Canadian Funding Corp. Reviews CMHC Statistics

There is no quick way out of our troubles, says this Canadian expert, but seven Canadian stocks hold the promise of a much brighter future.

“I wince every time I think of Peter Lynch’s putdown that if you spent five minutes with an economist you’d be wasting three.”

So speaks Dr. Michael Graham, who has put his economic skills to work as the head of his own investment counselling service.

Mr. Lynch, of course, was for many years a noted fund manager whose books on common-sense investing became best sellers.

No economist worth his salt would make any ironclad predictions for the future at this point, in Dr. Graham’s opinion. There have been signs of optimism, to be sure, he says in The MoneyLetter, but there are simply too many uncertainties to contend with.

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His own solution involves four “p”s — protection, preparation, potential recovery and participation.

Even in this “uncharted territory” there are certain distinct advantages in being able to invest in Canada today, this expert tells us.

With that in mind, he has chosen a “Group of Seven,” a collection of Canadian stocks that promise to paint a brighter picture for the future.

What’s right with Canada

There are many causes for concern in the economy. Any signs of recovery thus far have been induced by official spending rather than by organic growth. How well will the economy do without massive government stimulus?

And what can prevent inflation with all that money pumped into the system?

But the obstacles to recovery are well known. Dr. Graham would rather focus on what’s right with Canada than what’s wrong with the world.

He quotes World Bank president Robert Zoellick, who estimated that “lots of countries would like to trade places with Canada even though it did not escape the effects of the global economic downturn.”

And Goldman Sachs singled out Canada as “the first of the advanced economies to emerge from the recession.”

Economic power shifts

Mr. David Rosenberg, who has returned to Toronto after a spell on Wall Street during which he became a well-respected commentator, “sees us not having the fiscal deficit problems of the U.S. and being well positioned as the economic power shifts to Asia and China.”

But we’re not immune from the crisis. We cannot ignore the “still-serious recession” and the spectre of inflation.

One way to prepare for this is with fixed income securities. Dr. Graham likes A-rated bonds with five-year maturities and re-settable preferred shares issued mostly by the banks.

But that’s not quite enough to get ready for the future.

The Group of Seven

Dr. Graham has four good reasons for choosing his seven stocks.

“These include protection against returning inflation, the growing ascendancy of the BRIC [Brazil, Russia, India, China] countries, the resumption of a bull market in commodities as China leads the way out of global recession and the U.S. dollar continues its long-term decline, and Canada’s favourable post-recession, pre-inflation positioning.”

Remember, these are stocks for the future. They are not all doing brilliantly now, and may not do so in the weeks ahead. Be patient.

The first is not doing especially well just now. Brookfield Asset Management (TSX-BAM.A) — once known as Brascan — has lots of commercial real estate and is adding to its portfolio of hydro generation and infrastructure assets. It has ample cash reserves and “an enviable record in buying distressed properties at times like now,” says Dr. Graham. At $19.33 it is cheap, well below its 52-week high.

No company is better positioned than EnCana Corp. (TSX-ECA) from this expert’s point of view. Natural gas prices are nothing to write home about, but astute hedging has kept EnCana’s revenues up. And natural gas has a great long-term future. At around $53, the stock is undervalued.

Sherritt International Corp. (TSX-S) is a commodity producer in nickel, cobalt, oil and coal and has important properties in Cuba and Madagascar. As the U.S. inches closer to Cuba, Sherritt could benefit enormously. Its share price of $4.90 may seem sluggish, but it’s up from its spring lows.

Safest of the group

Canada’s biggest mining firm, Teck Resources Ltd. (TSX-TCK.B), has had a rocky road. Since Dr. Graham’s article appeared, Teck has wriggled out from under some of its debt by selling China Investment Corp. a 17 per cent stake in the company. As copper prices rise in the future, so will Teck, promises this author. It’s trading at around $19.

The safest of this group of stocks is undoubtedly TransCanada Corp. (TSX-TRP) with its pipeline revenues and new projects on the go. Chief among these is the Alaska natural gas pipeline in partnership with Exxon Mobil. Still, at $31, it’s undervalued.

The shares of Viterra Inc. (TSX-VT) haven’t done too badly of late, although at $9.20 they’re still down from their highs. The former Saskatchewan Wheat Pool is Canada’s biggest grain handler and agri-business and the pending acquisition of Australia’s ABB Grain will open up new Asian markets for the company.

Molybdenum was a hot metal during the commodity boom (it’s very valuable in the steel industry) and will be again, says Dr. Graham. And Roca Mines (TSX-ROK) has lots of it in its high-grade Max mine, which has cut back on production, but can ramp up when demand does. It is currently crawling along at $0.34, the cheapest buy in the Group of Seven.

It is time, Dr. Graham tells his readers in The MoneyLetter, to weight risks against potential rewards, “and to be substantially — if prudently — invested.”

In short, protection and preparation beat predictions any time.

http://www.dailybuyselladviser.com/news/blank/commodity-stocks696-1.html?CMP=OTC-RSS

reviewed by Moishe Alexander, CFC canadian funding corp CEO

If you place a good portion of your assets into real estate today, you won’t have to worry about tomorrow.

By Ozzie Jurock

Received tons of email … Not all favorable. Some people wish to bet me money – some a case of beer, that real estate is going to go down … just wait and see. Likely they are all the people who never bought anything. If you go to http://www.realestatetalks.com/ you can see some 16,000 people arguing for more than 14 years the ups and downs of Vancouver real estate. It is always the same guys and gals that argue collapse and (yep) often the same that argue that eventually we will always be higher (because of monetary expansion creating it).

