Inescapable Challenge

THE INESCAPABLE 2012 INVESTMENT CHALLENGE
And Its Deserved Canadian Bias

Debt of unprecedented magnitude – the servicing of which is devouring unsustainable proportions of disposable income, personal wealth and overall economic output.

Debt so debilitating that three members of the 17-country Eurozone – Greece, Ireland and Portugal have already needed to be bailed out (Greece twice), while within the 27-strong European Union note worthies like Spain, Italy, France and even the United Kingdom have needed to be put on life support under painful austerity programs.

Neither should it be much different in a debt and deficit-riddled U.S.A. where “it’s the economy, stupid” is once again the battle cry in a bruising presidential election campaign, that is already well up and running.

If there is some accompanying good in all of this it is that the developed world has at last awoken to a serious debt habit, the longer it lasts the harder it is going to be to shake.

A legacy of debt like no other is also why 2012 increasingly emerges as a pivotal year in which there is already no choice but to be “inescapably” invested.

Today’s artificially-low central bank-managed interest rates and a quiescent (for now) but ever-present risk of returning inflation are two imperative reasons for switching the focus to equities rather than bonds.

Inevitably, the markets as opposed to the central bankers will begin calling the shots as to where interest rates should truly settle. It’s already happening in Portugal, Spain, Italy and other EU countries and could well come sooner than currently thought in the U.S.

Remember, as well, that history shows few if any nations ever paying off their debts instead succumbing time and again to the temptation of inflating them away. It would be amazing if it were any different this time round as debt looms longer and more ominously than ever. Far better, then, to own rather than to loan and to look to equities and appropriate equity products to make good income shortfalls and to concomitantly build inflation protection into portfolios.

Another powerful – perhaps overwhelming – plus in favour of equities lies in the incredible power of market-driven capitalism which rewards the successful, and punishes the headless and the unsuccessful. This same power is an integral part of the globalization that is arriving in all its controversial, disruptive and historic glory, to quote Sam Palmisano, the esteemed former chief executive of IBM. Nowhere are these qualities more apparent than in the emergence of the Asian and BRIC (of Brazil, Russia, India and China) economies as the new drivers of a still-vibrant and dynamically-changing world economy.

Whether for their superior (to fixed-income) yields, inflation protection and the stakes they provide in TODAY’S THRILLING global economy, equities and equity products must now be the way for all investors to go. It’s also the way they should want to go for in these ever-growing equity markets could also lie extraordinary investment opportunity to more than provide for the independent financial futures our fiscally-strapped governments can no longer be counted on to help provide us with to anything like the extent we or they once hoped. Instead, we must be on board as investors.

In a dynamically changing world arena there can be few countries better-positioned or more attractive than today’s “energized”, fiscally-sound and highly invest-able Canada. Long gone is the spoilt, deficit-ridden, debt-bloated Canada of the 1990’s: in its place a leading edge economy that can rank and compete with the world’s best, and provide the developing Asian market like few others.

While Canada’s recovery future is not locked down in what is also an increasingly interconnected world, the economic agenda of the majority Conservative government is achievable, credible and investment-friendly – not only in the natural resources for which we have long been famous, but now also a whole lot more besides!

I cannot over-emphasize Canada’s emerging superpower status across the entire energy spectrum to – hydro carbons and other. In addition, modern-day Canada offers the widest array of world class non-resource leaders in banking and financial services, our consumer and manufacturing sectors, communications, electronics, et al.

Furthermore, I’m convinced that the remarkable trend changes in Canada favour vis-à-vis the next-door U.S. over the opening decade of the 21st century are here to stay. America may be cheaper shorter-term, and right now could be the cheapest and best-performing market in the world in stock market terms, as it was in 2011. But when you get your hands on trend changes like those currently gaining momentum, that modern-day Canadian “train” is still just leaving the station.

As I look forward to keeping MGIS clients and subscribers posted, I confidently continue recommending today’s Canada for growth and safe passage in an enthralling world in which one must own rather than loan in which Canada stands out for its exceptional investment perhaps as never before!

Michael Graham is a 50 year veteran of the Canadian investment industry and President of MGIS (http://www.michaelgrahamis.com/) through which he offers his experienced and distinctive presentations and subscription services. A long standing contributing editor to The MoneyLetter, a columnist for Advocis’ Forum magazine and a frequent radio and television quest, he can be reached at: Michael@michaelgrahamis.com