In its statement announcing the decision, the BoC noted that, although the global economy has experienced an “an intense, synchronous recession,” there are now “increasing signs that economic activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system.”

Efforts by fiscal and monetary authorities, a more stable financial system and a rebound in commodity prices have combined to lift consumer and business sentiment, although a relatively strong Canadian dollar continues to hamper to overall rate of economic growth.

Much of the pre-announcement scuttlebutt focused on how the central bank would address the currency situation, but the BoC’s tone on the loonie was much softer than it was a month ago, when it noted, “the unprecedentedly rapid rise” in the currency could “fully offset” positive factors.

The loonie has rebounded lately, but this rally isn’t as significant as the one that preceded the June rate announcement. While its specific statement on the loonie didn’t vary much from what was written in June, the BoC didn’t identify the specific factors driving its recent appreciation.

On the heels of last week’s relatively rosy Business Outlook Survey and Senior Loan Officer Survey, the BoC’s more upbeat tone is not surprising, though the central bank is more bullish now in its growth outlook.

In April, when it took the overnight down to 0.25 percent and set the stage for the possible implementation of extraordinary monetary efforts such as so-called quantitative easing,” the BoC forecast the Canadian economy would contract by 3 percent in 2009 and a “more gradual” recovery would take hold in the fourth quarter. The central bank forecast growth of 2.5 percent in 2010 and 4.7 percent in 2011.

Today, the BoC sees the Canadian economy shrinking by 2.3 percent in 2009 and growing by 3 percent in 2010. Though clearly an upgrade from where Mark Carney and company were before, and they’re now well above private economists’ consensus expectation, this optimism isn’t unbridled.

The early signs of strength in Canadian domestic demand, for example, “represents the bringing forward of household expenditures.” In other words, recent housing figures and evidence of an up-tick in auto sales may not be durable because they were supported by certain incentives introduced by policymakers.

And the BoC will continue to provide additional liquidity through its purchase and resale agreements (PRA). This program–the central bank buys securities from a chartered bank and agrees to sell them back to sell them back to the bank the next day, putting cash into the system, boosting money supply and holding rates down–seems to be winding down of its own.

The central bank last week couldn’t find buyers to fully take up a PRA for the first time since it resumed the auctions in September last year. Today’s auction had CAD500 million of transactions, half the CAD1 billion offered. In another sign that credit is easing, the BoC’s term loan facility has seen no transactions for 25 consecutive auctions.

“Conditions in funding markets have continued to improve,” the central bank said in a statement announcing the new schedule of PRA auctions. “The Bank of Canada remains committed to providing liquidity, as required.”

The BoC moved its overnight rate target to its “effective lower bound” in April and announced at the same time a plan to basically print money. This was before “green shoots” became a 30-million-plus Google hit, when such extraordinary and unconventional credit and liquidity measures seemed reasonable.

At least as far Canada’s central bank is concerned, policy responses–monetary as well as fiscal–have helped the economy bounce back from what in early spring, so soon after Lehman Brothers, seemed like oblivion. Lending is improving; people are spending more. But these are qualified positives–only better compared to what was before, only capable of enduring with continued help.

According to the BoC, “Effective and resolute policy implementation remains critical to sustained global growth.”

The Green Wave

In a post Waxman-Markey world, carbon-free power generating assets have a lot of value, a proposition validated by yesterday’s announcement of TransAlta Corp’s (TSX: TA, NYSE: TAC) CAD4.55 per share all-cash offer to acquire Canadian Hydro Developers (TSX: KHD, OTC: CHDVF).

TransAlta will make the offer directly to shareholders after Canadian Hydro’s board rejected friendly negotiations.

Canadian Hydro has developed, owns and operates 21 renewable energy generation facilities in Canada with a net 694 megawatts (MW) of capacity in operation, 185 MW in and nearing construction, and 1,624 MW in development. Its portfolio includes three technologies–water, wind and biomass and is spread around Alberta, British Columbia, Ontario and Quebec.

The capacity of a combined TransAlta/Canadian Hydro would be 8,657 MW, with about 22 percent coming from renewables.

TransAlta sees an opportunity because it believes Canadian Hydro will have difficulty securing financing for CAD1 billion worth of projects in development.

