InvestRationale: My 2009 approach during the middle of the crisis

Top 5 market facts as we go in for fresh round of buying

• Financial/credit crunch impact uncertain – credit card and commercial porperty still to unfold in the US so also GM outfall

• Market rally surprising (early) as US fundamentals are not rosy – probably cash on sides coming in – to not miss rally

• Emerging countries market finaly moving ahead of the US

• European markets will be the slowest to come out

• The fall of the USD has begun – the substitute is yet to be found

“Call” on the economy and the world for next 12 months as we “sputter” here in the West

• The US consumer is not coming back to the mall for another long period – and when she comes back, she is not going to spend as much so the highs of the past for the market will be a much slower road to get to in the US

• Among emerging countries, the N-11 (Pak, Bangladesh, Viet, Eastern Europe etc) and export focussed smaller Asian countries will suffer as long as the US is down. Read atleast 9 months.

• Brazil, India and China will see run-up in the stock market but India's will be the 1^st to fade; if world economy picks up, Brazil will go on else it will soften too, China will have the longest run up

• USD has begun its fall but it wont be very sudden moving beyond May for a while as the substitute is not yet firmed up (In 12 months, Yuan won't go convertible; Asian currencies will doctor themselves to come back to the exporting ways so won't raise themselves against the $, multiple currency/commodities may start replacing the USD but slowly, Euro ain't getting stronger on its own unless China or mid East support it which China won't given the huge US papers it has; plus all economies are inflating themselves to some extent); but finally after the next forecast period, I will again look for the signs of the eventual collapse of the USD against commodity currencies (CAD, Rand, AS$) and emerging currencies .... US cannot get away without big taxes or hyper-inflation both of which will drive the USD down

So how do we play in next 12 months - buying

• More aggressive portfolio – combination of equity and property

• Only ETFs for equity for this period

• Pension fund gives exposure ot industrial countries, big to US and huge to Canada – no more deliberate investment here beyond pension and existing equity linked GICs – the continued pension investment will guarantee that we don't miss out on any “surprise” upside to these markets or if these advanced markets don' rise, atlesast we would have them at relative lower valuations

• Geo exposure increased for:

1. Gulf

2. Africa

3. Lat Am (already done with Brazil, so hold off)

4. India (already done so hold off)

5. China – through East Asia or small caps (when price more attractive)

• Invest in agriculture, water (at right levels)

• Add to Telco and IT (prefer in developing), energy incrementally

• Buy commodity (mixed) if it goes a bit low

• Monitor housing REITs – US homes, China and Asia property

• Start watching for transport, shipping if real economic good news starts coming in (refer to background on detecting US economic indicators)

• If good times come back, buy Global Consumer Staple ETF when people move money out and sector gets beaten and dividend payers such as Colgate, Nestle are attractive again

• Now, we buy property in India, and look for investing property in any but the US $ denominated US propert market

So how do we play in next 12 months - selling

• Stick to old Rules of selling

Our investment rules for equity market reiterated

• Shall not pay management fees to the extent possible – Indexes, ETFs or direct stocks (very rare) only

• Investments will be made with a mid to long term perspectives, not short

• Money will be lying in easy float in e-Trade to capture any panics (e.g. temporary fall) in markets or shares we believe in even if notional loss sensed

• We will not over-diversify our portfolio but we will buy “attractive” sectors and geos and keep acculmulating – sticking to a mximum of 7 themes – we may rotate choice of investments in accordance with business cycles and sentiments there will be a maximum of 20 individual ETFs and stocks at any given point

• For individual company buys, we will buy only if

  • We know something special about it – due to sectoral knowledge through our main profession

  • Company must be profitable for the past 2 years

  • Operating cash-flows are regularly rising

  • Something unique to offer to the market

  • We understand the market, customer needs and general direction of the company

  • There are no major know litigation challenges

  • After quantitative checks (see below)

  • If Hi-tech unproven companies (additional criteria): Uniqueness of model, Mgmt background - Israel, IIT, MIT, Entrepreneurial hunger, Makes life or business easy SIGNIFICANTLY

• Quantitative factors to consider while buying individual stocks

  • Price to cash flow (income – depreciation + amortization) very well rewarded in the market

  • Large caps with low Price to Sales do well

  • Dividend yielding large caps do well

  • Low price to book rewarded, not Price to earnings

  • Is there price momentum for a year or 2

  • Conservative ratios: debt to equity <= 1.55, CR >= 2, QR >= 1 ;

  • Safety net asset value = (CA – CAL – LTD) / Number of shares below 1/3 is a steal

  • Long term earnings over 5 years; average over 5 years versus current earnings

• Smart advice to keep in mind

  • EPS, EPG Growth > inflation, payroll/ revenue

  • Qualitative (ugly duckling, spin-off with low attention, Porter analysis, defensive, lower analyst coverage, faster growth in dull industry)

• When to sell

  • 25% upside within 2 years – if still good, come back when pull back occurs; if we believe in the continued grwoth story of the security, we will still sell 50 % of the security at the 25 % rise

  • Valuation has changed completely

  • Perspective for buying initially has changed to the negative

  • Too many analysts covering it as “hot tip”

• While picking individual stocks, additional criteria, heed Zell:

  • Company should have “staying power"--in other words, that there will be continuous future demand for their product.

  • He particularly likes situations where he does not have to spend any money on marketing because consumers already have a need for what is being offered.

  • Management must be aligned with shareholder interest. At its most basic, this means that management should own large positions in the company’s stock. Still, management that is obsessed with stock price is worrisome. I want them to obsess about the business.

  • Avoiding companies that have anti-takeover devices.

InvestRationale: My 2008 approach - mid year review

July 2008 analysis

Re-visited the portfolio and re-considered the market factors, altering the investment mix. At that time, in July 2008, view was:

Top 5 market facts as we go in for fresh round of buying

* Oil price uncertainty to continue – wide ranging estimates

* Financial/credit crunch impact uncertain – new revelations, bank crash speculation

* Emerging countries disentanglement with US not as good as previously thought on stocks, but economic disentanglement will be real

* Money fleeing equity market towards commodities, bonds and sitting in low interest cash

* USD has fallen but there is uncertainty as to how much bigger the fall will be

"Call” on the economy and the world as uncertainty continues

* Oil price will go down in the coming 2-3 quarters dramatically (go to 60) and come back after the fall. Factors that have driven up oil in my view from highest to lowest and my forecast for each:

1. Speculation and lack of alternative investments, so “hot money” chasing oil and commodities – this will move out the moment other modes of investment return to normalcy

2. Subsidies in Venezuela and Middle East drastically distort consumption especially as people feel rich – this wont change significantly hence the return to low 100s price after dramatic fall in oil price

3. Perception that demand is huge – this wont hold too long as subsidies in Emerging countries will get chopped due to inflation and huge subsidy loss currently undergone + my belief that US consumers will make real changes to reduce consumption

4. Mid-east tension especially Israel attacking Iran – this will reduce as reality of an attack diminishes

5. Perception that supply is constrained – this will continue to be a factor as we have no clear reality check on Mid East oil, the largest supplier and there is continued under-investment despite price rise in middle East

* The global financial crisis will ease in 2-3 quarters and the write-offs in the banks in reflection will look very large when people look back a year out

* The US consumer is not coming back to the mall for the next 12 months nor are they traveling or buying homes despite whatever happens. Period.

* Among emerging countries, the N-11 (Pak, Bangladesh, Viet, Eastern Europe etc) will suffer as long as the US is down. Read atleast 12 months.

