Canada: The World's Economic Compass

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If you're looking for a reliable investment, look no further than Canada.

It's strange, but with so much talk about troubles in the United States, Europe, China and the Middle East these days, one of the best-performing economies in the world is often overlooked.

Of course, that's finally started to change since the financial crisis has exposed our northern neighbor as a model economy.

Suddenly, Canada is being held up as a shining light of sobriety, daring, common sense, and strong returns.

Why is Canada's economy so strong? Should investors be looking north for big returns? Find out in this free report…

True North

Regulation Saves the Day

Canada largely sidestepped the entire global financial crisis of the past four years because its highly regulated banks were prohibited from securitizing mortgage debt to the extent that was widely practiced in the United States. Canada's banks also were banned from taking on high levels of leverage to make larger and riskier loans.

Canada's gross domestic product (GDP) is growing at a 6.1% clip, which is about 20% faster than the United States and leagues ahead of Europe. Its residential housing market is strong, and almost 75% of the jobs lost in the recession are back on line.

Five major banks dominate Canada, and regulators know each of the top bank executives personally, The Associated Press reported. Four of those banks are included in North America's top ten largest banks as measured by assets: Royal Bank of Canada (NYSE: RY), Toronto Dominion (NYSE: TD), Bank of Nova Scotia (NYSE: BNS) and Bank of Montreal (NYSE: BMO).

"Our banks were just better managed and we had better regulation," ex-Prime Minister Paul Martin told The AP. "I was absolutely amazed at senior bankers in the United States and Europe who didn't know the extent of the problem or they didn't know that people in some far-flung division were doing these kinds of things. It's just beyond belief."

Canada's Bright Future

The International Monetary Fund (IMF) recently said that Canada is likely to be the first of the seven major industrialized democracies to return to surplus by 2015, and last month it became the first such country to raise interest rates since the world financial crisis began.

If Canada were farther away and we had more perspective, we might see it as a larger and icier version of Australia, as they are both resource rich and have relatively small populations. In addition to a stable financial system, it has abundant oil, natural gas, uranium, gold, coal and water, plus an advanced industrial base and healthcare system.

Topping it off is the appeal of its plentiful oil sands, which are becoming increasingly attractive to the United States as companies shift away from offshore oil drilling.

As you can see in the chart above, its region fund has been one of the most stable in the world over the past 11 years, beating U.S. and European stocks by more than tenfold.

Posting those numbers Canada should have little trouble keeping its banks in enviable health and attracting new investments into its commodity-rich economy.

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Join the conversation. Click here to jump to comments…

  1. Grace Tonna | July 24, 2010

    Hello Jon.,
    The ISHARES MSCI CANADA INDEX FUND, is it ETF?
    I'm Canadian and I like to invest in the TSE. It's nice to know some Funds are doing well. I enjoy your news letter and I thank you for your information.

    Sincerely,

    Grace Tonna

  2. John Newell | July 25, 2010

    I am trying to subscribe but it will npt accept either one of credit cards which are both valid . What do I Do

  3. ghhudson | July 25, 2010

    I am interested in investing in Canada, but concerned about the future of trusts next year.

  4. paul dybedal | July 25, 2010

    great column

  5. abdul waheed abdul hye | July 26, 2010

    Please rush to supply me the action needed to triple the funds avaialble.

  6. asim jafri | July 26, 2010

    Am intersted to invest in canada trust fund,,,,

  7. Carles | July 27, 2010

    In Canada, someone told me something about canadian people said in the US: what is like an american, talks like an american, but is not an american? a canadian.

    That's some kind of bad opinion about canadians, but all the despreciative opinions said in the US about Canada and other countries, is envy for their way of life.

    Learn something and be modest!

  8. larry lirazan | August 17, 2010

    well said on the controls and regulatory measures in place. one other strong factor is the outlook and attitude towards building the economy forward through competent and reliable work force and hence consumerism. canada did very well in opening its doors for able migrants. thats one basic thing that the us and britain paled in comparison. these 2 economies deliberately closed their doors to potential mass base by sheer discrimination and bigotry. in the end they only successfuly kept out potential taxpayers but left a window open for gangsters and terrorists.

    as the old saying goes, you only reap what you sow. and that says it all.

  9. June Kuoppala | September 17, 2010

    Send me your daily newsletter.

    June Kuoppala

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