October 7, 2015

S&P 500 up 0.8% and Toronto up 1.6%.

Stocks of note: Melcor up 6.2% (but on thin volume as usual), AutoCanada up 2.8%, Toll Brothers up 2.8%, Boston Pizza up 2.6%, Canadian National Railway up 2.5%. Bombardier down 13%.

Car Prices and currency:

About two weeks ago a car dealer was telling my that a lot of cars were being bought and shipped tot eh U.S. because they are now significantly cheaper in Canada because prices did not rise as our dollar fall. Today, this story was confirmed as Nissan warned its dealers not to sell cars to people planning to ship them to the U.S.

In some ways car prices in Canada should be adjusted promptly when the currency changes. But the industry apparently follows an archaic practice of setting most of the prices in January and thenĀ  sticking with that. They also seem to try to smooth out currency variations. Imports did not get remarkably cheaper when the Canadian dollar soared from 70 cents up past a (U.S.) dollar nor have they gotten expensive on the way down.

The only way the industry can maintain vastly different prices on the two sides of the border is if there are restrictions and costs on customersĀ moving cars across the border. Clearly there are some costa and then the car companies try to erect additional barriers such as banning cross border sales.

It will be interesting to see what happens to Canadian car prices when prices are adjusted again which I understand will happen in January. We could see quite a jump in prices. This would be a negative for AutoCanada.