On his way to London for a summit of G20 leaders, Canadian Prime Minister Stephen Harper made stops in Washington, DC and New York to tout his ideas to fix broken banks and maintain free trade.

Among his many public statements in recent days, the prime minister appeared on the DC-originating Fox News Sunday broadcast with Chris Wallace and also gave interviews to Bloomberg News and the Financial Times.

Mr. Harper’s discussion with Mr. Wallace focused initially on Afghanistan and Canada’s continuing role before transitioning to the global economy. Mr. Wallace wondered how the conservative prime minister felt about the increasing role of global governments in the repair of the economy:

Wallace: Now, you’re a conservative. A lot of conservatives in this country say if you get the government too involved, you squeeze out all the innovation, all of the risk taking, that’s so important to a free market system.

Harper: Well, and that–that’s a risk. And you know, I think we have got a pretty decent balance in Canada where we have good macro prudential regulation but we don’t try and micro manage financial systems.

But I–I would say this as a conservative, if I–if I can be frank. It’s great to say, “Let’s have less regulation in principle and less intervention in the marketplace,” but where has that led us, Chris, in many countries?

It’s led us to a situation where the government is, in fact, intervening massively as a consequence of under regulation, and where we now have, effectively, in many countries, nationalization of the financial system.

I know in Canada there have been some criticisms in the past that we were perhaps too activist, intervening too much, but we’re emerging from this with probably the only truly free market financial system in the world.

So I think, you know, a happy medium of regulation is the way to go.

Mr. Harper’s central message: The global recession cannot end unless the financial system is repaired and global flow of goods resumes. The prime minister told Bloomberg he expects “a fair degree of consensus” for tougher rules on financial markets to emerge in London. His approach would emphasize national regulators rather than the international regulators some European countries favor.

G20 leaders will consider recommendations by a working group on regulation, which Canada co-chaired. These recommendations include calls for more oversight of hedge funds as well as a system-wide approach to reduce excessive risk-taking. Canada’s preference, supported by the US, is for a strong national regulator with an “international peer review” system.

The G20 working group proposed that each country establish mechanisms to gauge the stability of its respective system and allow government to intervene if actions by particular firms pose systemic risk. Canada’s existing bank regulator, the Office of the Superintendent of Financial Institutions, would assume the lead role the new framework, and its model may serve an appropriate template for other nations to follow.

January GDP

The Organization of Economic Cooperation and Development (OECD) issued a statement today suggesting that, while the Bank of Canada and the federal government have done much to combat spiraling economic activity, the country has the monetary and fiscal flexibility to do more.

Those observations, coupled with news from Statistics Canada that the economy shrank by 0.7 percent in January, as well as Mr. Harper’s emerging G20 leadership role, indicate he’ll be an important ally in London for President Obama.

Canada’s economy will shrink at an 8.5 percent annualized pace in the first quarter, the largest decline since at least 1961, the head of parliament’s budget office said March 25. Bank of Canada Governor Mark Carney is likely to reduce the BoC’s outlook for the economy, which included a forecast for a 1.2 percent drop in output in 2009, in his biannual Monetary Policy Report due in late April.

Big Five Bonanza

During his conversation with the FT, Mr. Harper recommended that Canada’s banks take advantage of the relative strength of their balance sheets by acquiring assets in the US and other countries.

Canada’s Big Five–Royal Bank of Canada (TSX: RY, NYSE: RY), Toronto-Dominion Bank (TSX: TD, NYSE: TD), Bank of Nova Scotia (TSX: BNS, NYSE: BNS), Bank of Montreal (TSX: BMO, NYSE: BMO) and Canadian Imperial Bank of Commerce (TSX: CM, NYSE: CM)–have stayed profitable and maintained dividends throughout the collapse of financial markets in other developed countries, and all five now rank among the 50 largest banks in the world.

The prime minister suggested Canada’s banks could lead an eventual consolidation, and said he would support such efforts as “an opportunity for Canada to expand its role in the world financial sector.”

“I’m not going to try running banks, but I hope our banks will see this as an opportunity to build the brand–the country’s brand, their own brand–and to expand their scope and profitability over time,” Mr. Harper said. “I can assure you that the steps we’re taking in the financial sector will not be designed to promote greater protectionism.”

Speaking Engagements

There are few better places to combine work and play than Sin City: Join Canadian Edge, Editor Roger Conrad and The Energy Strategist Editor Elliott Gue for The Money Show Las Vegas, May 11-14, 2009, at The Mandalay Bay Resort & Casino.

