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 - something the Group of 20 (G20) summit highlighted last weekend.
Suddenly, Canada is being held up as a shining light of sobriety, daring, common sense, and strong returns.
It 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 last week. 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."
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.
[Editor's Note: As this analysis demonstrates, Money Morning Contributing Writer Jon D. Markman has a unique view of both the world economy and the global financial markets. With uncertainty the watchword and volatility the norm in today's markets, low-risk/high-profit investments will be tougher than ever to find.
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Wow again! I may just start reading Jon's columns for more than entertainment value. This article is dead on.
Yes, the article is dead on. What surprises me id that Canada is doing well and the Canadian Banks avoided the errors of other countries.
Harper has done a good job of keeping the economic pain and additional depth to a minimum.
The credit for Canada's unprecedental success in this shaky Global world economy goes to our former Prime Minister ( who was our most successful Federal Minister of Finance in Jean Cretean's Cabinet for nearly eight years).
HERE, HERE! 100% correct Nazir, thanks for adding that! I wish Paul Martin was still around. Hopefully, Harper will be gone in the next term – especially after his $1.2B G-20 camp-out; turning our largest city (and financial hub) into a veritable Mad Max at Thunderdome – ironically, halting our local economy and handing the keys over to the Black Bloc outsiders.
It was really funny the *next* weekend during the Pride parade and Jazz Fest (sponsored by TD Bank, no less) – a "love in" of over 250K people… I think there were 5 cops on duty for crowd control and they were mostly eating pretzels all day [handed to them by grateful Torontonians] – welcome to the REAL Toronto!
You really need to look carefully at Darnley Bay Resources (DBL) on Toronto's Venture exchange.
They are setting up drilling on the largest anomoly known in the world
This site is 35 miles x 50miles . The total area is under agreement with DBL , the local natives ,Inualivit,and the Canadian Government.
This will be the largest mineral source in the world once they determine what the majority of the mineral is.
There are over 100 Kimberlite pipes covered in their land claims. They have found industrial diamonds on the ground.
Once they drill in early August, it will have every mining company in the world on it's doorstep looking for a piece of the action.
Check it out. If you think it is real, maybe you can sign me up so I can re invest some of the money I will make on DBL. I am just a shareholder
Canada is indeed THE place to park your investment dollars for stability and growth whether they are banks, precious metals, oil sands, natural gas and other energy sources, etc.. Thanks for the enlightening article. It was just what I was looking for, for reinforcement in making stock selections.
It was Harper who took the flag when the financial crisis started. It was Harper who balked at the large amount of money wanted by the opposition for stimilus and bail out. It was Harper everybody screemed at for holding the line and now – finally Canada is held as an example of good management.
Martin was good but he is long gone so give credit where credit is due.
This is so true. I cannot believe the US so-called bankers did not know better. Really? If you get an insurance on your derivative and then sell it, it must mean you don't believe in what you are trading with and just want vulgar gain at any cost.
I wonder who exactly it was in the Canadian banks that managed to keep a cap on such trading. I want names, so that, as Fred says, credit can go where it's due.