Monday, March 13, 2006

Canada: Let the Good Times Roll!

Due to the continued strength of the world economy and the need for basic commodities such as oil and metals, Canada's economy moves from strength to strength.

The latest report shows Canadian unemployment down to a generational low of 6.4%, a rate not seen since the mid-1970s. Some places, like oil-rich Alberta whose unemployment rate is only 3.1%, is experiencing a shortage of workers of all sorts, but particularly those whose skills are needed in the oil patch. The average hourly wage in Alberta is now some $21.39 per hour, and expectations are that this will continue to rise.

This economic boom is expected to be continued to be fuelled by proposed investments of up to $25 billion to turn areas near Edmonton into a refinery hub to rival areas along the Gulf Coast of Texas (sans hurricanes of course). Other areas of the province are booming along with the massive incoming investments, to such an extent that even basic service jobs, like those in fast-food restaurants and grocery stores, are going unfilled.

This too is drawing workers from the long-suffering Atlantic provinces, some 3,000 miles distant into the Alberta economy. While young people have for some time left the region in search of employment, now the chance to earn $5,000 weekly is drawing fathers away from their families for extended periods, as they work in oil fields camps for several months, and return quarterly or semi-annually to get re-acquainted with their wives and children.

In other areas where these resources don't play such a large part in the local economies, such as people-rich Ontario, Quebec and the Atlantic provinces, the angst is palpable, as the soaring Canadian dollar has made it more difficult for manufacturing-dense Ontario and Quebec to import into the US market. There has been much hand-wringing over the fate of the manufacturing region of the country and whether Canada will be subject to the so-called "Dutch Disease".

In any case, while there's some local disruption, there's also no doubt that the boom as a whole is a net economic benefit to Canada, and more particularly, to Alberta.

Aside from the obvious stock market plays into the oil and gas sector, and the mining sector, different Alberta-based public companies should enjoy extended periods of super-sized profitability. These would include those involved in the real estate sector. Three such companies include ALberta-based land developers Melcor Developments Ltd., which trades on the Canadian TSX Exchange under the symbol "MRD", and Genesis Land Development Corp. which trades under the symbol "GDC", and the Boardwalk Rental Communities REIT - the largest owner of residential rental suites in Alberta. It too trades on the TSX index, under the symbol "BEI.UN".

Canada - not just a place that cold fronts come from!


The Confused Capitalist

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