* Amongst the BRICs, Brazil will continue its story of upward growth, Indian and Chinese stock markets will be pessimistic for another 2 to 3 quarters and can see negative trend too, not just flatness as inflation and probable interest rate hikes dents them (see backgrounder on inflation below that I believe in)

* USD wont see further significant erosion for next 18 months as Euro falls (economy set to tank there), Asian currencies are kept low and Commodity boom sizzles

So how do we play in next 12 months - buying

* Only ETFs for sectors + 2 stocks MAX

* Pick US Defence ETF – when average of top 5 P/E less than 15

* Pick as Financial ETF (global preferred?) – confirm P/E less than 12 for top 5 holdings

* Pick Middle East ETF

* Confirm time for Technology (Internet services, internet infrastructure or communication sector invested in tapping new world economy) ETF

* Transport – follow Warren or CP or CN – when things get hit due to slowdown

* One pure risky 10 K play - Water or alternative energy or both – narrow on ETF

* Pick a staple – Nestle or Lever (later), ETF NOW

* Narrow on Health theme to follow and pick ETF – Global ? Sub-sector

* Track Brazil ETF, at slightest respite or LatAm once commodity craze subsides

* Pick India, after 3 quarters and trip to India

* Pick Spanish ETF if LatAm component high and average P/E sensible (below 15)

* M&E play or travel play as stocks continue to get beaten

* Pick an India infrastructure play after India visit

* Pick A US and a European global infrastructure or engineering player if not ETF

* Pick luxury ETF after “forecast” murder in 2008

* Pick oily ETF (from Canada?) once price crashes

* Pick Agricultural ETF when price comes down

* Think about parking portion in Target Date funds

So how do we play in next 12 months - selling

* Sell China and Pacific Play at 1st rise back above 25%

* Sell anything that has increased by 30% for old holdings and 25% for any new buys

InvestRationale: My 2007 approach, corrective actions and tweaking the outlook

By mid 2007, it was time to re-look at the portfolio, adjust it and update the view on macro factors to consider. Here is my 2nd take at investment in my notes to my wife on the subject Analysis of our portfolio: over/under-exposure by sector/economy/type of companies - 2007

• Greater exposure to growth of emerging countries (especially of China) than of US, Europe and Japan
• Success of current portfolio dependent on China/Pacific – very high; Canada – very high; US – medium to high; India – medium; Latin America – low to medium; developed Europe – low to medium ; low to medium; Japan – low to medium; Eastern Europe – absent; Africa – minimal; middle east - absent
• Oil & gas play very significant; materials are a step behind; tech - 3rd and fin – 4th
• Good strong largely stable techs
• Minimal health; low on discretionary, consumer, staples, durables, low on pure infrastructure, no significant bets on cutting edge unproven tech, bio-sciences,
• Large caps play almost completely globally, in US or in Canada; Significant dividend play story except MDA, PD, TLM

Factors about the stock market to consider as we go in for a fresh round of buying – reflecting on analysis made earlier (most of which did very well)

• Bull run for 4 years currently on; typical runs are for 3-4 years; is market on last legs?
• Or is it a long run like the 1950s and the 1990s – that is the trillion $ question
• Bearish view– too many people chasing gains, making riskier bets, M&A frenzy, emerging and foreign markets becoming larger part of the portfolios in the US and Canada households, US Housing market in reverse, deficit at the highest; oil prices will kill consumer and emerging country confidence; credit risk will move from Housing to Private equity to full market and the credit squeeze will slaughter us; democrats will ruin market especially Defence, health, energy in the US; Democrats will bring up trade barriers slowing global economy; China will be punished and costs in world economy will again rise as China’s deflator goes away
• Bullish view – US no longer runs the world, China, India and Asia matter and will keep the world up as they grow; Lat Am in great shape unlike before; Europe and even Africa doing well; mid-east – too rich so lots of money for equity available; current consumer data in US still up
• Humans in investing generally gloss over bad news and take more risks in market than they would in any other aspect of life
• We are young and can make a few mistakes and suffer losses in the immediate to mid term as long as our bets are real
• Most investment to be made will be in USD so currency loss could be a factor and prevent locking on gains or aggravate losses till USD rises against CAD; question crucial to answer
• One thing is sure that the market is nervous and there will be crashes at the smallest bad news and that will present buying opportunities so we need our portfolio ready for that bad day – the prepared mind like the furrowed fields prospers

My view of the world economy as a backdrop to the investment approach, based on some reading, some listening and the gut feel – 2007 analysis

• US economy has shown amazing resilience in the face of the bursting in 2000-01 of the biggest stockmarket bubble in history, of terrorist attacks and of a tripling of oil prices; flexible wages and prices, rapid immigration, a sounder banking system and globalisation as factors that have made the economy more resilient to shocks.
• Part of America's current prosperity is based not on genuine gains in income, nor on high productivity growth, but on borrowing from the future.
• As a result of weaker job creation than usual and sluggish real wage growth, American incomes have increased much more slowly than in previous recoveries.
• Central banks in Asia and oil-producing countries have so far been happy to buy dollar assets in order to hold down their own currencies. However, there is a limit to their willingness to keep accumulating dollar reserves.
• Given that consumer spending and residential construction have accounted for 90% of GDP growth in recent years, it is getting difficult to see how this can occur without a sharp slowdown in the US economy.
• Last year, emerging countries’ GDP grew in current dollar terms by $1.6 trillion, more than the $1.4 trillion increase of developed economies. And there is more to this than just China and India: these two countries together accounted for only one-fifth of the total increase in emerging economies' GDP last year. Vietnam, Brazil Russia, Middle East, Easter Europe and even other Asian countries are joining in. People are now talking of BRIC plus N-11 which includes Pakistan, Vietnam, Bangladesh etc
• Emerging economies have also become increasingly important markets for companies from the rich world. Developed economies' trade with developing countries is growing twice as fast as their trade with one another. Over half of the total exports of America, the euro area and Japan now go to emerging economies. The EU exports twice as much to them as it does to America and Japan combined.
• Of course, with half the world's output but five-sixths of its population, emerging economies still have incomes per head far lower than the rich world. Their share of exports has more than doubled since the 1970s. Over the past five years, they have accounted for more than half of the growth in world exports. On the other hand, their stock-markets still account for less than 20% of global capitalisation.
• Unlike many previous booms, the emerging countries’ current expansion has been financed largely by domestic saving rather than debt: their average ratio of foreign debt to exports has fallen and they have built sizeable forex reserves.
• However, some of the recent boom in emerging economies is due to three factors that may be unsustainable. First, rising commodity prices have given a fillip to producing countries, such as Russia, Brazil and South Africa. Second, low interest rates have reduced debt-service costs—especially important for Latin America, where the debt-to-export ratio is twice as high as the average for emerging economies. And last, exports have been boosted by America's strong import demand. This favourable environment cannot last: interest rates are rising, and American consumers cannot keep spending more than they earn. Emerging economies' energy-intensive heavy industries are also vulnerable to high oil prices. A saving grace is that these risks partly offset each other. A slump in American demand would reduce both interest rates and oil prices.
• Perhaps the biggest risk is that the boom may encourage complacency and reform fatigue. Yet further action is needed, from greater fiscal discipline to more flexible exchange rates. India an China are still leading the fight to keep economies closed.
• The future expansion of emerging economies will not follow a straight line. It is unavoidable that emerging economies are more prone to economic ups and downs and financial bubbles, as America was during its entry on to the global stage in the late 19th century.
• My pet concern re emerging countries - local political challenges, fear in Western World and reaction possible (highly probable)
• However, the long-run prospects for emerging economies as a whole look excellent, so long as their move towards free and open markets and sound fiscal and monetary policies continues. Get these basics right, and developing countries ought to outpace advanced economies. Because they start with much less capital per worker than developed economies, there is huge scope for boosting productivity by importing western machines and know-how.
• Globalisation is causing the biggest shift in relative prices (of labour, capital, commodities and goods) for a century, and this in turn is causing a significant redistribution of income. Low-skilled workers in developed economies are losing out relative to skilled workers. And owners of capital are grabbing a bigger slice of the cake relative to workers as a whole.
• As a result of China, India and the former Soviet Union embracing market capitalism, the global labour force has doubled in size. To the extent that this has made labour more abundant, and capital relatively scarcer, it has put downward pressure on wages relative to the return on capital. Throughout the rich world, profits have surged to record levels as a share of national income, while the workers' slice has fallen. Hence western workers as a whole do not appear to have shared fully in the fruits of globalisation; many low-skilled ones may even be worse off. But this is only part of the story. Workers' wages may be squeezed, but as consumers they benefit from lower prices. And as shareholders and future pensioners, they stand to gain from a more efficient use of global capital. Competition from emerging economies should also help to spur rich-world productivity growth and thus average incomes.
• The profits boom has been fuelled by globalisation. The emergence of China and India, with their vast, cheap labour forces, has weighed on labour costs in the West, as well as keeping a lid on inflation and interest rates. But there is a flipside. The demand for raw materials from China and other fast-growing emerging economies is now posing a threat to profitability, as commodity prices rise.
• Russian, Indian and Chinese stockmarket subject to significant fraud and manipulation as well as regulatory crackdowns.
• Fire in the belly to do better in East Asia, India, China, Eastern Europe.
• Less wastage in middle east – education, health and infrastructure being recognized as focus areas.
• China rules: Even though China is investing at the staggering rate of 46% of GDP, it is still running a net saving surplus, and that surplus is still growing. Savings, commodity prices, cost of goods, manufactured goods demand driven by it.
• Americans now save less than 1% of their disposable income, compared with a euro-area average of 10%. America's budget moved sharply into deficit, whereas Europe's public finances have seen less change. As a result, America's national saving rate is now below 14% of GDP, compared with over 20% for the euro zone.
• Europe has, in fact, made significant progress on economic reform in recent years. Germany's labour market has become more flexible and the country's social benefits have been trimmed. France's pension system has been overhauled. The market is already reflecting this good news and optimism in Europe.
• A reason for unusually low interest rates is that a large chunk of those surplus savings has been under the control of central banks, particularly in Asia. Thus far, these banks have cared less about risk-adjusted returns than about stopping their currencies from rising. The sustainability of America's deficit and the risk of a hard landing depends on whether they will continue to do so.
• Africa seems to be progressing at grass-roots but Africa and Middle East story not yet captured the market. This is an untapped story.
• Decision making at consumer levels in household very much in control of women and younger people with new tastes will be the other prominent group – various new segments popping up – niches are to be served.
• Entertainment taking up larger part of time of consumers and soon wallet share too in developed countries; entertainment and communication expenses will be even more prominent as people “surge” upwards in developing countries – not education or health as much.
• Baby boomers will cause a need for specialized training, knowledge coaches, recreational needs, health care, religious products in the Americas.

