Currency Reportings

For the sake of simplicity, all blog posts so far have treated passive income reportings simply as a $ amount – without any differentiation between USD$ and CAD$. This blogger is based in Canada and this was fine in the past as the Loonie (the nickname for the Canadian dollar) was on par with the US$. However, over the last couple of months, the loonie has dropped down below the US$ and for the sake of more transparency, I have decided to differentiate the currency reporting unit.
The Loonie and The Greenback

Brokerage Holdings
My brokerage allows me to hold US$ and CAD$ and funds are converted back and forth depending on availability of funds. All my deposits are in CAD$ (local currency) and are held as CAD$ in cash until I execute a trade (although the brokerage has a provision for me to deposit in US$ if I choose to).
If I don’t have any US$ funds in my account and buy a US$ denominated security, the brokerage converts the funds from CAD$ to US$ (with a little cut for the brokerage, of course) and executes the trade. When I sell a US$ denominated stock or fund, the cash is held as US$ (and not automatically converted back into CAD$) – this way, if I buy a different US$ denominated stock of fund, I am not losing more with the constant exchanges of currency. In case of dividends, as expected, the dividends paid out by US holdings is held as US$ and the dividends paid out by Canadian holdings is held as CAD$.
A note about my investments
The drop in the loonie is a good news for me – as I invested heavily in the US market over the last couple of years when the loonie was trading either on par or above par the greenback. This means, I was able to buy more US-based stocks for the same CAD$ amount in companies such as Archer Daniels Midland (ADM), Chevron (CVX), Johnson & Johnson (JNJ), Omega Healthcare Inc (OHI), Realty Income Corp (O), Kinder Morgan (KMI), The Southern Company (SO), Wells Fargo & Co (WFC). The dividends that are paid out by these companies – when now converted from US$ to CAD$ will yield more!
This is also good news for my passive income streams such as advertising revenue for this blog and payouts from writing Seeking Alpha premium articles – which are paid in US$.
Blog Updates
For all future passive income updates, I will indicate the different US$ and CAD$ amounts and a total for the month (exchange rate calculated at the time of reporting) converted to my local currency – CAD$. 
As an overview, my passive income is in the following currencies:
  • US-based stocks, funds and options: US$
  • Canada-based stocks, funds and options: CA$
  • Interest on cash holdings: CA$
  • Cash back rewards credit card: CA$
  • Advertising revenue from this blog: US$ CA$ (Google has changed my unit of ad revenue from US$ to CA$, as of last week).
  • Earnings from publishing premium articles on Seeking Alpha: US$
Feel free to leave a message if you have any questions or comments. 
Full Disclosure: Long all stocks mentioned above. My full list of holdings is available here.

11 thoughts on “Currency Reportings

  1. That’s great you were able to take advantage of the differences in currency value. When I worked for a financial planner, we had a client that lived in Canada 6 months out of the year. He would call when he needed money transferred to his bank account and depending on the value of the USD and CAD, he would have us transfer the money accordingly.

    • There are a lot of snowbirds in Canada who spend a considerable amount of time in the US. Sometimes I daydream if I would do the same as I get older too πŸ™‚
      Yeah, after the recession, I was able to take advantage of the strength in CAD$ and invest heavily in the US equities. That investment decision is bearing fruit now πŸ™‚ (and continues to)

      Best wishes
      R2R

  2. Now that it’s changed the other way maybe I need to start investigating some more Canadian DG stocks. That sucks that it’s about 400 bips roundtrip but at least they don’t automatically convert back to CAD from USD if you sell a a US company and that the US dividend stay in USD. I’m glad I don’t have to deal with currency exchange for the majority of my holdings as it’s just one extra layer of complication.

    • JC, yeah the currency conversion sure adds some extra complication. As I mentioned in my comment to Bryan, theres another way to convert funds that Ive tried a couple of times called Norberts gambit and journaling the shares over. For large sums, I use this method for conversion.

      Thanks for stopping by
      R2R

    • Hey DW,
      I havent looked into hedging my currency risk. Its something that Ive thought about in the past, but never read up or acted on it. Let me know if you come up with something πŸ™‚

      regards
      R2R

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