Election Results Are Vote of Confidence in Canada

Thursday, 19 May 2011 02:44 PM

By David Skarica

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I am originally from Canada. Despite the fact that I now live offshore and no longer vote, I still take an interest. Part of it is the political junkie in me. My father was once an MPP (Member of Provincial Parliament) in the province of Ontario.

I still have much of my assets in Canadian dollars, as Canada is the center of the resource industry, a sector I am very long-term bullish on.

In the mid-1980s, Canada was a wreck. Pierre Trudeau had driven the country into the ground with his excess spending and taxing.

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Despite having a resource boom in the 1970s, Canada’s unemployment rate rose and its dollar fell. The country then began to restructure in the mid-1990s as Moody’s downgraded the debt.

I would say the country is in much better shape than its neighbor to the south. The debt levels are much lower. The banks are solid with no government money being needed during the financial crisis. It has a lower corporate tax rate. It also has a much more progressive immigration system than the United States, so it should be able to replace the retiring baby boomers in its work force.

One of the biggest worries in Canada has been political stability. Canada runs a British-style parliamentary system. Its politics are divided between four major parties. Because of this, the country has been in a minority government for the past 7 years, with four elections in those 7 years.

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However, in the recent election, the pro-business, pro-growth Conservative party won its first majority since the early 1990s.

This is very important because if my cycle theory is correct and we have 5 years to 10 years left in the mining-and-resource bull market, the conservatives will run the country for at least 4 of these years. This means that unlike the 1970s, Canada won’t throw away the resource bull market.

Canada has even told the Chinese that if you want our resources, we want our banks to have access to your consumer market.

This will spur even more growth in the Canadian banking sector.

I would look for Canadian stocks as well to continue to outperform their American counterparts.

This makes me even more bullish on the Canadian dollar going forward.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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