InvestRationale: My 2006 approach and rules for investing

1st of my 5-series post on how I have been looking at investing in equity since Dec 2006, when I decided to put my money where my mouth was and start learning investment with real $$$. In Dec 2006, on a flight back to India, I created this note for my wife on how we need to put our money to work. Since then, I have tweaked the approach. Now, I have decided to put my experience and changes made to my investment outlook in this very public forum in keeping with the title of my blog "Nothing Held Back". In 2006, focused on a quick country and quick sector view, moved to a very ETF centric investment approach and evolved 13 rules of investing for our equity holdings. Here is how I laid it out then: Country/region specific view – Dec 2006 US o Pros: Most innovative economy, largest economy, huge company profitability of late, inventory exhausting, potential investment in capital by cash rich companies, developed financial markets o Cons: High deficit, high debt, currency fall risk, housing price collapse, consumer confidence may get hit Western Europe (non UK) o Pros: 2nd largest economy, good governance of companies, developed financial markets, Government will step in to prevent run-away losses, excellent infrastructure, European stock markets already moving up and economy getting better o Cons: Ageing population, slow growth, stagnant policies, Euro costly (currency risk big), general sense of unhappiness will impact growth, extensive social protection, high tax wedge on labour income reducing the incentive to work, high non-wage labour costs, rigid employment protection and persistently weak domestic demand depressed the demand for labour Japan o Pros: 3rd largest economy, excellent companies in some sectors, banks re-structured, its Government efforts to directly boost economy, currency will not go down but likely up, brilliant technical capability, hard working quality conscious people, huge trade surplus o Cons: Ageing population, slow growth, China/US/Taiwan/Korea taking away its existing areas of dominance, oil dependent economy, resource starved, immigration low therefore wage impact, bad relations with neighbours India o Pros: fast growing economy, IT and service driven economy, young population, driving hard, optimism, realization that infrastructure needs to be focus area, entrepreneurial, scientific man-power, highly educated manpower coming in droves, significant expansion in the production of durable consumer goods including cars, scooters, consumer electronics, computer systems and white goods, Services, including airlines, banks, construction and small-scale private traders, as well as the public sector, accounted for 49.4% of GDP in 2001/02; Indian companies gaining confidence and striding globally o Cons: Oil dependent economy, political wrangling with left, slow reforms, lop-sided growth, endemic poverty, pathetic industrial infrastructure, India’s trade deficit rising. Although exports performed strongly, rising by 31.3% to US$78bn, imports soared by 42% to US$97bn, Two-thirds of India’s labour force works in agriculture which, with forestry and fishing, accounts for around 25% of GDP and most are on subsistent basis, agriculture monsoon dependent; service sector wages rising very fast; hubris of corporate chieftains Latin America o Mexico still a commodities driven country, could not capitalize on US relations, excellent literate population, endemically weak? o Brazil is a commodities story again; but seems the seeds of economic growth are growing deeper; market friendly socialist government o Peru/Chile : tourism, commodities driven – difficult to find vehicles to invest in South Africa o South Africa, best known for its precious metals, fruit, and wine, has in fact moved from an economy historically dominated by mining and agriculture to one where manufacturing and financial services contributes the larger share of GDP. o Mining, nevertheless, remains an important foreign-exchange earner: gold accounts for over one-third of exports. The main mined products include manganese, chrome, platinum, gold, coal and diamonds. o Agriculture, together with mining, continues to be an important provider of both direct and indirect employment. o Manufacturing accounts for around one-fifth of total GDP, but has faced significant challenges since the opening up of the economy to global competition. o Metals and engineering, especially steel-related products, drive the sector. o Services is the most important contributor to GDP, ranging from an advanced financial sector to a developing tourism sector, which has significant employment potential, and an active retail sector. o Unemployment is a worrying structural feature of the economy. With the official unemployment rate at 29.4%, creating sufficient jobs for the estimated 4.7m currently without jobs remains the most critical economic challenge in South Africa. The high unemployment rate has contributed to South Africa’s ranking as one of the most unequal countries in the world judged by distribution of income. Canada o Pros: leading G8 economy, excellent infrastructure, commodity rich, services sector accounting for over two-thirds of the country's output and providing employment for nearly three-quarters of the working population, NAFTA, good peaceful relations with almost all, taxes (personal and company) should go down or worse case remain at the current levels; water can be next “white gold” o Cons: US dependent, highly taxed, greying population, weakening manufacturing prowess, socialist tendencies, Quebec separatism moves can result in pressures on costs, minority Government can be unstable and not good for economy, lack of ambition Industry/sectoral perspective - 2006 1) Bullish: alternative energy, refining, infrastructure builder, gas and petrol tech, engineering consulting, defence, biometrics, security equipment, ports, high end containers, US religion, US sports at good price, genetics, staples, high end retail, metals, materials, pilot training and simulators, manpower consultants in 3rd world, video & wireless equipment, aerospace, mid end hotels 2) Neutral/watch/confused: communication service, internet infrastructure, health, brokers (or banks), transportation, Web 2.0 3) Bearish: Airlines, auto, ancillaries, building, building supplies Our rules to be in the game 1. Be humble when making gains – they may be fleeting 2. We must always remember rationality and economics are just some factors in driving equity; fear, paranoia, herd mentality, psychology, mass hysteria, politics drive these markets, albeit in short to mid term, long term fundamentals will triumph 3. Shall not pay management fees to the greatest extent possible – look for lowest cost of investment 4. Investments will be made with a mid to long term perspectives, not short 5. Money will be lying in easy float in e-Trade to capture any panics (e.g. temporary fall) in markets or shares we believe in 6. We may go along with advice from pundits but we will always take a few contra or unique bets 7. We will not over-diversify our portfolio i.e. we will not spread across all sectors – we may rotate choice of investments in accordance with business cycles and sentiments and bulk of our investments will be in 5 to 7 industries or plays (sector, region, segment) with a maximum of 20 individual buys (shares plus ETFs plus indexes) 8. For ETFs, the general rule would be to buy from: o Vanguard for US exposure and global generic o iShares for different countries o Powershares for exotic global and US sector offerings o Claymore for exotic bets no one else wants to take 9. For individual company buys, we will buy o Check industry – bear or bull o Company must be profitable for the past 2 years o If operating cash-flows are regularly rising o It has uniqueness in market o We understand the market, customer needs and general direction of the company o There are no major know litigation challenges? o After P/E and PEG checks o For Hi-tech unproven companies (additional criteria): Uniqueness of model, Mgmt background - Israel, IIT, MIT, Entrepreneurial hunger, Makes life or business easy 10. Quantitative factors to consider while buying stocks o Price to cash flow (income – depreciation + amortization) very well rewarded in the market o Large caps with low Price to Sales do well o Dividend yielding large caps do well o Low price to book rewarded, not Price to earnings o Is there price momentum for a year or 2 o Conservative ratios: debt to equity <= 1.55, CR >= 2, QR >= 1 ; o Safety net asset value = (CA – CAL – LTD) / Number of shares below 1/3 is a steal o Long term earnings over 5 years; average over 5 years versus current earnings 11. Smart advice to consider from others o EPS, EPG Growth > inflation, payroll/ revenue o Qualitative (ugly duckling, spin-off with low attention, Porter analysis, defensive, lower analyst coverage, faster growth in dull industry) 12. When to sell o Sees too much upside – market has embraced the scrip – take off and then come back when pull back o Valuation has changed completely o Perspective for buying initially has changed to the negative o Too many analysts covering a “hot tip” 13. Low cost players are attractive when o Scale o Location advantage o Regulation specific advantage

