Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Obama Stimulus Boom for Canadian Stock Market?

Stock-Markets / Investing 2009 Jan 16, 2009 - 02:23 PM GMT

By: Money_and_Markets

Stock-Markets Diamond Rated - Best Financial Markets Analysis ArticleInvestors are already positioning themselves in U.S. stocks to make the most of the boom fueled by Obama's stimulus plan. While many of these picks could rally nicely as our government throws hundreds of billions at our economic problems, they're not outside the box. Or maybe I should say “outside the borders.”


Because if President-Elect Obama actually succeeds in jumpstarting America's economy, I think one of the best places to put your money to work is in Canada.

Canadian Stocks Could Skyrocket!

About 70% of Canada's exports go to the U.S. So if the U.S. catches a cold, Canada gets pneumonia. Likewise, the reverse is true. If the U.S. starts to recover, Canadian stocks should be on the launch pad.

Obama is pressing Congress to act quickly on a two-year, $850 billion economic stimulus plan. This plan includes:

  • New government spending,
  • $300 billion worth of tax cuts,
  • And the second half of the bailout fund Congress approved last fall — worth $350 billion.
70% of Canada's exports go to the U.S. So if the U.S. starts to recover, Canadian stocks should be on the launch pad.
70% of Canada's exports go to the U.S. So if the U.S. starts to recover, Canadian stocks should be on the launch pad.

It's hard to see how this will be enough to re-inflate the biggest credit bubble in history. Still, economists tell us that each dollar of government spending increases the GDP by 1.4 dollars. So this is a sizeable plan that could shorten the recession. And that, in turn, could turn up the economic heat in our neighbor to the north.

Canadian stocks have a lot going for them right now, too. And they're going to look even better in an economic recovery.

Let me give you three reasons why …

Reason #1 — Canada Stimulus Package to Come

Prime Minister Stephen Harper has said his government is working on a stimulus package that could be worth as much as $50 billion.

Considering that Canada's gross domestic product is roughly one-tenth that of the U.S., $50 billion spent in Canada could be the equivalent of a $500 billion stimulus package here in the U.S. And it will surely add juice to select Canadian stocks.

Reason #2 — New Tax-Free Investment Plans

Just last week, Canadians became eligible for new, tax-free savings accounts (TFSAs).

Now, Canadians can deposit up to $5,000 annually into a TFSA. Investment earnings in the account are tax-free. And anecdotal reports show that Canadians are using the new funds to buy bargain-bin stocks. After all, when stock prices are comparatively low, these accounts might be best used for “Tax Free Trading.”

This should ramp up any market rally in Canada as investors use the TFSAs to pile aboard small-cap stocks in hopes they're going to blast off.

Reason #3 — Canadian Stocks Are Cheap

Do you think the S&P 500 Index is cheap at around 16 times trailing earnings? I sure don't. Though you'd be hard pressed to find it cheaper on a price-to-earnings basis in the last 10 years.

Now, let's take a look at the historical price-to-earnings ratio of the Toronto Stock Exchange Index …

The leading Canadian stock index recently traded at a trailing P/E ratio of just 10.8 … and trades at just 9.7 times forward earnings. This is historically cheap. The last time it traded at its current price, its P/E was 18.

To be sure, these stocks could get cheaper. But remember, stock buyers discount the future.

By the way, in both the short term and the medium term, Canadian stocks outperform U.S. stocks. The TSX is up about 37% in the past six years, compared to just 1.7% for the S&P 500.

If you put together a historically cheap valuation with the fact that the U.S. is going to have a massive stimulus plan … Canada will have its own stimulus plan … AND Canadian investors have a new, tax-efficient way to trade stocks, you can see how we could be in for a heck of a rally!

So when the broad market finally returns to health, who do you think will be among the leaders? My money is on the stocks in the TSX.

Plus, the Canadian Dollar Can Outsize the Payoff for U.S. Investors

The Canadian dollar, also known as “the Loonie” because of the bird on their one-dollar coins, depreciated 18% in 2008 as the global slump reduced export demand. And a recent Bloomberg survey of economists forecasted that the Loonie would weaken to C$1.28 in the first quarter of 2009.

But a funny thing happened: On Friday, Canada's dollar touched a two-month high against the greenback. And it looks like it could be poised to break out to the upside.

The Canadian dollar is way off its highs and seems to be bottoming.

The Loonie's recent rebound was fueled by a rally in hard assets — especially copper and gold. We should see volatility in both going forward. But longer-term, I expect hard assets like gold to go higher. And that should boost the Canadian dollar.

Because your Canadian investments would be made in loonies, your returns in U.S. dollars would actually get an extra boost from any strengthening of the Canadian currency.

So to get your portfolio on track for the boom I see coming north of our border, I have …

Three Canadian Picks You Might Want to Consider …

Pick #1 — Central Fund of Canada (CEF on the AMEX, CEF.A on the TSX)

CEF invests in gold and silver bullion — one ounce of gold for every 50 ounces of silver. If you think precious metals are trending higher over the longer term — and the greenback will trend lower — the CEF is a closed-end fund that looks good at current prices.

Pick #2 — The iShares Canada Fund (EWC on the NYSE)

This ETF is filled with leading Canadian companies including Royal Bank of Canada (finance), Encana (natural gas) and Barrick Gold (gold). It has put in a nice double-bottom on the charts and looks poised to run higher.

Pick #3 — Agnico-Eagle Mines (AEM on the NYSE or TSX)

One of the best gold producers around, this stock has already racked up open gains of 42.7% since I recommended it in the “Golden Parachute for 2009″ report I sent to my Red-Hot Global Small-Caps subscribers a couple months ago. But it could go a whole lot higher!

Since this is a volatile market, you should consider buying any of these three investments on pullbacks. After all, this is a wild and wooly market, and timing is crucial.

Yours for trading profits,

Sean

P.S. Later this month, I'm heading up to Vancouver, Canada, to attend the Vancouver Resource Investment Conference. I've also arranged to meet with some of the most promising small-cap natural resource companies in Canada … and the world.

I'm looking for smaller gold and silver miners that are off the radar screen and that are in, or near, production. I'm talking about companies with pounds in the ground — or even with production — that are way undervalued compared to bigger companies.

And on January 29, I will fire off a special report, Three Red-Hot Picks from Vancouver , with my recommendations for my best picks in Canadian small-caps.

These stocks are too small for a recommendation in Money and Markets. So this report will only be available to a select group … subscribers to my Red-Hot Global Small-Caps .

If you want to get in on the ground floor of three of tomorrow's potential superstars … with the kind of service that can hit the mother lode in small stocks … call 1-800-898-0819 or click here. My team will set you up and make sure you're all squared away so you can act on these recommendations IMMEDIATELY as soon as my report comes out.

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules