Lehman Brothers crumbled nine months after the official start of the current recession; here we are, another 12 months along, and individual investors are still looking for some sort of confirmation that the worst is behind us.

What was simply a credit crunch metastasized into a full-blown crisis when one of America’s five independent investment houses declared bankruptcy Sept. 15, 2008. The virtual cessation of lending hampered businesses’ ability to operate on a daily basis, costing people jobs. These people cut spending, leading to further curtailment of production. The recession that got started in December 2007 was on its way to becoming the worst economic downturn since the Great Depression.

The 57 percent decline in the S&P 500 from the all-time intraday high established Oct. 11, 2007, to the beastly low for the cycle plumbed March 9 erased many investors’ retirement savings. These people are still scared. Overcoming this instinctive reaction to what in many cases are literally tragic consequences of a market meltdown will take years. A lot of individual investors simply have nothing left. Others have permanently joined the “widows and orphans” subset, allergic to anything other than US Treasuries. It wouldn’t then be accurate to say these folks “missed” the post-March 9 rally.

There is, however, another group, one less susceptible to the vicissitudes of the market. If you’re part of this group, you may be waiting for “the bottom,” a clear, unequivocal point of entry for the next bull run that’ll carry you to retirement. As is the case with waiting for absolute confirmation that the worst is over, there will be no general announcement that the indexes will go straight up from here.

Calling bottoms, and tops, is uncertain business, even when the underlying economy isn’t as unsettled as the one we’re currently experiencing. You can, however, take advantage of dips to establish positions in companies that have held up during the downturn. Rather than embrace the fear, you can build some hope on the facts of solid quarterly numbers.

High-quality oil and gas producers, for example, the focus of the September 2009 Canadian Edge feature story, have cut expenses, paid down debt and employed aggressive strategies to get through the downturn. Many are now positioned to grow through acquisitions of smaller, less flexible companies and to capitalize on the normalization of economic activity. Focus on sustainability leaves many Canadian trusts and high-yielding corporations ready to pay post-Jan. 1, 2011, distributions equal to what they’re paying now as tax-advantaged entities.

The sheer fact of the market’s monumental decline is enough to overwhelm if you lose sight of the fact that it, like any other human endeavor is a constantly evolving process. At the same, time it’s possible to get lost amid all the information generated to measure or explain these changes.

For our part this week, we’ll leave you with one simple observation.

The collapse of Lehman Brothers ushered in what’s widely acknowledged to be the worst global credit crisis since the 1930s. It’s axiomatic that credit is the lifeblood of a capitalist economy. Signs that credit is circulating are therefore good.

According to Statistics Canada, Canadian household and corporate borrowing rebounded in the second quarter, spurred by lower interest rates. Household loans rose to an annualized pace of CAD98.3 billion between April and June from CAD70.1 billion in the first quarter, the first increase in a year. Non-financial company borrowing jumped to CAD62.2 billion from CAD14.6 billion on a spate of new bond issuance. Mortgage loans rose to CAD64.4 billion in the second quarter from CAD49.1 billion in the prior three months. According to StatsCan, companies took advantage of “favorable bond rates” and consumers borrowed to buy new homes and cars.

This is more evidence that efforts by Canada’s government and its central bank to support the country’s financial system are working.

It’s fair to wonder–in fact it’s in your interest–when this spring and summer of green shoots will turn into sustainable growth. As we’ve noted here since September 2008, a properly functioning credit system is the sine qua non of recovery. The second quarter numbers from Canada say its flowing again, pumped by the visible hands of elected officials or central bankers or not.

What’s November without an Election

Parliament won’t get back together until Monday, September 14, but gauntlets have already been laid by the main opposition Liberal Party and the ruling minority Conservatives have countered with variations of the “it’s not best to swap horses when crossing streams” argument.

Liberal Leader Michael Ignatieff plans to run against Harper’s “disappointing economic record” and recently promised to reduce Canada’s CAD50 billion federal budget deficit “without raising taxes.” He plans to offer Canadians “a more compassionate and more competent government.” Prime Minister Stephen Harper, meanwhile, plans to introduce a set of reforms for Canada’s unemployment insurance program.

These reforms would target long-tenured workers who lost their jobs during the recession,, improvements to job training programs, including potential extension of benefits for those needing more time to acquire job skills. According to Human Resources and Skills Development Minister Diane Finley, further expansion of the reduced work week and work sharing programs are also being examined, as is the idea of introducing more generous maternity and parental leave benefits.

A bipartisan committee established to address this issue during the summer recess was unable to come up with a recommendation. The House of Commons also agreed June 19 that the government would present a budget accountability report during the week of Sept. 28, and that the Liberals would have an opportunity to present a motion of non-confidence in the government three days after the report is presented.

The Liberals would need the support of the New Democratic Party and the Bloc Quebecois to defeat the minority Conservatives in a non-confidence vote. Neither party has indicated which way it will lean.

If the government is defeated, Governor-General Michaelle Jean would likely call an election. Under Canada’s elections law, the campaign would be at least 36 days long.

Backseat Issue

The effort to reform the US financial system was obscured by the bright political lights shining on the health care debate during Congressional recess. And tightening regulation of banks and capital markets may take time as health care dominates the fall season.

Let this little nugget, however, cast a little light on your reading of legislative efforts to tame the animal spirits. Simon van Norden, professor of finance at HEC Montréal (École des Hautes Études Commerciales), guest blogging at Econbrowser, takes a look at causes and consequences of three US financial crises, S&Ls in the 1980s, Long-Term Capital Management in the ’90s, and our current situation. He concludes:

Looking at recent events from this perspective, I still see the size of the losses as breathtaking, but the causes and dynamics seem much more familiar. What bothers me is that some of the suggested solutions sound pretty familiar too; make derivative trading more transparent, improve coordination among the regulators, give regulators more power to control systemic risk in new places, and so on. Despite that, not only was there another crisis, but it was much larger than the two previous crises combined.

Speaking Engagements

Roger Conrad is making the trip to the Great White North for The World MoneyShow Toronto, October 20-22 at the Metro Toronto Convention Centre.

Roger will, of course, discuss Canadian income trusts and high-yielding corporations as well as the utility universe. Click here to register and attend as his guest.

The Roundup

Oil and Gas

Suncor Energy (TSX: SU, NYSE: SU) and Petro-Canada have completed their merger. The combined company is Canada’s largest energy company and the fifth-largest North America-based energy company by market value. The company will operate and and trade under the Suncor Energy name and will maintain the Petro-Canada brand for its refined products and national retail network.

The combination is expected to result in an annual reduction of CAD1 billion in capital spending as overlapping efforts are eliminated. Management expects another CAD300 million in savings from reduced operational expenditures. Suncor Energy is a hold.

Gas/Propane

Superior Plus Corp (TSX: SPB, OTC: SUUIF) is buying a retail heating oil and propane distribution business from Sunoco (NYSE: SUN) for USD82.5 million in cash plus working capital. The deal is expected to be immediately accretive to cash flow.

Sunoco Retail Heat serves markets in Pennsylvania and New York; its distribution network includes the operation of two pipeline-supplied fuel terminals and 22 retail bulk plants providing up to 20 million gallons of storage capacity. In 2008, Sunoco Retail Heat delivered approximately 160 million gallons of heating oil, gasoline, diesel fuel, kerosene and propane to 97,000 residential and commercial customers.

Superior is offering 3.97 million common shares at CAD11.35 per on a bought-deal basis through an underwriting syndicate; proceeds–approximately CAD45 million–will be used to cover the Sunoco deal. Superior will fund the remainder of the transaction cost through its CAD570 million credit facility. Superior Plus Corp is a buy up to USD12.

Business Trusts

IBI Income Fund (TSX: IBG-U, OTC: IBIBF) has amended its credit facility, increasing the amount available from CAD100 million to CAD150 million and extending the term to Aug. 31, 2012. IBI Income Fund is a buy up to USD15.

Real Estate Trusts

Cominar REIT (TSX: CUF-U, OTC: CRXIF) is selling CAD100 million of 6.5 percent convertible unsecured subordinated debentures on a bought-deal basis through a syndicate of underwriters. Proceeds will be used to pay down an existing credit facility, which was used to finance Cominar’s acquisition and development activity. The debentures will mature Sept. 30, 2016.

The stability of the Quebec market was demonstrated in Cominar REIT’s second quarter results; it remains a buy up to USD14.

Morguard REIT (TSX: MRT-U, OTC: MGRUF) is offering on a bought deal basis CAD90 million of 6.5 percent convertible unsecured subordinated debentures with a maturity date of Sept. 30, 2014. The debentures are convertible, at the option of the holder, into Morguard units at CA14 per.

Proceeds from the offering will be used to reduce the amount outstanding on the REIT’s credit facility, to fund future acquisitions and for general purposes. Morguard REIT is a buy up to USD12.

Natural Resources

Cameco Corp (TSX: CCO, NYSE: CCJ) is opening an office in India under the guidance of Dr. Chaitanyamoy Ganguly, who has held senior executive positions with International Atomic Energy Agency and India’s Dept of Atomic Energy.

India gets less than 3 percent of its energy from nuclear power but plans to more than double its current capacity to 10,000 megawatts by 2012. Domestic uranium deposits of an estimated 70,000 to 100,000 tons are too little and of too poor a quality to support the needs of a fast-growing economy with more than a billion people.

Cameco, which already sells some uranium to China, is also negotiating with a long-term supply agreement with representatives of the Chinese government. Cameco management estimates that China is constructing 13 nuclear reactors; boosting its nuclear generating capacity to 75 gigawatts by 2030 from 9 gigawatts today will require China to establish a stable supply of fuel. Cameco also expects South Korea and Japan to build more nuclear reactors and to try to negotiate long-term supply agreements. Cameco Corp is a buy up to USD30.

Financial Services

CI Financial (TSX: CIX, OTC: CIFAF) reported gross sales of CAD534 million and net sales of CAD65 million and posted its sixth consecutive month of asset growth in August. Assets under management as of Aug, 31, 2009, were CAD62.9 billion, an increase of CAD1.3 billion, or 2.1 percent, for the month.

Subsidiaries CI Investments and United Financial Corp had combined retail net sales of CAD76 million in long-term funds and CAD11 million in redemptions in money market funds for the month. CI Financial is a hold.

Health Care

Extendicare REIT (TSX: EXE-U, OTC: EXTEF) is out from under the shadow of a lawsuit in Wisconsin, as a judge in Milwaukee County Circuit Court ruled that a class action lawsuit brought against its US subsidiary was improper and ordered the case dismissed in its entirety. The lawsuit was originally filed Nov. 14, 2008, as a copycat lawsuit to two other lawsuits that were similarly dismissed by federal courts in Washington and Minnesota. Hold Extendicare REIT.