10 things I love about Canada: part of the 10 years in Canada (Jan 1999-2009) blog series:

On every day spent in Canada, there has been a lot to be thankful for and a lot to feel good about – so it was tough to pull 10 things I love most. However, I have created a mixed list of top 10 Canadian icons, attitudes, assets and social/political facts that bring home the joys of being in Canada.

1. Natural beauty of the land and its deep appreciation The 2nd largest country in the world has breath-taking scenery spread across 7 time zones and nearly 10 million square kms of largely un-inhabited land. Green pastures, breath-taking mountains, red beaches and absolutely pure blue lakes (check my pictures on Facebook, Flickr or Picasa) adorn this landscape. Most Canadians truly respect this gift of Nature and spend a chunk of their time enjoying this bounty. This appreciation of Nature pervades the minds of the people, in the famous stories, the extremely popular paintings (such as those by the Group of Seven) and the marks/pictures on currency notes & coins. Even politicians routinely posture in the media on canoes, skidoos, ski gear, in Arctic gear or with fishing rods to express their love for Canada’s natural beauty.

2. The natural riches of the land It was not some brilliant economic design or the rollout of a strategic foray into a new market; rather the plentiful supply of precious & base metals, oil & gas that have save the bacon for Canada at critical points. Along with the stability of its banks, the bounty from below the earth helped Canada emerge as a top performer amongst the G8 countries through these past few tumultuous months in the world economy as Canada’s manufacturing sector got decimated, its leading new age hi-tech companies (Nortel, JDS Uniphase in my sector) went under and its legendary retail chains (Eaton, The Hudson Bay Company) floundered over the past few years. Even in the future, another natural resource (its plentiful supply of fresh water) will likely become a key source for Canadian sustenance and wealth. As the water shortage issues around the world become acute, Canada with the 2nd largest supply of fresh water in the world feels like a great place to be in.

3. The Rick Mercer show If you see my blog post on things I rail about in Canada, you will see my unhappiness about the “absence of outrage against waste and ineptitude”. Now, the only avenue where I see this addressed correctly, regularly and loudly is on the Rick Mercer show. Rick (note for non-Canadians: he is an amazing comedian on TV who has active interest in politics) in the “rant” part of his show addresses waste and ineptitude in the most humorous but direct fashion – unrivalled across any other media or forum in Canada. Besides the “rant” portion of the show, Rick does a terrific job of highlighting the numerous facets of Canada – stuff most people would be unaware of or never get exposure to – be it the working of the parliament or a small unique, festival in some remote part of Canada. Of course, in the process of Rick showing us Canada, he reconfirms that he is the most powerful and perhaps the luckiest Canadian around (he gets to fly the Canadian air force jets, play guitar with legends such as the lead guitarist of Rush, join Canadian Olympians in their practice sessions, drive police cars …) with uninhibited access to the Prime Minister, top politicians, rock legends, academic dons, sports-stars and the top civil/defence officials.

4. The CBC The unbiased coverage of Canadian Broadcast Corporation (CBC) is such a relief when I compare it to the news coverage from elsewhere (compared to the coverage in the US, Singapore and India – places I have been most exposed to). While its coverage may not be as deep as that of the BBC on Africa or Europe or Asia, the CBC truly is deep on all issues Canadian and American, strikes a great balance between Left & Right, brings forward some real honest hard-hitting programming and of late even looks very cool (great graphics, interesting angles, newer additions to the line-up of hosts). No other media even in Canada maintains as perfect a balance as the CBC (though the Globe & Mail comes close to it in the press). The objectivity was driven home especially at the start of the Iraq War when free discussions were held on CBC while the US TV had all aligned with a single point of view and was smothering any real discussion, which they later quietly regretted.

5. Almost an Enlightened Capitalist society In one of my 1st blogs ever, I talked about “Enlightened capitalism” – where there is economic freedom, results are driven by risk taking and hard work but when a person slips through the cracks, there is a helping hand. Though not yet a completely “enlightened capitalist society”, Canada comes close to it. Equidistant from the excesses of the US capitalist model (of recent years) and excessive stifled economies like France and Italy, Canada strives to strike a decent balance. A little below some of the Nordic countries on the scale of Enlightened Capitalism, Canada occupies the next berth along with Australia, Singapore and maybe the UK. And that is one of the HUGEST draws of this country for me – to see the economically disadvantaged (mostly) taken care of, absence of any ghettos, a large middle class and (mostly) equal access to public services.

6. A high concentration of very decent people Canadian media points out often how lots of Americans put Canadian flags on their back-packs when travelling through Europe. When I travel through Latin America, and tell people where I live, people immediately tell me about encounters with amazing Canadians and how well they think of the country (of course most in Europe tell me that they find India more exciting or interesting to visit and most in Latin America after griping about US policies, do let out their admiration for the US economic might). The above points of Canadian decency are random examples to validate what I experience in my daily life across Canada. Though the level of grace may vary across the regions or along rural-urban lines, largely and with a few exception (7 great experiences for every 1 bad behaviour witnessed), the folks here are very decent in the way they behave themselves publically, in the community, on the road, while using public transit or in the office.

