A year ago, the Lehman Brothers implosion and John McCain’s response to it provided Barack Obama great material to close his case for change. It was the largest bankruptcy in US history–Lehman held more than USD600 billion in assets–but the Republican nominee coughed up the observation the “the fundamentals of the economy are strong.”

Yesterday, in observance of the one-year anniversary of The Filing Felt Round the World, President Obama visited Wall Street to ask the high-flyers to cooperate in their own wing-clipping. This task won’t be as easy as cutting the McCain footage into snappy 30-second campaign ad.

On one hand, recent economic reports suggest we’re progressing from the “green shoots” phase into actual growth. This morning, for example, the US Commerce Dept reported a 2.7 percent month-over-month jump in August retail sales. The headline number includes, of course, the impact of the federal government’s “cash for clunkers” program.

There can be little doubt now that government intervention–by fiscal as well as monetary authorities–has juiced the US economy, just as similar actions in other countries have boosted activity.

Fiscal efforts such as the USD787 billion package in the US and the USD585 billion in China have lifted activity well above what otherwise would have taken place, and central banks have pumped trillions of dollars of new money into the financial system over the past two years in an effort to prevent a depression.

The concern–still, at this point, more important than the specter of inflation–is what happens once these extraordinary measures are removed.

At the same time, there are still problems that require serious attention.  As a report from the Bank for International Settlements (BIS), the central banks’ central bank, suggests, all is still not well at the epicenter of the crisis.

The BIS said Sunday that interbank money markets are recovering to levels not seen since early 2008. However, although financial institutions are once again dealing with one another, they remain hesitant to extend credit to businesses.

Banks are benefitting from liquidity injections, but they’re speculating with the largesse, not lending it back to “the real economy.” The incentive structures left over from the pre-Lehman days still guide the banks; rosy quarterly numbers reported by banks are more the result of the revival of equity markets, and such trading profits are notoriously unreliable indicators of long-term health.

Here’s a nice summary of the top economists and financial experts who believe the economy won’t recover unless insolvent banks are broken up–a who’s who that spans the ideological spectrum–and those who appear to want to let theses too-big-to-fail institutions to get bigger. This group includes the names that matter right now: Bernanke, Geithner, Summers.

The BIS concluded in June that “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery.” The report added that government interventions had left certain banks believing they were, in fact, too big or too interconnected to fail and that government will inevitably save them.

The Obama administration, the Federal Reserve and governments and central banks around the world have difficult needles to thread on several levels: scaling back fiscal spending programs to restore budgets to balance; unwinding extraordinary liquidity provisions; crafting a regulatory framework that prevents a similar situation from happening in the future. 

This Week in Green Shoots

An updated Canada Mortgage and Housing Corp (CMHC) forecast for Alberta is a positive sign for the energy-focused province: CMHC is now calling for 3,000 new single family homes in Calgary in 2009 and 4,000 next year, a 33 percent jump in the forecast from a few months ago.  CMHC’s forecast is based on the view that higher average energy prices and more confirmed energy projects should continue to generate healthy immigration to Western Canada.

And Canadian payrolls actually increased by 0.2 percent in August, driven by gains in retail and wholesale trade and in financial services. This, however, is a piece of the good news/bad news genre of economic data to which we’ve become so accustomed lately: Full-time employment actually decreased for the month, but at least jobs were added.

This is further evidence that Canada has weathered this recession better than most because of its conservative financial system, its relatively healthy federal budget situation and its reliance on commodities.

Things on the employment front are better up north, but they’re not all bad here: The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey for July reveals an increase in hiring by private companies. The rate rose to 3.5 percent of total jobs from 3.3 percent. Companies are still getting rid of more workers than they are hiring, but this shows that the number of hires may finally be rising. Although the hiring rate remains lower than it ever was during the 2001 recession and its aftermath, the increase is another favorable sign.