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And make plans to join Roger, Elliott, Gregg Early and Benjamin Shepherd at the 18th Atlanta Investment Conference. Sponsored by Friends for Autism, the conference is held in a mountain setting north of Atlanta from Thursday, April 23, to Saturday, April 25.

Roger, a steady hand through many market events such as the one we’re dealing with now, will talk about Canadian income and royalty trusts as well as his new service focused on exploiting the greatest spending boom in history, New World 3.0.

Elliott will detail the new direction for Personal Finance and provide insight into his approach to stock selection and portfolio management. What’s required now amid these difficult times are clarity and focus, qualities Elliott has demonstrated in these pages and through The Energy Strategist for years.

Gregg, a constant at PF for nearly two decades, will be there to address recent developments with the publication. He’ll also discuss the Smart Grid, an endeavor he’s exploring as part of his role with New World 3.0.

Ben, editor of Louis Rukeyser’s Mutual Funds and Louis Rukeyser’s Wall Street, the in-house mutual fund expert, will discuss efficient, cost effective ways to simplify the investing process.

Be sure to bring your questions. These guys love to talk markets and everything that impacts them.

Attendance is limited to 175 of the most enlightened, savvy individual investors. Go to http://www.aicatchota.com/ for more information. Meals are included for the Maple Leaf Memo discounted price of $459 for a single and $599 for couples. Call 770-952-7861 or e-mail altinvestconf@mindspring.com to register.

The Roundup

Conservative Holdings

Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF) reported a 29 percent increase in distributable cash for 2008, from USD80.1 million to USD103.7 million higher project income as well as positive impacts from non-recurring cash flows such as the release of debt service funds related to its Pasco project and reduced working capital at Onondanga.

The company declared distributions of USD61.3 million (USD1 per IPS) for an annual payout ratio of 59 percent.

In the fourth quarter, Atlantic distributable cash declined to USD37.2 million from USD42.3 a year ago; in the period ended Dec. 31, 2007, the company realized a significant tax refund. It paid out USD13.4 million (USD0.22 per IPS) for a quarterly payout ratio of 36 percent.

Management reiterated its forecast that cash on hand and projected future cash flows from its projects will be sufficient to meet the current distribution level, which was increased 3.2 percent in the fourth quarter, until 2015. That guidance doesn’t take into account potential growth through acquisitions or organic growth.

Atlantic issued guidance for distributions from its 15 projects in the amount of USD90 million to USD95 million for 2009, which represents a decrease of about USD30 million to USD35 million from 2008 levels. The decrease won’t impact the company’s ability to pay distributions, however, and has been included in management’s long-term cash flow projections. The decrease is based largely on expiring contracts and one-time items.

Atlantic Power Corp is a buy up to USD10.  

Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF) reported 11.4 percent growth in fourth quarter revenue over 2007 levels. That was somewhat below the 37.5 percent full year growth rate. But it reflects the continued strong health of the company’s contracting business, which increased order backlog by 14 percent last year to a record CAD1.1 billion. Bird increased fourth quarter earnings per unit by 28.4 percent.

The trust has also virtually eliminated debt while doubling its working capital–a key element for winning contracts–to CAD83.5 million as of the end of 2008.

Management expects a tougher year in 2009, mainly because of an expected slowdown in construction work in the energy patch. In fact, the company suspended work on a project for oil sands giant Suncor Energy (TSX: SU, NYSE: SU) earlier this month, as the latter pulled in its horns to deal with tumbling energy prices.

Fortunately, the amount of collectible revenue left on the contract was minimal (roughly CAD20 million) and clearly not a material threat to Bird’s balance sheet or its earnings. But it does illustrate a tough environment, where new stimulus spending on infrastructure by Canada’s federal and provincial governments is likely to be offset by private sector weakness.

This is the negative business trend Bird shares overreacted to last year, when its share price fell by more than three-quarters from mid-year highs. We were able to add the trust to the Conservative Holdings virtually at its nadir in December, and it’s since rebounded roughly 80 percent from our entry point.

The question now is whether Bird shares are fairly or even over-priced, relative to the risks to the trust’s business and its ability to withstand them. Given the fourth quarter numbers, the answer appears to be the shares are still cheap, despite their recent surge.

For one thing, business still looks very good despite the slowdown. For another, Bird shares are still at half their highs of last summer, despite becoming arguably a more valuable company since then. The price-to-earnings ratio based on trailing 52-week profits is only 5 and the shares sell for roughly 30 percent of sales. Finally, every analyst covering the company on Bay Street is bullish on its prospects.

Bird Construction Income Fund is a solid buy up to USD20.