7. Attitude to the under-privileged One of the best things I have seen in both the US and Canada is the spirit of charity built into the psyche of the majority of the common population. But as a society and Government, Canadians’ attitude to the under-privileged is heart-warming for me. I am sure in quite a few countries of Western Europe (and from all account, the Nordic countries) the same attitude prevails but its something that cannot be missed in my top 10 for it continuously impresses me. I have seen charitable and kind acts play out in parts of Asia but the demarcation between “beneficiary and benefactor” is often obvious while the kind actions are being performed – something that takes some of the dignity away from the receiver of the benefits. Out here, atleast the way I have seen it play out, the acts of kindness and charity seem very dignified and genuinely kind.

8. Prevailing attitude: Humility and self-effacing You could be sitting on a flight next to a musical giant or a top Government official or a legendary academician who is Canadian, more likely than not, you will not notice any fuss, arrogance or even feel their presence. They will more likely than not underplay their status while moving about in public. At work, you will rarely see anyone boasting about their own accomplishments or achievement (though they will be happy ;) to tell about their kid’s great hockey game from the previous night). In short, be it a famous or an ordinary Canadian, they are largely humble, quite about their successes and to a large extent self-effacing unless asked very specific questions.

9. Ability to take along a diverse set of people without imposing an explicit change There are very few countries with as much racial and “country of origin” diversity as the US, the UK and Canada. The milling of people with different backgrounds, past prejudices & preferences, deep set values always creates tensions in society. Humans by nature are not inherently tolerant of diversity. In Canada too, prejudices are prevalent and discrimination plays out at individual level, but society as a whole still pulls along in the same direction with little palpable tension being evident. Communities have grouses against each other but do not necessarily act upon them (unlike what I know happens in some parts of the UK). And this restraint at the macro level helps take along the hugely diverse set of people who live in Canada. What sets the Canadian experiment in creating a nation with hugely diverse strains of humanity apart from the US is the process of “Canadianization”. There is an “Americanization” process in play in the US – an implicit set of norms immigrants go through in a generation or two. In Canada, there is no explicit change and complete absence of the “Canadianization” process of those new to the land. I do fret about this absence but also am equally mesmerized about how Canada holds together without any explicit “naturalization” process.

10. Tim Horton’s Tim Horton’s coffee and Tim Horton, the coffee chain brings it all together for me – the essence of Canada. Unpretentious, clean and serves a great cup of no-fuss Java (one choice of beans – no choices) at a very reasonable price, the brand embodies Canadian values like very few other things – good, strong, virtuous (the company does a lot on the social front), unpretentious and classless (embraced by every strata of society). Served across the country (in almost every terrain) and even on the Canadian Force’s base in Afghanistan, it is a symbol of Canada everyone can attach to without seeming jingoistic.

5 personal stories I love telling: Part of the 10 years in Canada (Jan 1999-2009) blog series

If kindness to strangers is a measure of the attitude of a society, here are 5 incidents/stories that I fondly recall from the past 10 years in Canada – small incidents with big impacts, not all executed in the blissful country-side (where it can be expected) but rather in the supposedly “big bad” cities too.  

1. You will not make it on time, so hop in
The 1st one is my own story played out in the 1st few months in the Greater Toronto Area. I was heading for a job interview to the suburbs (around Toronto). Not aware of the weak public transport links (rare taxis, poorly served bus routes) on the outskirts of Mississauga, I had planned to arrive at the local railway station and walk to what looked like (on a paper map) a quick short trip a couple of roads away from the station. As I strolled out of the station, it hit me that the roads that showed up on the maps were fenced off in reality. There was no way to get across them – rather, I had to take a detour of atleast 6-7 kms to get to my destination. By the time this occurred to me, it was 45 mins from appointment time and there was no taxi in sight. I made some calculated guesses and decided to cut through a residential community. As I hurried through the area, I stopped to re-check my bearings and chanced upon a middle aged lady in her driveway. She came over and pointed out the route to my destination and asked me the reason for my haste. Two minutes after I thanked her for the directions and took off on a quick march in my suit and tie, I heard a car approach me. Turning around, I saw the lady had got in to the car and driven over. She asked me to hop on with the words “You will never get there on time so you better get in.” I jumped in and got to my interview in good time. I walked in relaxed and was able to “crack” the interview and secure the job offer. All this was made possible by a stranger who was kind enough to realize that I had grossly underestimated my travel distance and stepped in to help. The lady didn’t want an acknowledgement for her generosity though she identified herself as “Ms Szabo”. I sent a “Thank you” card into the ether at a vague “made up” address but moreover still remain in eternal debt for this act of extreme kindness.  

2. There is always space in here - so what if it’s a tiny car
The next one is a fascinating story from Halifax on the eastern seaboard of Canada. Sonika, my wife and a colleague of hers were travelling to the airport when their taxi developed engine trouble a few kms away from the airport on a quite strip of the highway. In freezing cold, Sonika and her colleague stepped out as they planned the next move – call a cab from the city or airport … They had hardly got through a couple of minutes of deliberations when they saw a small old hatchback (the size of a Mini) pull to the side. A couple was sitting infront and their whole home was on the move with lots of bags, packs etc in the tiny car. They insisted on driving Sonika and hear colleague to the airport though they were not headed in that direction. Sonika and her colleague thanked them but initially declined given that the car was tiny, packed and moreover not heading in the direction of the airport. But the couple insisted and were soon re-arranging the artefacts in the car. Along with the packs from the back seat, there emerged a baby in a bucket seat and a massive dog (Labrador). Within a couple of minutes, Sonika’s 6 foot 3 inches tall colleague was seated in front alongside the gentleman driving the car. His wife, Sonika and the little baby were fitted in the back seat and all the belongings along with the giant dog squeezed in the room behind the back seat. Of course, they got to the airport in a few minutes. The couple refused to take any money or offer their name for a card/thank you gesture and when Sonika and her colleague insisted on doing something, the couple asked them to “pass the favour along to some other stranger.” “Wow!” is all I could say on this amazing gesture of the couple with the tiny car but huge hearts.  

3. Did you leave something behind?
We were living in the busy part of downtown Toronto. I paused at a newspaper vending box, took out my wallet, put the right amount in and pulled out the paper of the day. Its 6 PM on a busy work day and with paper in hand I hop across in 5 minutes to my condominium unit. I would have sat for 15 minutes when the phone rang and a police officer was on the line asking me questions to identify myself and check if I had dropped something. I looked around and had no clue. And so the officer asked me if my wallet was missing. My heart went “Thump!” I checked my coat and trouser pockets and indeed oblivious to me, I had left the wallet behind – on the newspaper vending box as the officer informed me. Again, as in the previous 2 stories, the Good Samaritan wanted to remain anonymous – apparently she had seen me leave the wallet behind (from very far), tried to catch up but could not, quickly picked it up from the newspaper vending box, handed the wallet (untouched) to the nearby police station and didn’t want to be thanked for. All this honesty and goodness in the heart of a bustling mega-city of 4 million plus.  

4. Welcome to Canada and “Be warm” in this Canadian police jacket
 This one should be pleasant reading for those who dread crossing borders and facing customs/immigration officials. While every return to Canada for me (by air or road) has been most welcoming and a pleasant experience (more in another blog post), this story by a friend of buddy of mine takes the cake for the welcoming attitude of the Canadian Immigration officials (if you are not doing anything wrong). My friend landed in Western Canada in Calgary from Dubai as an immigrant checking into the country for the 1st time. At most times, my friend tends to be in a general state of hyper-excitement and so in his usual vein, he was comfortably suited in shorts and tee-shirt on the flight in though it was late November. Having landed at the airport with very light luggage, my friend quickly made his way to immigration, submitted his papers to enter the country for permanent residency. A few minutes later, he was admitted into the country. As he crossed in, the immigration officer took a good look at him and ushered him into a room. “Sir, you better go in there”. A bit taken aback, my friend entered the windowless room to see a police officer behind a desk. Nervousness turned into puzzlement as the officer asked him “Do you know that you are in Calgary and the weather is freezing out there. Where is your jacket, Sir.” When my buddy clarified that he had landed ahead of his family and was carrying only his summer clothes as he was there for a week, the officer pulled out a nice warm Canadian police jacket and asked him to walk along. My friend was loaned the jacket till he was inside a warm cab and only once he was comfortably seated did the police offer take back the jacket, and waved to him “Welcome to Canada !” I have read about and chatted with people on their encounters with immigration and police officials all over the world but rarely heard a story anywhere close to this one. Have you?  

