David Rosenberg Makes The Case For Canada As A Low Beta Emerging Market Play
Preface: for those not familiar with David Rosenberg, he is a very well known economist (some claim a relative perma bear) who made the move over from Merrill Lynch to a Canadian firm Gluskin Sheff, earlier this year. While having mostly
missed this rally, much of what he says deals more with the long term structural issues we bring up - rather than any tactical short to mid term trading concepts.
Reader 'SKS' pointed us to
this article from the Toronto Globe & Mail in which he makes the case for Canada as a "low beta way to play the emerging markets via commodity exposure". You will also notice the side by side "sector" weighting in the major indexes of the S&P 500 versus TSX.
Please note, from my general understanding the Canadian banking system is dominated by
5 major banks (an argument against the need for "too big too fail") but they are highly regulated (an argument for regulation).
- Banking in Canada is widely considered the most efficient and safest banking system in the world,(1) ranking as the world's soundest banking system according to a 2008 World Economic Forum report.
But as the globe expands and modernizes the real juice will be in Canada's commodity exposure, very similar to the situation in Australia.
- I stand accused of having missed the turn and that accusation comes from the throngs who believe that the only way to generate a positive return is through the equity market. You see, for so many pundits, you are labelled a "bull" or a "bear" based on how you feel about the equity market. You turn on the various business shows on bubble-vision and it's all about equities; one would think that there is no other market on the planet.
- Equities continue to grab the imagination of the investment public even though they are now barely halfway through a secular bear market – a long-term, flat-to-down cycle – that is likely to last 18 years.
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