Carney predicted the growth rate would pick up through the end of 2009 and into 2010, essentially declaring an end to Canada’s first recession in 20 years. The BoC’s latest forecast is for 1.3 percent growth in the third quarter and 3 percent in the fourth. In its previous forecast in April, the BoC forecast the economy would shrink 1 percent in the current three-month period.

The recovery in consumer and business confidence, according to Carney is “unfolding a little faster” than the BoC anticipated. Nevertheless, in press conference remarks the central bank governor also cautioned that recovery “is not a foregone conclusion.”

As was alluded to in the central bank’s interest rate announcement two days prior, the economy remains dependent on massive government stimulus as well as the BoC’s conditional pledge to keep its overnight interest rate at a historically low 0.25 percent until mid-2010.

Carney also noted that employment is likely to lag, even deteriorate further, before businesses hire new workers. Decision-makers, confident now that recovery is on the horizon, will have to be shown that it’s a durable up-turn.

The BoC–criticized by many economists for its rosier-than-reality views leading up to and throughout the recession–sees Canada rebounding at more than twice the rate in the US, which it expects to grow only by 1.4 percent next year. Europe’s recovery will be even weaker, with 0.7 percent growth in 2010.

The strongest engine of global growth will be China, which the BoC expects to grow 8.3 percent next year, almost 200 basis points faster than predicted in the April Monetary Policy Report.

The BoC traces Canada’s quicker bounce-back to a rebound in commodity prices and the underlying strength of the domestic economy–specifically, a relatively stable financial system, the absence of a subprime-loan-driven housing implosion and a consumer base not saddled with an overwhelming debt burden. Also, wage growth north of the border has remained relatively healthy at 3 percent annualized, a pleasant surprise in the face of massive layoffs, falling inflation and production cutbacks.

The BoC sees future improvements for Canada’s export sector, which it says will disproportionately benefit from the US recovery starting next year. Just as Canadian exports of autos and wood products were hardest hit during the downturn, they’ll rise faster than other industries once demand returns in the US.

The Credit Crunch Is Over

Canadian Hydro Developers (TSX: KHD, OTC: CHDVF) shareholders face a simple question: Have credit markets eased sufficiently to allow the growing green power giant to fund its planned projects?

TransAlta Corp (TSX: TA, NYSE: TAC) first started sniffing around Canadian Hydro back in December 2008, when the pure-play carbon-free power generator was trading just north of CAD2. Back then, in the middle of the post-Lehman Brothers credit collapse, it was reasonable to assume Canadian Hydro would have difficulty securing financing for its planned projects. TransAlta’s CAD4.55 per share offer and the arguments it’s made directly to shareholders are all about providing a safe exit into the arms of a coal-and-natural-gas player with a strong balance sheet.

Canadian Hydro management, banking on credit markets calming and green power coming back into style, is resisted TransAlta’s initial overtures, and it’s turned down the recent formal offer.

This resistance should now pay off handsomely: Utilities are able to borrow at reasonable rates and passage of the Waxman-Markey energy and climate bill by the US House of Representatives signals the dawn of some form of North American cap-and-trade for carbon emissions credits. Canadian Hydro already has power purchase agreements for much of this still-potential output. Based on the track record, there’s little question they’ll deliver.

In this type of environment, Canadian Hydro’s assets will have significant value, to carbon emitters of all stripes–electrical power generators as well as perhaps oil sands producers looking to offset emissions.

TransAlta executives continued to pound the financing fears in conference calls with and presentations to Canadian Hydro shareholders. This is so six months ago. Canadian Hydro is now quite capable of raising capital on its own, and the company has hired FirstEnergy Capital and Societe Generale to seek better offers.

Responding to TransAlta’s bid, Canadian Hydro’s board “concluded that the TransAlta offer is inadequate and contrary to the interests of Canadian Hydro and its shareholders.” Canadian Hydro CEO Kent Brown, explaining to Dow Jones Newswires, noted “We are the largest pure-play renewable-energy company in Canada. We have the same investment-grade credit rating as TransAlta. We have a solid financial position and a track record of success.”

There is certainly risk involved with Canadian Hydro’s approach here, but the stock has already eclipsed CAD5. And the only way to find an offer bigger than CAD4.55 is to look for one.

A Little Something, You Know, For the Effort

Pope Benedict XVI has offered–several times, including yesterday–his views on the financial system meltdown and resulting global recession.

Now comes the Dalai Lama, expressing hope for a reordering of values while conceding his lack of understanding of the subject matter–which apparently leaves him in a class with just about everyone, academic economists, financial titans, global policymakers alike:

“Maybe this unfortunate crisis can be a lesson to start to think about other values of human beings, not only just money,” he told a predominantly student audience at Warsaw University.

“What have we learned? In money matters we need truth, honesty–transparency is very essential,” he said.

“Of course my knowledge, experience in the financial field is zero. Of course one, thing I know: money is important. Without money you can’t survive,” he said, chuckling.

Speaking Engagements

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The Roundup

Four Conservative Holdings have announced quarterly results in recent days, and the new numbers continue to support their inclusion in the CE Portfolio.

The patterns emerging in the US and around the world are to a large degree reflected in the CE universe, although the top-line growth picture seems a bit brighter in Canada than elsewhere.

We’ll continue to monitor and report on earnings announcements for all Portfolio recommendations and spotlight results for noteworthy How They Rate companies.

Colabor Income Fund (TSX: CLB-U, OTC: COLAF) reported a 1.8 percent increase in sales and a 5.8 percent increase in earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter. Net earnings rose 52.1 percent.