5. Even a good municipal worker story
For variety, I am picking the last story – a simple one but from a very unexpected quarter – an act of kindness “beyond duty” by a municipal (or City) worker. We were returning home to Richmond Hill (Ontario, Canada) after a vacation of 2-3 weeks in peak winter. When we got home, our driveway was packed with ice (not snow) several feet high and our cars were stuck in the garage. I started chipping at it with my ice removing machine, shovel and axe but the progress was extremely slow. It was very clear that I would have to keep going for a couple of days before I could get through the pile-up. But we could not see a quick solution. Then, all of a sudden, we spied a little construction machine with a loader making its way towards us. A City (or municipal) worker had seen our predicament in the quiet corner of our neighbourhood and was hurrying over to help us. Within minutes, he had cleared the snow off our driveway, refused to accept anything more than our heart-felt thanks and was back to his work. Typically, I expect a City worker (in any other country) to be bummed with life, reluctant to even do his job, let alone do an unpaid for, beyond duty work. But, hey this was Canada and you never know where the next act of kindness may come from.

Canada – then and now – in numbers (10 data sets) as part of the 10 years in Canada (Jan 1999-2009) series

On Jan 19, 2009 we completed 10 years in Canada (with the Greater Toronto Area as our base). That is a big deal – no actually, it’s a huge deal - given that our initial view was that we would be perpetual global nomads: spend 2-3 years here, then move to another part of the Americas, and gradually make our way through Africa and Europe to Asia. A relaxation in the plans to “be on the move”, rapid acclimatization/addiction to the social & professional environment in Canada, accumulation of immovable assets and some exogenous factors changed all that. And we decided to stay put.

So, in a series to mark the 10^th anniversary of our coming over (Jan 19, 2009), I will post 4 or 5 blogs starting with this one. In these, I will dwell on the aspects I am most passionate about our life here in Canada. Starting with a story of Canada in dry stats, I will weave in personal stories, thoughts on what I love most or rail most about and of course reflect on travel through this great big land mass.

I have picked 10 sets of statistics about Canada that reflect the social and economic changes over this period. Hopefully, they make for a couple of “aha” moments J … Instead of elaborate comments analysing each set of stats, I will limit myself to a maximum of one paragraph on each of these 10 sets and leave you to make your own conclusions.

1. The key economic stats were stable over the 10 years

Parameter/Dimension	1999	2009
Inflation for previous year	0.99	2.37
Unemployment	7.6% (Jan)	7.2% (Jan)

When we landed in Jan 1999, people here were talking about how they had got through some tough economic times in Canada just a few years back with huge unemployment and big deficits. The Government had taken some serious measures in controlling the deficit and repaying the debt (more about it in another point below) and over the decade here, we saw more stable conditions play out.

2. Canada and Canadians grew pretty well over the decade

Parameter/Dimension	1999	2009
GDP (In PPP terms) per Capita (in USD) – World Bank figures	$ 27,051	$ 36,444– world rank: 12
Canada’s population	30,499, 200	33,487,208

Canada despite several serious economic and structural deficiencies continues to attract people to the country to fill this 2^nd largest country in the world.

3. Canada looked good compared to most of its other peers in the OECD

An open economy (no manipulation of currency and subject to international financial scrutiny), hugely dependent on the US for its exports, supported by a rather small population of relatively relaxed people with almost a European model of social welfare system and a huge Government STILL managed to hold its own and look good compared to its peers in the OECD over the decade (1999-2009) as these two tables below show.

Surplus (+) or deficit (-) as a per cent of potential GDP
	1998	1999		2000	2001	2002	2003		2004	2005	2006	2007	2008	2009	2010
Australia	3.6	3.6		2.3	2.1	3.4	3.1		2.5	2.7	2.7	2.5	2.3	1.5	1.5
Austria	1.0	-0.2		-0.5	1.9	1.4	1.1		1.7	0.9	0.3	1.0	0.4	-0.2	-0.1
Belgium	6.9	5.9		5.3	5.6	5.0	4.0		4.0	3.6	3.5	2.8	2.6	3.0	3.0
Canada	5.3	5.5		5.2	3.0	2.1	1.7		2.4	2.5	1.8	1.6	0.7	0.3	0.1
Czech Republic	..	-3.9		-5.0	-4.1	-4.0	-4.4		-1.7	-2.4	-2.9	-2.0	-1.9	-1.3	-0.8
Denmark	2.5	3.5		3.4	2.2	1.8	2.2		3.7	6.2	4.9	3.8	1.8	0.3	0.0
Finland	2.9		2.8	6.7	4.8	4.0	2.7		2.3	2.7	3.2	4.0	3.4	3.1	2.9
France	0.8		1.1	0.3	0.3	-0.9	-1.6		-1.0	-1.0	-0.2	-0.6	-0.6	-0.4	-0.1
Germany	0.8		1.1	0.8	-0.8	-1.2	-0.7		-0.4	0.2	1.1	2.1	1.9	2.0	2.2
Greece	4.1		5.0	2.6	2.0	1.1	-0.8		-2.1	-1.1	-0.5	-0.7	0.1	1.4	2.1
Hungary	-0.3		1.0	1.8	0.1	-3.9	-3.9		-3.9	-5.5	-7.1	-1.6	0.5	1.6	2.8
Iceland	0.0		1.4	1.9	-0.6	-2.2	-1.7		-0.4	2.9	4.4	3.8	2.9	1.3	1.5
Ireland	3.8		4.3	3.9	0.0	-1.2	0.1		1.3	1.3	2.2	-0.4	-4.6	-3.7	-3.2
Italy	5.3		5.3	4.1	2.7	2.5	0.6		0.7	0.4	2.1	3.1	2.6	3.4	3.7
Japan	-4.1		-5.4	-5.5	-4.9	-5.9	-5.5		-5.7	-4.5	-3.0	-2.4	-1.9	-2.1	-1.4
Luxembourg	3.5		2.6	3.6	2.3	0.5	0.0		-1.0	-0.2	0.7	2.0	1.2	0.9	1.2
Netherlands	2.4		2.8	2.5	0.7	-0.7	-0.5		1.0	2.4	2.6	1.8	2.0	1.6	1.5
New Zealand	1.5		0.5	2.3	2.4	3.4	3.5		3.1	3.3	2.7	2.2	1.8	-0.2	-0.9
Norway1	-7.3		-7.4	-10.9	-11.1	-11.7	-13.6		-12.9	-13.4	-13.4	-11.9	-13.3	-13.0	-13.2
Poland	-0.5		-0.3	-0.9	-1.7	-1.9	-2.6		-3.6	-2.5	-2.6	-1.6	-1.9	-1.5	-1.4
Portugal	-0.2		-0.6	-1.5	-2.7	-2.4	-2.4		-2.0	-2.3	0.0	1.6	1.2	1.0	1.1
Spain	1.7		2.0	1.6	1.5	1.8	1.8		2.0	2.4	3.1	3.3	1.0	0.6	0.8
Sweden	1.8		1.9	3.1	1.6	-0.6	-0.6		0.7	2.1	1.4	2.5	2.6	1.5	1.5
Switzerland	-0.7		0.1	1.7	0.6	0.3	-0.1		-0.3	0.4	1.5	1.6	1.5	1.4	1.3
United Kingdom	2.9		3.1	3.1	2.3	-0.4	-2.0		-2.2	-1.6	-0.8	-1.1	-1.8	-2.6	-3.3
United States	3.4		3.1	3.4	1.5	-1.6	-2.6		-2.5	-1.5	-0.7	-1.0	-3.1	-3.3	-3.0
Euro area	2.0		2.2	1.6	0.9	0.4	0.0		0.2	0.4	1.2	1.6	1.3	1.5	1.6
Total OECD	1.8		1.6	1.5	0.4	-1.3	-1.9		-1.8	-1.1	-0.3	-0.2	-1.2	-1.3	-1.1
Note: Adjusted for the cycle and for one-offs and excludes the impact of net interest payments on the underlying balance.
1. As a percentage of mainland potential GDP. The financial balances shown are adjusted to exclude net revenues from petroleum activities.
Source: OECD Economic Outlook 84 database.