It makes sense as well because Canada is likely to follow the US’s lead on regulating greenhouse gas emissions. TransAlta has a lot of coal assets that generate pollution; Bloomberg reported last year that it’s Canada’s biggest carbon dioxide emitter. Canadian Hydro’s assets would provide an offset should Canada pass some form of cap-and-trade or other carbon tax. If the acquisition proves as accretive to earnings as management forecasts, shareholders will be doubly pleased.

While Canadian Hydro must enter a still-tight credit market to fund its growth, it already has power purchase agreements in place for that CAD1 billion in development. And the same carbon-free characteristics that make it attractive to TransAlta make it attractive to other potential suitors.

Canadian Hydro certainly believes so, as it issued a statement last night advising shareholders “not to take any action until further notice” from its board of directors. As it must, the board has formed a committee to study the offer; after TransAlta commences its offer on July 22, the board will issue its opinion.

Hyperbolic Transparency

You want transparency? Neil Barofsky’ll give you some transparency:

Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program set up by the Treasury Department, came up with the largest number yet in testimony prepared for delivery Tuesday to a House committee. “The total potential federal government support could reach up to $23.7 trillion,” he stated.

As Floyd Norris suggests, this is a little too much bloody transparency:

But in the report accompanying his testimony, Mr. Barofsky conceded the number was vastly overblown. It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

It also assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

Of course,

The sheer unreality of the number did not stop some members of Congress from taking the estimate seriously.

Speaking Engagements

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Venture west for the San Francisco Money Show Aug. 21-23, 2009, at The San Francisco Marriott and discover how Roger Conrad, Elliott Gue and GS Early can help you profit in these adventurous times.

Roger will discuss utilities, 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 his forecast on energy markets for 2009. GS, a constant at PF for two decades, will be there to speak on emerging tech, nanotech and defense tech.

Click here or call 800-970-4355 and refer to priority code 014310 to register as a guest of MLM.

The Roundup

Oil and Gas

Advantage Energy Income Fund is now Advantage Oil & Gas (TSX: AAV, NYSE: AAV); the former’s trust units have been de-listed from both the Toronto Stock Exchange and the New York Stock Exchange, and the common shares of the latter are now trading under the symbol AAV on both boards. Sell Advantage Oil & Gas.

Bonavista Energy Trust (TSX: BNP-U, OTC: BNPUF) is buying 400,000 acres of natural-gas weighted properties in central Alberta from EnCana Corp (TSX: ECA, NYSE: ECA) for CAD694 million.

The properties are currently producing approximately 11,400 barrels of oil equivalent per day (boe/d), including 53.2 million cubic feet per day (MMcf/d) of natural gas, 2,150 barrels per day (bbl/d) of natural gas liquids and 380 bbl/d of light oil.

Bonavista will fund the acquisition with bank debt and through the issuance of subscription receipts; in conjunction with the asset purchase, the trust has also executed an agreement to sell 23 million subscription receipts on a bought-deal basis for CAD16.85 each for proceeds of CAD388 million. Each subscription receipt represents the right to receive one trust unit on the closing of the acquisition.

Bonavista is also negotiating to increase its available credit line by up to CAD400 million while maintaining the same maturity and financial covenants of its existing facility. Bonavista has secured CAD150 million of commitments in this regard. The trust would have up to CAD1.4 billion in available credit to fund ongoing capital spending. Bonavista Energy Trust is a buy up to USD18. EnCana Corp is a buy up to USD55.

Natural Resources

First Quantum Minerals (TSX: FM, OTC: FQVLF) reported copper production of 92,600 ton for the second quarter of 2009, a 14 percent year-over-year increase. Copper production for the first six months of 2009 totaled 182,100 tons, up 16 percent from 156,600 tons during the first six months of 2008. First Quantum Minerals is a buy up to USD50.

Noranda Income Fund (TSX: NIF-U, OTC: NNDIF), citing reduced demand for and production of sulphuric acid and zinc, has “suspended” its monthly cash distribution. The fund has been operating at 80 percent of 2008 levels due to weak market conditions, dealing a severe blow to cash flow.

