Here’s a quick quiz for my PROFIT CONFIDENTIAL readers:
What is the only country in the Group of Seven Industrialized Countries (G7) running an annual surplus that it uses to pay down its debt?
If you answered Canada, you are right. For the past three years I’ve been hinting, suggesting, and even begging my American readers look to Canada as a good place to invest. We even started a daily column in PROFIT CONFDEINTIAL where investment expert Inya Ivkovic tolls the virtues of investing in Canada. And, over the past 36 months, the Canadian dollar has increased in value by 28.6% against the U.S. greenback.
What’s the growth in the value of the Canadian dollar mean for American investors? It often means if you buy a stock on the main Canadian stock exchange, the TSX (the Canadian equivalent of the NYSE), you are seeing both price growth of your stock and your investment because you are buying in Canadian dollars that keep rising against the U.S. dollar.
Just to give you an idea, if you had invested in the basket of stocks which make up the S&P/TSE Composite (the Canadian equivalent of the Dow Jones Industrial Average) three years ago, you’d be up today by 55%. If you are American, your return on U.S. dollars would actually be 71% because you can cash in your investment today for more U.S. dollars today than you put in three years ago.
I really believe the Canadian dollar will keep rising in value against the U.S. dollar because the Canadian Federal Government is focused on reducing its debt… a stark contrast from the U.S. The Canadian Federal Government racked up a $13.2 billion surplus last year. That money will be used to bring down total Canadian government debt to only $481 billion (the equivalent of about the U.S. annual deficit). The national debt of Canada as a percentage of the country’s GDP is now at a 24 year low.
Canada is also rich in resources, metals, and minerals– commodities the U.S. and China demand. I continue to believe Canadian stocks offer great value, especially for American investors.