General government gross financial liabilities (% of nominal GDP)
	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Australia	32.3	28.0	25.0	22.2	20.1	18.8	17.0	16.7	16.1	15.4	14.2	13.4	13.3
Austria	68.4	71.2	71.0	72.0	73.2	71.3	70.8	70.3	65.9	61.9	62.6	64.8	67.7
Belgium1	122.9	119.5	113.5	111.8	108.3	103.5	98.6	95.7	91.2	87.6	92.2	92.3	92.1
Canada	95.2	91.4	82.1	82.7	80.6	76.6	72.6	71.1	68.0	64.1	63.0	65.6	66.9
Czech Republic	..	..	..	..	33.1	34.9	34.7	34.9	34.7	38.4	36.1	35.1	34.8
Denmark	69.7	64.1	57.1	55.0	55.4	53.6	50.1	42.3	37.4	31.0	28.4	28.5	29.5
Finland	60.9	54.7	52.4	49.8	49.5	51.3	51.4	48.4	44.8	41.5	39.6	38.8	39.2
France	70.7	67.1	65.9	64.4	67.4	71.5	74.1	76.0	71.5	70.1	72.5	75.9	79.0
Germany2	62.2	61.5	60.4	59.7	62.1	65.3	68.7	71.1	69.4	65.5	64.8	66.3	66.3
Greece	97.6	101.1	114.9	117.9	116.3	112.5	114.4	112.3	105.8	102.3	100.8	99.8	99.1
Hungary	64.9	66.2	60.1	59.7	61.0	61.4	65.3	68.7	71.9	72.0	71.8	73.6	75.3
Iceland	47.9	43.4	41.0	45.9	42.1	40.8	34.5	25.4	30.1	24.0	24.8	122.4	126.7
Ireland	62.2	51.3	40.1	37.4	35.2	34.1	32.7	32.6	28.8	27.9	32.8	40.9	48.4
Italy	132.6	126.4	121.6	120.8	119.4	116.8	117.3	119.9	117.1	113.2	113.0	114.4	115.9
Japan3	113.2	127.0	135.4	143.7	152.3	158.0	165.5	175.3	171.9	170.6	173.0	174.1	177.0
Korea	13.1	15.6	16.3	17.4	16.6	18.4	22.6	24.7	27.6	28.9	32.6	31.5	33.3
Luxembourg	11.1	10.0	9.3	8.2	8.5	7.9	8.5	7.6	10.4	9.9	18.1	17.3	20.2
Netherlands	80.8	71.6	63.9	59.4	60.3	61.4	61.9	60.5	54.2	51.7	54.5	54.2	54.7
New Zealand	42.2	39.6	37.4	35.4	33.5	31.4	28.6	27.5	27.1	25.3	25.3	28.4	32.8
Norway	30.8	30.8	34.0	32.9	40.5	49.3	52.7	49.1	60.9	57.9	45.4	52.7	57.4
Poland	43.8	46.6	45.4	43.8	55.0	55.3	54.6	56.4	55.9	52.5	52.8	54.0	55.5
Portugal	65.2	62.0	61.1	62.6	66.1	67.2	69.5	73.0	72.0	70.1	70.9	72.9	75.1
Slovak Republic	41.2	53.5	57.6	57.2	50.3	48.3	47.3	38.7	34.7	36.5	38.0	39.0	40.0
Spain	75.3	69.4	66.5	61.9	60.2	55.3	53.4	50.8	46.6	42.7	44.2	47.7	51.8
Sweden	82.5	73.7	64.7	63.4	60.5	59.8	59.5	59.7	52.5	47.0	44.6	41.3	40.5
Switzerland	54.9	51.9	52.5	51.3	57.2	57.0	57.9	56.5	50.6	48.6	48.1	47.5	47.3
United Kingdom	52.5	47.4	45.1	40.4	40.8	41.2	43.5	46.1	46.0	46.9	58.7	63.6	69.4
United States	64.5	61.0	55.2	55.2	57.6	60.9	61.9	62.3	61.7	62.9	73.2	78.1	82.5
Euro area	80.3	78.5	75.3	73.9	74.2	75.1	75.9	77.0	74.7	71.4	70.7	73.2	74.7

Total OECD	72.9	72.2	69.5	69.8	71.7	74.0	75.6	77.4	76.0	75.0	79.7	82.8	85.8
Note: Gross debt data are not always comparable across countries due to different definitions or treatment of debt components. Notably, they include the funded portion of government employee pension liabilities for some OECD countries, including Australia and the United States. The debt position of these countries is thus overstated relative to countries that have large unfunded liabilities for such pensions which according to ESA95/SNA93 are not counted in the debt figures, but rather as a memorandum item to the debt. Maastricht debt for European Union countries is shown in Annex Table 62. For more details see OECD Economic Outlook Sources and Methods (http://www.oecd.org/eco/sources-and-methods).
1. Includes the debt of the Belgium National Railways Company (SNCB) from 2005 onwards.
2. Includes the debt of the Inherited Debt Fund from 1995 onwards.
3. Includes the debt of the Japan Railway Settlement Corporation and the National Forest Special Account from 1998 onwards.
Source: OECD Economic Outlook 84 database.

4. The markets recognized these general improved conditions

Parameter/Dimension	1999	2009
On Jan 19, 1 US $ =	1.53 CAD	1.24 CAD
S&P/TSX Composite index	6800	8842

When we came to Canada, it took discipline on our part not to de-camp for a US salary with the huge differential in the forex rate … by 2009, the Canadian $ (Lonnie as we call it) was up significantly against the US $ (and had touched parity in between). The stats above are as of Jan 19, 2009 but since then the fall of the US $ against the C$ has led to a deliberate attempt by Canada to “talk down the C$” to prevent the impact on exports. The rising demand/price for oil and base metals along with the stabler banks in Canada ensured that the stock market didn’t go down in Canada as severely as in the US during these very tough economic times.

5. BUT .. the story on labour productivity was not encouraging …

Labour Productivity Index: 1999-2008 (2002=100) Canadian Economy - Business and Non-business Sectors
NAICS Code	Sector	Productivity Index		CAGR* 1999-2008	% Change 2007-2008
		1999	2008
*Compound Annual Growth Rate (Source: Statistics Canada, 1999 to 2008.
11-91	Canadian Economy	90.7	115.0	2.4%	0.5%

In an era of huge computerization worldwide, shift towards a service economy and strong growth in prices and demand of “Canadian stuff (oil, gas and metals), between 1999 and 2008 labour productivity in the Canadian economy increased just 2.4% per year on average, which when compared to many fast growth countries was dismal (but perhaps the employees/workers became even more chilled and relaxed in this period J).

6. … and the economic competitiveness of the country is rather mixed

Beyond labour productivity, other factors too show signs of weakness, a fact reflected in the table below – where despite signigficant progress in Canada’s measures on economic freedom, Canada slipped dramatically when measured on competitiveness.