The company, which has been paying taxes at the corporate level since the January 2007 acquisition of Summit Food Service Distributors, distributed 68.7 percent of after-tax distributable cash to shareholders, down from 71 percent in the second quarter of 2008.

Organic sales growth in the wholesale segment was 4.4 percent; comparable sales in the distribution segment declined by 3 percent year-over-year, due mainly to weakness in the Summit division, which operates Ontario, a province hard hit by the economic downturn.

Colabor has already taken steps to deal with the downturn in Ontario as well as in Quebec, its two primary bases of operation, by freezing management salaries and cutting costs. However, the food distribution business is traditionally less affected than others by economic downturns, and management believes “that 2009 could generate interesting profit.” The company, with ample cash flow and access to credit, will continue to pursue opportunities to “increase its penetration of the food services market in Canada.”

Colabor Income Fund, which recently announced its conversion to a corporation while committing to maintaining its distribution, is a buy up to USD12.

Great Lakes Hydro Income Fund (TSX: GLH-U, OTC: GLHIF) reported second quarter revenue of CAD65.4 million and EBITDA of CAD33.5 million, year-over-year increases of 16 percent and 7 percent, respectively.

Generation for the second quarter was 1,271 gigawatt hours (GWh), up slightly from 1,260 GWh a year ago and consistent with a long-term average of 1,278 GWh. Generation from hydroelectricity was 1,149 GWh, down 9 percent compared to the exceptionally strong second quarter of 2008 but in line with a long-term average of 1,152 GWh. Hydroelectric generation in Quebec and New England remained strong, while Ontario and British Columbia were lower than long-term average due to less favorable hydrology.

Distributions to unitholders were CAD16.7 million (CAD0.31 per unit), consistent with the CAD15.1 million (CAD0.31 per unit) in the second quarter of 2008.

As at June 30, 2009, the fund had a strong liquidity position with cash and short-term investments, net of borrowing on its credit facilities, of CAD25.8 million, an increase of CAD21.4 million since the end of 2008. The fund has access to about CAD54 million of committed credit.

According to CEO Richard Legault, “The stable, long-term nature of (the fund’s) assets and contractual framework has largely insulated the fund from the ongoing economic challenges, while the major transaction and strategic repositioning that we recently announced will position the fund for continued success in the fast-growing renewable power sector.”

Great Lakes Hydro recently raised CAD185 million by selling more than 12 million subscription receipts, plus an additional CAD195 million through private placement sales to “certain institutional investors.” Proceeds will be used to buy 15 hydroelectric stations owned by Brookfield Renewable Power as well as a wind project currently under construction. Great Lakes Hydro Income Fund is a buy up to USD16.

RioCan REIT (TSX: REI-U, OTC: RIOCF) reported net earnings for the three months ended June 30, 2009 of CAD27.2 million (CAD0.12 per unit) compared to CAD44.8 million (CAD0.21 per unit) for the same period in 2008. Funds from operations (FFO) for the quarter was CAD67.9 million (CAD0.30 per unit) compared to CAD86.9 million (CAD0.40 per unit) a year ago. Excluding gains from properties held for resale, the decrease in FFO would be CAD1.6 million.

Decreases in FFO were offset by net operating income (NOI) from rental properties increasing by CAD7.1 million from a year ago. Same property NOI increased by 1.5 percent year-over-year.

As at June 30, 2009, RioCan’s indebtedness was 55.8 percent of aggregate assets; the REIT could incur additional indebtedness of approximately CAD664 million and still not exceed the 60 percent leverage limit set out in its declaration of trust.

The portfolio occupancy rate as at June 30, 2009 was 97.1 percent compared to 96.9 percent as at Dec. 31, 2008 and 97 percent as at June 30, 2008.

Approximately 714,000 square feet were renewed during the second quarter of 2009 at an average rent increase of approximately 7 percent, including anchor tenants, and approximately 9 percent, excluding fixed-rent options, compared to an average rent increase of approximately 4 percent, including anchor tenants, and approximately 5 percent, excluding fixed rent options, in the first quarter of 2009.

Rock-solid RioCan REIT remains a buy up to USD15.

TransForce (TSX: TFI, OTC: TFIFF) reported second quarter revenue of CAD454.2 million, down 24 percent from CAD595.6 a year ago on weak demand across all four business segments. Revenue excluding fuel surcharges was down 17 percent to CAD424.8 million. EBITDA was CAD59.8 million in the quarter, down from CAD66.9 million in the second quarter of 2008.

Net income for the period was CAD17.9 million (CAD0.21 per share), down from CAD19.3 million (CAD0.22 per share) a year ago.

“While volumes have declined, the company has largely sustained its EBITDA margin by maintaining our focus on cost savings and efficiency,” TransForce said in a statement accompanying the earnings release.

In the first half of the year TransForce lowered its debt level by more than CAD50 million; management reiterated a commitment to reducing debt by CAD100 million during 2009.

In a conference call to discuss the results, CEO Alain Bedard noted that volume in TransForce’s less-than-truckload segment “is down in the double-digits.” Although he characterized this as a “short-term event,” Bedard said he wasn’t sure when the company would start to see a pick-up in volume, though he is “cautiously optimistic that a bottom may have been reached.”

Efforts to preserve operating income focused on cost-cutting; TransForce shaved 26 percent off its operating expenses and 16 percent off its fixed and administrative costs year-over-year. A hiring freeze enacted in the first quarter will continue. TransForce is a buy up to USD6.

Here are tentative earnings announcement dates for the remaining CE Portfolio recommendations.

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 12
• Consumers’ Waterheater Income Fund (TSX: CWI-U, OTC: CSUWF)–July 30
• Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF)–August 6*
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–August 6
• 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
• 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 10
• 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 12
• 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 6

*Bloomberg estimate