Get Ready for Canadian Elections in May

For me, it’s easy to tell the difference between Americans and English-speaking Canadians. The clues that tip me off that I’m speaking to a Canadian are when the person:

  1. is extremely polite and says sorry repeatedly even if I am at fault
  2. is more interested in the Boston Bruins than the Boston Red Sox
  3. asks for poutine at fast food restaurants (French fries covered with cheese curds and gravy)
  4. calls someone who sits in front of the TV all day a Chesterfield potato
  5. pronounces the word “about” as “a-boot”
  6. can’t go through a full day without asking where the nearest Tim Horton’s (NYSE: THI) is located
  7. thinks nothing of calling whole milk “homo milk”
  8. spontaneously starts singing “God Save the Queen.”
  9. stares at you if you don’t know who Bob and Doug McKenzie are
  10. finishes every sentence with “eh”

Another obvious difference between the two countries is the form of democratic government. The United States has a presidential system whereas Canada has a parliamentary system. The presidential system has three distinct and equally powerful branches of government: executive, legislative, and judiciary. Each branch serves as a check and balance on the other two. In contrast, the parliamentary system merges the executive and legislative powers together: the prime minister is both chief executive and leader of parliament. 

In the U.S., the president is elected directly by the people and serves a full four-year term regardless of how low his popularity gets during his term in office, unless he is impeached by the House of Representatives and convicted by the Senate. Only two U.S. presidents (Andrew Johnson and Bill Clinton) have ever been impeached by House and neither has actually been convicted and removed from office by the Senate. Richard Nixon probably would have been removed from office, but he resigned instead.

In Canada, the people vote for political parties in parliamentary elections every four years, not individuals. Whichever party wins a majority of seats in parliament appoints the prime minister. The prime minister has no set term of office (other than mandatory parliamentary elections every four years, with the next scheduled for October 2012), but only serves as long as he maintains the support of a majority of parliament. If the prime minister introduces important legislation or a budget that is rejected by parliament, this rejection acts as a no-confidence vote in his leadership and he will typically call early elections (i.e., before the four-year parliamentary term is over) to resolve the dispute.

Canada has a president-like figure known as a “Governor General,” but this is primarily a ceremonial post and the person is technically appointed by the Queen of England. Can you imagine?

I am providing this civics lesson today because Canadian prime minister Stephen Harper, head of the Conservative Party, is about to have his budget proposal rejected by parliament. Roger Conrad, editor of Canadian Edge, has written that Harper leads a minority government, which means that the Conservative Party has a plurality of seats in parliament but not a majority. There are 308 seats in parliament and the Conservatives have only 143 seats, 12 seats short of a majority:

Source: Parliament of Canada

Without a majority, Harper must govern by entering into a coalition with other political parties that agree to vote with the Conservatives to achieve a majority. Up to now, Harper has been able to convince Bloc Quebecois (BQ) to vote with the Conservatives during crucial votes, but BQ has turned against Harper and the Conservatives over the budget proposal. Opposition from the Liberal Party — the Conservatives’ arch-nemesis — is a given, leaving the New Democratic Party (NDP) as the deciding factor. Yesterday (March 22nd), the NDP gave Prime Minister Harper its answer: NO. The left-wing NDP wants more government spending, but Harper is trying to be fiscally responsible and balance the budget by 2015. With all three opposition parties pledging to vote against the budget, Harper will have no choice but to call for early elections, the fourth general election in the past seven years. If an early election is called, it will probably occur on one of the first two Mondays in May (the 2nd or the 9th).

The budget vote is scheduled for Friday. Finance minister Jim Flaherty has stated that there is “no chance” that the budget will be amended, so it looks like the Conservatives are willing to suffer a no-confidence vote and face voters. One reason the Conservatives may want elections sooner rather than later is that a political scandal is brewing involving one of Harper’s former political aides. Bruce Carson, a 66-year-old former aide, has been accused of illegally lobbying government officials on behalf of a business owned by his 22-year-old fiancée, who is a former “escort” (i.e., prostitute). Are Bruce Carson and Charlie Sheen related?

According to Roger Conrad, editor of the market-beating Canadian Edge investment service, the Conservatives are likely to win another plurality in early elections: “The bottom line is neither the Liberals nor any other party has a realistic chance of winning power.”

The reason to expect another Conservative victory is clear: the Canadian economy is doing extremely well under Prime Minister Harper’s leadership. Unlike most of the world, the Canadian economy is enjoying an enviable combination of low inflation and growth. Just last week, Statistics Canada reported that core inflation in February was only 0.9%, the lowest level since the government started keeping records in 1984! As one economist put it:

While the rest of the world seems to be grappling with rising inflation pressures, Canada is going in the opposite direction – both headline and core inflation have eased since the start of the year.

At the same time, the government has upped its forecast for economic growth in 2011 from 2.5% to 2.9%. Wells Fargo Securities praises Canada’s economy, saying it is one of the best in the world right now:

While Canada did endure a recession, the fallout was not as bad as other large, developed economies. The peak-to-trough decline in Canadian real GDP was 3.3 percent, not as severe as the more than 4 percent decline in the United States and a far cry from the 6.4 percent decline in the United Kingdom. The Canadian economy also bounced back quickly. While many developed economies are still in recovery (which is to say that GDP has yet to return to pre-recession levels), total output in Canada crested above its pre-recession peak in the second quarter of 2010 and has been in expansion territory ever since.

There are a number of explanatory factors that can shed some light on the relative outperformance of [Canada] including a less-leveraged consumer and rapid implementation of government stimulus programs. Still, the attribute that perhaps goes the furthest toward explaining the difference is that Canada is rich in natural resources and exports of raw materials are important. The fast pace of growth in developing economies over the past few years, especially in China, has increased demand for raw materials and that has helped boost economic growth in Canada.

Clearly, Canada is the place to invest right now.

If you don’t have time to do your own Canadian due diligence, let Roger Conrad do it for you. He lives and breathes Canada. He knows who Bob and Doug McKenzie are. He says serviette instead of napkin. And he’s unerringly polite. The editor of the market-beating Canadian Edge investment service has uncovered not only the highest-yielding Canadian stocks, but those with the strongest business fundamentals to sustain their dividends and grow them further.

Canada is an economic oasis of peace and prosperity. To find out the names of the Canadian high-income stocks Roger likes best right now, give Canadian Edge a try today!

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March 22, 2011 No Comments »
Posted by Xavier Kopsen
Tags: Canadian, Canadian Elections

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