Parameter/Dimension	1999	2009
Canada’s world-wide rank in terms of competitiveness – source: World Economic Forum Measure of competitiveness: “set of institutions, policies, and factors that determine the level of productivity of a country.” Uses 12 pillars for measurement across Infrastructure, Education, size of market, financial access etc.	World Rank = 3 (using 2001 ranking as a proxy as this was the most reliable figure I got publically)	World Rank = 9
Index of Economic Freedom – source: Heritage Freedom and Wall Street Journal Measures 10 dimensions of freedom: Business, Trade, Fiscal, Govt Size, Monetary, Investment, Financial, Property Rights, Freedom From Corruption, Labour	World Rank = 25	World Rank = 7 (Score = 80.5) versus #1 – HK with score of 90)

7. Interestingly, services producing part of economy grew faster than goods producing despite the media pre-occupation on Canadian autos, oil, gas and metals industries

Other than construction, all good producing components of the economy grew 1% or less over the period 1999-2008 while every component of the services sector grew at 1.5 % or more. This set of stats did surprise me given the media pre-occupation with oil, gas, metals and the auto/manufacturing story.

Gross Domestic Product (GDP) by Industry Sector: 1999-2008 Canadian Economy (NAICS 11-91)
NAICS Code	Sector	GDP* (millions of chained 2002 dollars)		CAGR** 1999-2008	% Change 2007-2008
		1999	2008
*GDP is expressed in chained 2002 dollars in order to maintain accurate growth rates. Chained levels are non-additive, therefore sector values will not add up to the value for the Canadian economy. **Compound annual growth rate. ***GDP values for these three sectors are combined. Source: Statistics Canada, Gross Domestic Product by Industry, 1999 to 2008.
11	Agriculture, Forestry, Fishing and Hunting	26,193	25,965	-0.1%	-1.9%
21	Mining and Oil and Gas Extraction	50,000	55,311	1.0%	-3.5%
22	Utilities	28,982	31,143	0.7%	-0.6%
23	Construction	49,053	74,570	4.3%	2.3%
31-33	Manufacturing	171,923	175,617	0.2%	-5.2%
Goods Producing Industries (NAICS 11-33)		326,151	362,606	1.1%	-2.9%
41	Wholesale Trade	49,396	70,360	3.6%	0.1%
44-45	Retail Trade	49,437	74,556	4.2%	3.0%
48-49	Transportation and Warehousing	46,603	56,755	2.0%	0.2%
51	Information and Cultural Industries	31,617	45,118	3.6%	1.7%
52, 53, 55***	Finance and Insurance, Real Estate and Leasing and Management of Companies and Enterprises	181,851	247,017	3.1%	2.7%
54	Professional, Scientific, and Technical Services	41,845	58,515	3.4%	1.1%
56	Administrative and Support, Waste Management and Remediation Services	20,934	31,106	4.0%	0.5%
61	Educational Services	50,162	60,525	1.9%	2.8%
62	Health Care and Social Assistance	63,754	79,262	2.2%	2.9%
71	Arts, Entertainment and Recreation	9,333	11,728	2.3%	0.1%
72	Accommodation and Food Services	23,804	27,753	1.5%	2.2%
81	Other Services (except Public Administration)	23,335	32,520	3.4%	3.1%
91	Public Administration	56,674	69,438	2.1%	2.9%
Services-Producing Industries (NAICS 41-91)		648,745	864,653	2.9%	2.1%

8. Trade winds shifted gradually over the decade though the US continued to dominate the export markets SIGNIFICANTLY

In 2008 a trend of diversification in Canada's export destinations continued, as reliance upon the United States was diminished. Although the United States still accounted for 77.7% of Canadian exports in 2008, this was down from 79.0% in 2007 and 86.7% in 1999. Non-US countries that saw their share of Canadian exports increase notably included Brazil and Asia Pacific countries (mainly Japan and South Korea). Exports to Brazil (not shown) were up 70.7% over 2007 levels, and Japan overtook China to become Canada's third most important export destination after the United States and the United Kingdom.

Top Export Destinations: 1999-2008 Canadian Economy (NAICS 11-91)
2008 Rank	Country	2008 Value in $ billions	CAGR* 1999-2008	% Change 2007-2008	% of 2008 Total Exports
						*Compound annual growth rate. Source: Statistics Canada, Canadian International Merchandise Trade, 1999 to 2008.
1	United States	375.5	2.0%	5.5%	77.7%
2	United Kingdom	13.1	10.5%	2.0%	2.7%
3	Japan	11.1	2.6%	20.3%	2.3%
4	China	10.5	14.7%	10.1%	2.2%
5	Mexico	5.8	13.7%	17.9%	1.2%
6	Germany	4.5	6.4%	15.3%	0.9%
7	South Korea	3.8	6.7%	27.5%	0.8%
8	Netherlands	3.7	9.0%	-8.5%	0.8%
9	Belgium	3.4	6.1%	14.7%	0.7%
10	France	3.2	5.5%	3.6%	0.7%
	Top Ten	434.6	2.6%	6.2%	89.9%
	Other Countries	48.9	9.4%	18.6%	10.1%
	All Countries	483.6	3.1%	7.3%	100.0%

9. On social measures, Canada continued to be a shining light

While one can be concerned about aspects of the economic parameters, on the social front, Canada continued to hold its high standing. Even though in perception, it lost its standing on the much-followed UN HDI, it scored higher than decade before and even though Canadian troops were doing duty in Afghanistan, Canada continued to be rated very high on measures of peace.

Parameter/Dimension	1999	2009
Canada’s rank on UN Human Development Index (across the world) – higher score is a better score. Methodology of measure: 3 dimensions of measures: · Life expectancy at birth, as an index of population health and longevity · Knowledge and education, as measured by the adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio · Standard of living, as measured by the natural logarithm of GDP per capita at PPP	1 (score of 0.932)	3 (score of 0.967)
Global Peace Index ranking (1st measured in 2007) – lower score is a better score. Methodology of measure: 23 indicators of the existence or absence of peace, which are divided into three broad categories: measures of ongoing domestic and international conflict, measures of safety and security in society and measures of militarization.	Rank: 8 (1.481) in 2007	Rank - 8 (score - 1.311)
Corruption Perception Index (Least corrupt country ranking) (Source: Transparency International) Measures the perceived levels of public sector corruption in 180 countries and territories. A composite index, the CPI is based on 13 different expert and business surveys.	6	9

10. The changing complexion of Canada gathered momentum over the decade

Ever since Canada opened its door to immigrants, the number of people immigrating to Canada has been on the rise. Canada’s growing social acceptance of diverse people, strong social infrastructure and relatively strong economic performance proved more attractive than its foreboding winters and the closed attitude at work towards recent immigrants. By 1996, there were 3.2 million visible minorities (Chinese, SE Asian, South Asians, Middle Eastern, Blacks and other clearly distinguishable folks) representing 11.2 % of the population, by 2001, there were 3.98 million visible minorities comprising 13.4 per cent of the total population and by 2006, 5,068,100 visible minorities accounting for 16 per cent of the total population.

Even beyond the visible minority story, the number and share of the foreign-born population in Canada has on the whole been rising from 1901 to 2006 and gathered momentum over the last decade. The census enumerated 6,186,950 foreign-born in Canada in 2006. By comparison, the 1901 Census counted fewer than one million foreign-born. This number gradually rose to almost 1.6 million people born outside Canada in 1911, to almost 2 million in 1921 and to 2.3 million in 1931. However, the foreign-born population fell over the war years. The 1941 Census showed 2.0 million in 1941, and that of 1951, 2.1 million. Since then, the foreign-born population has been growing steadily, rising from 2.1 million in 1951 to 2.8 million in 1961, to 3.3 million in 1971, to 3.8 million in 1981, to 4.3 million in 1991, to 4.9 million in 1996, to 5.5 million in 2001 and finally, close to 6.2 million in 2006. In 2006, 19.8% of the entire population was people born outside Canada. This is the highest proportion recorded since 1931, when foreign-born represented 22.2% of the population.