
The NHL now pays the players a % of the revenue denominated in USD. This provides an opportunity for the owners to address the currency risk to Canadian teams. I expect the next CBA will have such risk mitigation mechanism...to a certain extent the current one already does...if the CAD falls, Canadian teams will stop sending revenue sharing dollars to the USA and start receiving said dollars...won't apply to the Leafs obviously...
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Post by gilligan on Apr 19, 2011 16:57:21 GMT -5
I'm no finance whiz but there is something I've wondered about. It's no secret that the biggest detriment for Canadian teams would be if the CDN dollar fell seriously below the Greenback as it did throughout the 90's. With player and coaches salaries paid in USD what is the best way to hedge against a low CDN dollar which hurt many CDN teams so severely in days gone by? Today... a 50 million dollar payroll would only cost 48M CDN funds. Great deal! Of course as time passes that 50M could easily go back to costing anywhere from 60 - 70M CDN. The layman in me says that purchasing vast quantities of USD today would be a good hedge if our currency falls dramatically again. There would surely be a downside to this I don't see right now. Our silent partner could easily procure a serious amount of USD to prevent a currency shift down the line. Is my thinking on the right track or am I delusional. I've placed this thread here to garner feedback. If the mods see fit please move. Thanks. Well I guess the obvious counterpoint would be that if the US dollar falls further, then you're paying more in CAN dollars than would be necessary. It'd put you on equal footing with the US teams more or less, but at a disadvantage to any Canadian teams using our own currency.
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Post by jetsorbust on Apr 19, 2011 17:13:09 GMT -5
I'm no finance whiz but there is something I've wondered about. It's no secret that the biggest detriment for Canadian teams would be if the CDN dollar fell seriously below the Greenback as it did throughout the 90's. With player and coaches salaries paid in USD what is the best way to hedge against a low CDN dollar which hurt many CDN teams so severely in days gone by? Today... a 50 million dollar payroll would only cost 48M CDN funds. Great deal! Of course as time passes that 50M could easily go back to costing anywhere from 60 - 70M CDN. The layman in me says that purchasing vast quantities of USD today would be a good hedge if our currency falls dramatically again. There would surely be a downside to this I don't see right now. Our silent partner could easily procure a serious amount of USD to prevent a currency shift down the line. Is my thinking on the right track or am I delusional. I've placed this thread here to garner feedback. If the mods see fit please move. Thanks. Well I guess the obvious counterpoint would be that if the US dollar falls further, then you're paying more in CAN dollars than would be necessary. It'd put you on equal footing with the US teams more or less, but at a disadvantage to any Canadian teams using our own currency. Hedging 101 - the exchange rate could go up or down, no one can say for sure where it will head. To buy $50 Million worth of USD x say 10 seasons would be a $500 Million investment... but the more common practice, would be for True North to buy "options", specifically forward contracts for US Dollars. They could lock in now to purchase US dollars at a guaranteed rate in 1 year, 2 years, 3 years, etc. This is common practice for many import/export firms, I'm not sure if NHL teams do it but they certainly could.
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Post by Gust Avacados on Apr 19, 2011 17:20:58 GMT -5
It won't be long before the players start begging to be paid in Canadian funds. The U.S. dollar is unfortunately heading in only one direction for the foreseeable future. Down. That's what happens when you print money to try and solve your debt problems. It's called hyperinflation and it has happened before. en.wikipedia.org/wiki/Hyperinflation
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Post by allthisgold on Apr 19, 2011 17:32:50 GMT -5
1. Revenue sharing would still be in place. Revenue for Canadian teams would fall as it is measured in $US. As such some Canadian teams would no longer have to pay into revenue sharing and some may receive it.
