Canada – is the last great resource frontier in the world

Posted by Michael Berry , Ph.D. - Discovery Notes

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Slowly but surely Canada is emerging.  Most observers do not count Canada as an Emerging Economy.  Many believe emerging economies are those teeming with impoverished citizens, overpopulated with poor nutrition and health care.  India and Brazil immediately come to mind.  But Canada is emerging in ways much more important. Canada is one of the last great resource frontiers in a less stable world, resource hungry world. Geography and size make it an incredibly important player in today’s globe.

Canada’s soldiers have taken the brunt of the fighting and death’s in Afghanistan.  Russia this past week began bullying its northern neighbours (Norway,Denmark, Canada and the US) on Arctic Sovereignty.  The Russians actually threatened hostility should their energy claims in the Arctic be challenged.  Canada will necessarily be a critical player in this upcoming dispute.

But what most people in North America do not realize is that Canada is rapidly moving to the right (relative to the US) on a host of issues.  Examine the following charts from yesterday’s Washington Post.

According the Post most provinces are lowering corporate tax rates. The Obama Administration is spending like a drunken sailor, slandering corporations and their executives and will penalize companies through much higher tax rates very soon.  This bodes well for investment in Canadian industry in the next decade.

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Canadian debt, as a percentage of GDP, is headed in the opposite direction to that of its southern neighbour. We need say little about what is likely to happen in Washington. Debt to GDP will approach 100% in the US within the next decade under the aggressive spending plans in Washington.  Who will finance this debt at reasonable interest rates once the recession ends?

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Canada’s resource economy will benefit further as recovery and growth ensue in the 2011 – 2012 timeframe.  Canada has reigned in its spending.   If the US decides not to purchase Canada’s energy largesse, the rest of the world will.  Meanwhile, in the US, the energy and extractive industries will have been completely dismantled for the fantasy of 4 million Green jobs and an onerous cap and trade penalty on utilities and industry in general.  Deficits of the size that may plague Washington tend to destabilize an economy.

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Perhaps the most telling difference in the future path of the two countries has to do with social spending, retirement and health programs. Here is what Professor Walter Williams had to say about the unfunded liability and hence sustainability of Social Security, Medicare and other entitlements in the US in an April 11th interview (Washington Post.)

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Perhaps the most telling difference in the future path of the two countries has to do with social spending, retirement and health programs. Here is what Professor Walter Williams had to say about the unfunded liability and hence sustainability of Social Security, Medicare and other entitlements in the US in an April 11th interview (Washington Post.)

… read pages 1 and 2 HERE

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Michael Berry has been a portfolio manager for both Heartland Advisors and Kemper Scudder where he successfully managed small and mid cap value portfolios. Dr. Berry has specialized in the study of behavioral strategies for investing and has been published in a number of academic and practitioner journals. His definitive work on earnings surprise, with David Dreman, was published in 1995 in the Financial Analysts Journal.

Previously, Dr. Berry was a professor of investments at the Colgate Darden Graduate School of Business Administration at the University of Virginia and has also held the Wheat First Endowed Chair at James Madison University.

Dr. Berry is a respected and dynamic speaker. He regularly presents around the world on topics such as value investing, the role of Austrian Economics in investment management, behavioral investing strategies and is a specialist in developing case studies to teach investors how to invest. While a professor, he published a case book, Managing Investments: A Case Approach.

He has recently focused on the role of precious metals in the asset allocation of the individual investor.

Dr. Berry publishes Morning Notes by Michael Berry, Ph.D. daily. This publication is distributed to clients worldwide to identify current market opportunities and behavioral anomalies.