Trend: Canada's solid banks, vast agriculture, mining operations, and energy reserves make it perhaps the most stable country in the world.
Canada has almost all of the important qualities of a country with a bright future and practically none of the pitfalls that will doom some countries to mediocrity. The ETF for Canada (EWC) might be a good way to benefit from its upward trajectory.
Whether measured by market value, balance sheet strength or profitability, Canada's banks are rising to the top. Since the credit crunch began in the summer of 2007, the Big Five banks have booked a total of $18.9-billion in profits.
In roughly the same period, the five biggest U.S. banks have lost more than $37-billion (U.S.)....
Canada, by contrast, has not had to inject capital directly into banks, other than starting a program to buy from banks $125-billion (Canadian) of insured mortgages – any losses from which the government was already on the hook for anyway.
The reason comes down to a fundamental conservatism. From lending practices to bets on trading to financial reserves and takeovers, the Big Five banks have long tended to be more careful than their global peers. And when they did want to get aggressive, government and regulators held them in check.
While U.S. banks sold a large proportion of their mortgages, Canadian banks held the bulk of theirs on their balance sheets, giving them an incentive to make sure they were good loans. Riskier ones are backed by government insurance. And the law here makes it tough for consumers to walk away from a mortgage because banks can go after other assets.
Like many export-oriented economies, prosperity in Canada depends on the goodwill and continued demand of its products from abroad. For the last couple of decades, the economy has grown increasingly two-pronged.
A common Canadian complaint is the mixed blessing of living next to the world’s most powerful nation, where its mood and appetite need to be carefully monitored and catered to. The Canadian manufacturing industries (particularly those in Ontario and Quebec), its film industry (much of Hollywood production is made in Canada, creating thousands of jobs and millions of dollars for the BC and Ontario economies), and the tourism industry, all depend a good chunk of their yearly revenue on the backs of Americans. In some instances, Canadian businesses closely parallel their American counterpart, none more obvious than the auto industry. America has been, and perhaps will stay the number one destination for Canada’s exports for the near future.
On the other hand, what Canada has stored underground, and what Canada is able to grow, has piqued interest the world over. The three prairie provinces that stretch through much of Canada: Manitoba, Saskatchewan, and Alberta, are fertile farmlands. When the prices of agriculture recover, and they inevitably will, those traditionally sleepy provinces may emerge as the real winners in the coming decades. In other parts of the country, forestry products and base metals abound. As China and India continue their industrialization process, aluminum, copper, gold, iron ore, nickel, uranium will fetch a pretty price yet.
Last but not least, there are the “black gold” of Albertan oil sands. Granted, large-scale operations have all but halted due to the precipitous drop in crude price. But most economists concur that the current price level is 1) temporary, and 2) harmful for long-term oil affordability. In fact, the retrenchment of large-scale drilling and exploration projects lead to an untimely delay to secure future resources. When demand roars back, we’ll get smacked around at the gas pump even worse than the last time.
The second one makes me more optimistic on the long-term prospects of the oil sands. Also around 2007, a large Chinese delegation visited the city in an attempt to either buy up a large and well-known oil company or to negotiate some kind of long-term delivery deal. Word on the street: as soon as the Chinese left, the Homeland Security Department landed by helicopter. Escorted by secret service, the top dogs marched straight up the executive suite of the unnamed company, and wagged their fingers. The deal never went through.
Then I remember that there’s always Canada. With plenty of land, self-sufficient resources, a working immigration policy that ensures the sustainability of social programs and cushions against the damaging effect of an aging population, the future is pretty bright.