I encourage long term investors to consider broadening their Canadian exposure by investing in the whole country. Here are my updated reasons.
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With the US debt was on pace to add another $1 trillion every two years, a way to play this long term is to invest in the commodity based economies that will benefit, like Canada. Some say another 100,000 people are needed in Fort McMurray, while others are expecting up to $100 billion to be invested in the oil sands over the next 10 years. Surely other businesses will prosper with that kind of growth and spending power.
I'm betting on Canada through the Canada ETF, symbol EWC. It holds energy companies ECA, SU, CNQ, and others, as well as banks, industrial materials, financials, telecom, etc. The average PE in the fund is only 16 and expenses are a low .57% I own EWC in addition to my oil sands because I believe all of Canada will benefit from the tremendous growth Alberta will experience; banks, investment houses, materials, infrastructure firms, etc. will all have more spending come their way. Canada has what the world needs for the next 20 years: energy, lumber, raw material, grains and other commodities, as well as educated workers, a stable government, and more. Here's some Canada trivia for you to consider:
Canada is the only one in the Group of Seven industrialized countries to consistently run a budget surplus. It posted a budgetary surplus of $1.6 billion in 2004–05. This marks the 8th consecutive year in which it has recorded a surplus, after 27 years of consecutive deficits. As a result of the budgetary surpluses recorded since 1997–98, the federal debt has been reduced by $63.0 billion to $499.9 billion from its peak of $562.9 billion in 1996–97. Federal debt as a percentage of the economy was 38.7 per cent in 2004–05, a reduction of 29.7 percentage points from its peak of 68.4 per cent in 1995–96.
Canada's business costs are the lowest among the G-7. (KPMG Study; fourth consecutive time.)
Each year World Trade magazine identifies the top 30 countries for trade and investment, using the US economy as a benchmark. Canada ranked first in the world in 2000.
Canada ranks No. 1 in the world in "Technological Potential." For more than a decade, Canadian productivity gains have outstripped American gains.
Canada's R&D tax treatment is the most generous in the industrialized world. For Research and Development, Canada is the overall cost leader for 2004 with a cost advantage of 21 percent over the U.S.
The North American Free Trade Agreement has turned Canada into the best place from which to serve all North American markets.
Canada has an ample supply of first-class educated workers at reasonable wages, great universities, a fine health care system, lower costs, and generous R&D write-offs.
The Global Competitiveness Report 2000 ranks Canada first in the world at developing knowledge workers. Canada has the highest rate of post-secondary enrollment in the world. On a per-capita basis there are more good workers in the high-skill job market in Canada than there are in the United States. Canadian labour turnover rates are also half those in the US, resulting in labour cost savings of 7% - 10%.
Canada produces vast amounts electricity, natural gas and oil, which make it the leading energy supplier to the United States. Canada is the largest producer of hydropower in the world, and the third largest producer of natural gas.
The oil sands in Alberta hold more reserves of oil than Saudi Arabia. Until recently neither the world market nor the U.S. government appreciated the extent to which technological changes had made an unconventional oil source viable. Yet in the aftermath of 911, the Iraq war and the Middle East, the United States is placing a new priority on its Canadian energy supply to increase its energy security, which has drawn increased attention to the oil sands.
The world is just starting to pay attention to Canada and the oil sands. From 60 Minutes to French TV and the BBC, coverage is starting to heat up. Scotland will send a delegation in March. Bloomberg reports that Japan, which imports about 90 percent of its oil from the Middle East, will study the feasibility of importing oil sands from Canada to diversify its sources of energy supplies. Japan, the world's third-biggest oil user, wants to reduce its dependence on
a single region for its energy supplies after growing demand from China and India pushed oil prices to record highs last year. Importing oil sands ``can contribute to raising Japan's energy security,'' an official said.
China's President Hu Jintao and a delegation of more than 100 of China's top business executives visited Canada in early September. Their focus was the availability of raw materials, uranium, oil and gas as well as semi-finished products, high technology, pollution control technology, engineering services and financial services. Included in the delegation were senior executives from aviation, internet communications, coal mining, steel, newspapers, power generation, fertilizers, shipping, hardware goods, real estate development, automobiles and auto parts, building materials, air conditioners, textiles, chemicals, industrial equipment, and electrical consumer products. China is looking to create joint ventures with small to medium-sized Canadian tech firms.
More liberal U.S. rules on measuring oil reserves will be the catalyst for an international takeover binge in Alberta's oil sands. The U.S. Securities and Exchange Commission is now deciding whether to modernize rules dating from the late 1970s that many in the oil industry criticize as unnecessarily conservative. Under current rules, large portions of any oil sands project's assets cannot be booked as reserves. A strict application of SEC rules would put the reserves of the oil sands at around 12 billion barrels, a fraction of the 175 billion barrels that many say is the correct way to calculate the size of Alberta's bitumen resource. Coxe said on a conference call: "My view still is that you should assume that the SEC is going to find in favor of the oil companies on this and what that will do is trigger a land rush buying by Big Oil of Alberta oil sands properties. And when the SEC rule is announced, what I think is, it takes the gloves off. There's going to be, I think, pretty formidable competition in bidding for these companies...."
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