So, take it easy. If you had listened to the experts who were dispensing the best advice available 20 years ago and locked yourself and your wealth into a plan which guaranteed to remit the then prevailing ‘safe amount’ of an income stream of $500 per month (a lot back then – pocket-change today) for the rest of your life, imagine the desperate poverty that you would retire to today. Stone soup would be a luxury.

Yes, we need more money now but who knows what this money will be worth tomorrow. Yes, we need more income, but who can possibly know the state of the world three months from now … much less 20 years from now? Nobody knows for sure the ‘what and where’ of interest rates and inflation rates and the value of money. It’s just not possible.

What we do know is that the safety that was inherent in the projected big income of 20 years ago is a pitiful joke today.

Yep, forecasting is never easy – particularly when it’s about the future. Crystal balls crack, vaunted talk-show soothsayers wither and drop off the television scene and the books that were treasure maps wind up in the remainder bin at the bookstore. In the last three decades stock markets have surged up and crashed down. Certain mutual funds that looked like they were blue chips sprang leaks and sank while others soared like rockets only to burn out and fall back down.

Through all of this the average folk watched their savings chewed away by insidious inflation.

However, in all the turmoil of this sound and fury, one asset has weathered the changes. Three decades ago, had you bought good quality real estate you would not be concerned about your future today. That real estate would have kept up with inflation, remained secure in value, and steadily appreciated. Sure, there would have been some temporary dips. There has to be because real estate is cyclical in nature. But one thing is certain – over the years, the base values have been steadily increasing. Back to that purchase 30 years ago – today it would be paid off and clear title – which means either a mortgage-free home (no more monthly ‘rent’ payments to the bank) and/or a steady rental income courtesy of your tenants.

Put into perspective, if you place a good portion of your assets into real estate today, you won’t have to worry about tomorrow. It doesn’t matter how wild or turbulent the economy or the marketplace. It’s like riding a horse with one spur – if half the horse goes, the other half has to go along with it. No matter how deep or tempestuous the water, you’re going to be floating on top of it.

Let’s review something all of us already know. The Chinese have used real estate holdings for wealth creation for 2,000 years. All huge fortunes were either started or extended with real estate. Home ownership (the most common form of real estate holding) has been the single largest factor in the accumulation of wealth for the average North American, firstly because of straight appreciation due to inflation, secondly, due to the leverage involved and thirdly real estate has a use and therefore always a value.

This basic principle of appreciation holds true for pretty well any healthy major urban center. Let’s take Vancouver, B.C. for an example.

In 1960 the average Vancouver home sold for $13,105. Thirty-eight years later in 1998 the average sale price was some $310,000. Almost a 2,300 per cent return. But in March 2008 the average sale price was $895,000. Almost a 6,830 per cent return. That’s on the price. Play with the return on down payment of $655 and you get tens of thousands per cent returns
If this kind of appreciation is going to continue, you have to be on the conveyor belt. If you’re not, you’re going to be left so far behind that it will be financially disastrous. And here we’re only talking from the perspective of a place to live. This isn’t even addressing the investment aspect of those monies outside the family home.

When you combine appreciation with leverage, you unlock the great secret of achieving the optimum result with real estate investment. And as you can see from the foregoing numbers, the ‘lever’ can lift you up or the ‘appreciation’, if you’re on the wrong side, can crush you down.
When your gain is measured on the capital invested, not the actual price of the property, some really astounding results come into focus. But the game is not as simple as it used to be. The goal posts move. The only constant is that everything is always changing. The secret of surviving and prospering is the ability to adapt to the changes.

The 1980s were very forgiving for the amateur. Benign with a capital ‘B’. That ‘B’ could also represent ‘Bucks’ and ‘Brainless’. Back then if you had a few dollars you could buy any piece of real estate, anywhere, and you would make money. Even if you could barely hear thunder and see lightning, it was almost impossible to make a big enough mistake. If you paid too much, it only meant that you had bought a little too soon. The clock and the calendar made you into a financial wizard. Thanks to inflation, prices soon caught up to you and bailed you out.
Still, there were lots of people in the early 1980s who managed to lose all their money in real estate. Those were the people who put their money into the wrong syndications, limited partnerships or real estate investment trusts. But we’ll talk more about that later. In the late eighties fortunes were made.

But after the 1980s the real estate world became less forgiving. For some investors the times were downright terrifying. All of a sudden there was the sudden change. Markets fluctuated area by area both as to volume of sales and prices. Different real estate categories rose or fell without any apparent linkage to each other. You could see in one market area the average single-family detached home rise in value by 40 per cent while in the exact same market area downtown condos slumped in value by 12 to 20 per cent (Vancouver 1990-1995).

The people who tried to play by the old rules found themselves playing someone else’s game. And most of the time they were handed their heads. Was it possible to avoid the dangers and yet at the same time prosper with the good stuff) Yes it was, but you had to put aside location, location, location, and instead you had to read the trends, position yourself as to the timing and then implement some new techniques.

To be successful real estate investors we must understand ourselves. That means we have to understand our investment objectives in relation to the risks we are willing and able to tolerate. But having done that we then must understand that aspect of ‘ourselves’ that is part of the New Consumer.

http://londonontariorealestatediagnosis.blogspot.com/2008/05/ozzie-jurock-why-i-will-always-buy-real.html

Recommended by Moishe Alexander, CFC CEO