Noranda’s board of trustees approved the suspension “until there is an overall improvement in the economic outlook.” The fund will provide more details when it releases second quarter earnings July 30. Sell Noranda Income Fund.

SFK Pulp Fund’s (TSX: SFK-U, OTC: SFKUF) lenders agreed to extend until July 22, 2009, a temporary waiver granted for SFK’s breach of the interest coverage ratio provided under its credit agreement. The fund continues to negotiate a permanent amendment to its credit agreement. Sell SFK Pulp Fund.

Energy Services

Eveready (TSX: EIS, OTC: EVRDF) shareholders have approved the acquisition of the company by a wholly owned subsidiary of Clean Harbors (NYSE: CLH).

Holders of Eveready common shares will receive, for each share held, CAD3.30 in cash and 0.1304 of a Clean Harbors common share. Sell Eveready.

Peak Energy Services Trust (TSX: PES-U, OTC: PKGFF) has sold its wireline assets for CAD5.75 million to an undisclosed third party. Peak noted “the increased competitive nature of this business line and the lack of current, near-term and future expected industry activity that will continue to diminish the returns being realized by Peak in this business unit.”

Proceeds from the disposition will be used to pay down long-term debt. Peak will continue to sell assets it considers “non-core” in order to focus on assets that will generate “appropriate” rates of return. The trust expects to incur a one-time accounting impairment loss on the sale of approximately CAD12 million in the second quarter. Peak Energy Services Trust is a hold.

Food and Hospitality

PDM Royalties Income Fund (TSX: PDM-U, OTC: PDMRF) is converting to a corporation via an arrangement with privately held Imvescor, which acts as the franchiser for PDM’s restaurant brands. The new publicly traded company would be called Imvescor Restaurants.

PDM currently owns the Pizza Delight, Mikes, Scores and Baton Rouge restaurant brands and licenses them to Imvescor, which runs four corporate restaurants and franchises out the other 255 restaurants in the royalty pool.

PDM also announced a reduction in monthly distributions to CAD0.05 per unit effective with the July 21 payment. The reduction is designed to allow the company to reduce debt, cover operational and growth costs and help finance the cost of the conversion.

Following completion of the conversion transaction the company “is expected to adopt a cash management policy that will enable the company to pay regular dividends in order to provide a significant level of current income to shareholders.” Hold PDM Royalties Income Fund.

Transports

Contrans Income Fund (TSX: CSS-U, OTC: CSIUF) won’t pay a second quarter distribution. Contrans suspended its monthly distribution of CAD0.0104 in March, opting to pay on a quarterly basis rather than monthly. It said at the time that it would announce a payment for the second quarter ended in June and would consider quarterly distributions after that.

A press release announcing the decision stated, “After a review of the fund’s performance to date in 2009, and the current business environment, the board of trustees has decided not to declare a distribution at this time.” Sell Contrans Income Fund.

Here are tentative second quarter earnings announcement dates for Canadian Edge Portfolio companies.

Conservative Holdings

• AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF)–August 5
• Artis REIT (TSX: AX-U, OTC: ARESF)–August 12
• Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF)–August 11
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–July 30
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–August 7*
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–August 11
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–August 7*
• Colabor Income Fund (TSX: CLB-U, OTC: COLAF)–July 24*
• Consumers’ Waterheater Income Fund (TSX: CWI-U, OTC: CSUWF)–July 24*
• Great Lakes Hydro Income Fund (TSX: GLH-U, OTC: GLHIF)–July 27
• Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF)–August 6*
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–August 7*
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–August 5
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–August 5
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–August 6
• Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF)–July 29
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–July 27
• TransForce (TSX: TFI, OTC: TFIFF)–July 23
• Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF)–August 6

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–August 12
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–August 7
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–July 29
• Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF)–August 6*
• Enerplus Resources (TSX: ERF-U, NYSE: ERF)–August 7*
• Newalta Income Fund (TSX: NAL, OTC: NWLTF)–August 6*
• Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF)–August 7*
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–August 12
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–August 6*
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–August 13
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–August 11
• Vermilion Energy Trust (TSX: VET-U, OTC: VETMF)–August 10*

*Bloomberg estimate