AND THE WINNER IS?
By Shan Saeed
Canada is the winner. Canadians are richer than Americans. A study released last week illustrates the average Canadian household is worth $363,202, while the average American household’s net worth was $319,970. That means each Canadian household is $43,000 richer than Americans.
Let's start with Paul Martin, Canada's Finance Minister from 1993-2002 and Prime Minister from 2003-2006. Martin represented Canada's Liberal Party. But don't let that name fool you. During his tenure in public service, Martin was credited with reducing a debt level that reached 70% of Canada's GDP down to 50%. He successfully delivered a balanced budget in 1998, managed a Canadian pension crisis, and reduced taxes to spur growth. But most importantly, Paul Martin forced Canadian banks to keep relatively high loan loss reserves. And thus prevented them from going on the merger spree that would create over-leveraged, too-big-to-fail behemoths.
Anatomy of a Winner
Now, Canada didn't escape the financial/housing crisis — but its real estate market has recovered more quickly than Uncle Sam's. The average Canadian home is worth $140,000 more than the average American home. Canada still has an unemployment rate at 7%, but that's far better than the 8.2% we have here in the U.S.
Of course, Canada has vast natural resources that help it sustain its economy. It has the third largest oil field in the world, with as much as 170 billion barrels of recoverable oil in the Alberta oil sands. It also has timber, fishing, and gold and copper mining. But these industries make up only around 5%-6% of GDP. And Canadian GDP has risen from $1.3 trillion to $1.7 trillion in the last three years. There's no doubt about it: Canada is further down the road to economic recovery.. And the best thing Americans can do to improve their own household wealth is to invest in strong stable economies like Canada's.
How to Improve Your Household Wealth
I expect most investors would be surprised to hear it, but Real Estate Investment Trusts (or REITs) have been among the strongest stocks so far this year. It's an impressive turnaround for a sector that was absolutely crushed by the financial crisis...But the combination of large dividends and upside potential makes these stocks very attractive — especially in the current low-growth environment.
In fact, Canadian REITs are at a five-year high as office vacancies have dropped to just 8.2%. Even better, office property values are expected to rise between 10% and 20% in Canada this year. I've recommended Canadian REIT to my valued investors. It pays a 5.6% dividend and its revenues are rock solid as it has long-term leases with some of the world's biggest retailers.