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Canadian Investments

Written By Brian Hicks

Posted June 2, 2008

MONTREAL, QUEBEC: Sometimes economic autonomy sounds pretty darn appealing.

In the first quarter of 2008-Quebec City’s 400th anniversary year—Canada’s national economy actually shrank.

But the French-speaking majority here has to balance separate policies on such key issues as immigration and education with the knowledge that western Canada’s resource wealth is boosting every Canadian’s dollar.


You may pay for your cup of coffee in French, but Canadian coins still bear Queen Elizabeth’s image, and they’ve skyrocketed in strength relative to the greenback.

The linguistic divide has long been a top issue in Quebec’s desire for autonomy and even separate nationhood—as recently as the 1970s three out of every four Quebec residents spoke only French.

These days, Quebec’s leadership is teaming up with English-majority Ontario in its latest tussle with the federal government in Ottawa.

It’s part of a political tug-o-war that international investors must understand if they want to make money from Canadian investments.

Canada Before There Was a Canada

"We were building Canada before there was a country called Canada," Ontario’s premier Dalton McGuinty told reporters on Sunday.

Before the process of Confederation turned British North America into the Dominion of Canada in 1867, Ontario was Upper Canada and Quebec comprised most of what the British called Lower Canada.

Over the weekend, McGuinty and counterpart Jean Charest of Quebec teamed up to mark Quebec City’s anniversary and lambaste the national government’s Conservative leaders over what may be modern Canada’s greatest economic advantage.

That’s because they see it as a liability.

They’re talking about the development of oil sands in western Canada, namely Alberta, and a Quebec-Ontario agreement to install a cap-and-trade system to limit emissions to 1990 levels.

Federal proposals differ from the Kyoto-oriented Quebec-Ontario plan, placing 2006 emission levels as the basis for future cuts instead of 1990.

A shouting match has erupted between McGuinty and Charest on one side, and the Conservative federal Environment Minister John Baird on the other.

"I think it’s more about talk and political posturing than cutting greenhouse gas emissions," Baird said on Sunday, bringing about the provincial heads’ fiery words in Quebec City.

Well, political posturing is something we know well down in the United States—especially in this election year.

And recent statements by Canadian market experts say that whatever economic punch either the Liberal or Conservative parties in Canada can deliver may be offset by a slowdown south of the border.

Economic Autonomy… From the United States?

Legendary American oil man T. Boone Pickens says he remembers sitting in the Calgary Petroleum Club in 1967 as the Canadian government announced its first investments in the Athabasca oil sands.

Back then, oil was five bucks a barrel, and heating up the bituminous dirt there for heavy crude seemed ridiculous to many until very recently.

Roll the clock forward to 2008, and Alberta has already taken in 352 million Canadian dollars in oil, gas, and oil sands leases so far this year. British Columbia surprised many in late May by announcing that it actually surpassed Alberta’s windfall with its own record $441 million bump.

The Canadian dollar is now considered by many to be a resource currency—backed not only by the full credit of a sovereign government but also by the black gold being processed out west.

Canada is also the world’s top uranium producer, with a full quarter of global output.

Nevertheless, a Yankee slowdown will drag on Canada’s wealth. Even though purchasing power is up on the consumption end with the rising loonie (the bird-based nickname for the Canadian dollar), 87% of the country’s exports go to the U.S.

Is that a reason to stay out of the Canadian market? Hardly.

Some Canadian Investments to Consider

We’ve been bullish on Canadian investments for years here at Wealth Daily, with top holdings in each of our premium portfolios capitalizing on industries from oil sands to organic food.

And for a simple ETF angle, the iShares MSCI Canada index fund has been an insurance policy for smart investors over the past year…

NYSE:EWC is up over 14% in 12 months versus the S&P’s double-digit decline.

A broad variety of holdings like Bank of Nova Scotia (NYSE:BNS), Blackberry makers Resource in Motion (NASDAQ:RIMM), and natural gas behemoth EnCana (NYSE:ECA) mean you have a line on alternating growth trends as Canada moves forward.

By the way, the U.S. won’t drag forever, and Canadian GDP growth is expected to triple again by 2010.

The time to go long Canada is now.


Sam Hopkins