2. Lower $CAN will result in the salary cap decreasing. Takes the sting away somewhat.
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Post by rabenga on Apr 19, 2011 17:37:18 GMT -5
I'm no finance whiz but there is something I've wondered about. It's no secret that the biggest detriment for Canadian teams would be if the CDN dollar fell seriously below the Greenback as it did throughout the 90's. With player and coaches salaries paid in USD what is the best way to hedge against a low CDN dollar which hurt many CDN teams so severely in days gone by? Today... a 50 million dollar payroll would only cost 48M CDN funds. Great deal! Of course as time passes that 50M could easily go back to costing anywhere from 60 - 70M CDN. Thanks. This collectively bargained agreement has a natural hedge for the CAD dollar if it does fall compared to the American Dollar. Considering that 40% of the revenue comes from the 6 CDN teams and that the salary cap is tied to the level of revenues (54% of revenue). If our dollar falls than so will the overall revenue which will also decrease the salary cap figure for each team.
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Post by Grumpz on Apr 19, 2011 17:51:06 GMT -5
Don't anyone fool themselves, the Canadian Dollar was never really worth .60 US. There may be an over correction with the Canadian dollar being over par, but the markets have realized what the loony is worth and it's not less than .80 US.
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Post by WpgJets2008 on Apr 19, 2011 19:52:15 GMT -5
I'm no finance whiz but there is something I've wondered about. It's no secret that the biggest detriment for Canadian teams would be if the CDN dollar fell seriously below the Greenback as it did throughout the 90's. With player and coaches salaries paid in USD what is the best way to hedge against a low CDN dollar which hurt many CDN teams so severely in days gone by? Today... a 50 million dollar payroll would only cost 48M CDN funds. Great deal! Of course as time passes that 50M could easily go back to costing anywhere from 60 - 70M CDN. The layman in me says that purchasing vast quantities of USD today would be a good hedge if our currency falls dramatically again. There would surely be a downside to this I don't see right now. Our silent partner could easily procure a serious amount of USD to prevent a currency shift down the line. Is my thinking on the right track or am I delusional. I've placed this thread here to garner feedback. If the mods see fit please move. Thanks. Great Post! It forms the basis of one way the new team is protected against currency effects. Myth #12: "The Canadian Dollar is Too Low" www.manitobamythbusters.com/webpage/id/83&MMN_position=114:101Summary: "Fact: While the Canadian dollar will always rise and fall against the US currency, a team in Manitoba will have to be able to outlast a dollar anywhere between 60 and 110 cents. The dollar has a large effect on the fortunes of the team, but it is not the largest. Because some revenues are in US currency while most expenses outside of team payroll are in Canadian dollars, a swing of 20 cents is worth about $8 million per season to team finances. Team management and ownership can mitigate this effect to a large degree through a number of ways including hedging currencies by laddering investments and loans and offsetting or deferring team payroll to higher dollar years. A huge difference from 1996 is the NHL CBA containing a much more generous revenue sharing system than what the Canadian currency assistance plan ever was. It allows Canadian teams whose revenues are reduced because of currency effects to receive this much larger top up. Conversely, while the dollar is high, US teams will receive equalization the opposite way. Annual revenue sharing in excess of $12 to $15 million (US$) have been paid out to individual teams in the two past seasons which demonstrates that currency effects can be managed a number of ways." Chris
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Post by jmt21 on Apr 20, 2011 6:57:43 GMT -5
Thanks to all who replied to my original post. I've learned allot. CHEERS
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Post by CravenMoorhead on Apr 24, 2011 5:52:23 GMT -5
I have a feeling the US dollar may be devalued for a long time. The US is in ridiculous debt (14 trillion), and it's been said they want their own dollar to be weak in order to devalue the debt. Although I'm not fully behind this theory, it makes some sense. In fact I can see the Loonie gain even more on the US dollar in the future. But I do laugh when I hear people say 'Well, what's gonna happen when the CDN$ goes back to 60 cents American??" That kind of thing won't ever happen again, IMO. I concur. The dollar will never fall below 90 cents US again. It most likely will be on par, or a couple of cents more valuable than the US Dollar.
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