Flaherty Cocks Potential Election Trigger

Canadian Finance Minister Jim Flaherty introduced a ways and means motion in Parliament Monday that could pave the way for the country’s fourth election in six years. The confidence vote on the motion, which contains items such as tax credits for home renovation and first-time homebuyers, drought relief for farmers and other minor tax measures, is scheduled for Friday.

We’ll have a full report on next week’s MLM.

Master Limited Partnerships Explained

Roger Conrad and Elliott Gue are a hosting a conference call on Sept. 17 at 1:00 pm EDT to outline the prospects for high-yielding master limited partnerships (MLPs) and explain the tax advantages (and intricacies) of these investments. Attendees will also have the opportunity to ask questions general questions about this security class and about specific MLPs.

Your registration also entitles you to a three-month free trial of MLP Profits, which covers high-yielding MLPs and includes sample portfolios for aggressive and conservative investors, advice on the tax treatment of MLPs and proprietary ratings of every name in the Alerian MLP Index.

This is your invitation to enroll today and join the discussion.

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

EnCana Corp (TSX: ECA, NYSE: ECA) announced a plan to split in two in May 2008 but delayed implementation in October after the global credit market froze. Management never abandoned the plan to separate; it only delayed action until credit got easier and cheaper.

Last week management announced that EnCana will become two companies. The natural gas business will keep the EnCana name and hold shale gas and other resource plays in the portfolio, including the Horn River and Haynesville Shale assets. The new EnCana will have 15.6 million acres leased, 12.4 trillion cubic feet equivalent of proved reserves and 3 billion cubic feet per day of production. Natural gas will account for 95 percent of production.

A new oil sands company, Cenovus Energy, will have 8.1 million acres and 1.2 billion barrels oil equivalent of proved reserves. The company will produce 248,000 barrels of oil equivalent per day, 55 percent of which will be natural gas. Cenovus will also have 226,000 barrels per day of refining capacity.

If you own one share of EnCana you’ll get one share in each company; the split should occur at the end of November 2009. EnCana Corp is a buy up to USD55.

Talisman Energy (TSX: TLM, NYSE: TLM) is planning a liquefied natural gas (LNG) production facility in Papua New Guinea, following its July acquisition of Rift Oil.

Talisman plans to combine its gas areas in Papua New Guinea with those of Rift and aggregate as much as 5 trillion cubic feet of reserves including those from acquiring stranded gas assets in adjacent blocks. The LNG facility will have capacity of 2 million tons to 3 million tons a year; drilling and pipeline may cost about USD1.67 billion. Talisman Energy is a buy up to USD15.

Real Estate Trusts

Crombie REIT (TSX: CRR-U, OTC: none) is raising CAD85 million via a bought-deal offering of convertible unsecured subordinated debentures through a syndicate of underwriters. The debentures mature June 30, 2015, and bear a coupon of 6.25 percent.

Each CAD1,000 principal amount is convertible into approximately 90.9091 units of Crombie at any time at the option of the holder at a conversion price of CAD11 per unit.

Crombie will use the net proceeds from this offering to repay debt and for general purposes. Crombie REIT is a hold.

Lanesborough REIT (TSX: LRT-U, OTC: LRTEF) has entered into an unconditional agreement to sell a 103,209 square foot office and retail complex in Winnipeg, Manitoba, for CAD18.35 million. The sale, scheduled to close October 1, is expected to result in net cash to Lanesborough of approximately CAD6.2 million. The REIT will use the cash to repay mortgage debt. Sell Lanesborough REIT.

RioCan REIT (TSX: REI-U, OTC: RIOCF) has acquired the interests of its partners Strathallen Capital Corp and Trinity Development Group in the first phase of RioCan Centre Vaughan, bringing its interest in the project to 100 percent. RioCan also purchased Trinity’s interest at RioCan Beacon Hill in Calgary, Alberta; it now holds a 50 percent stake.

The total cost for the two transactions was approximately CAD38 million. The 25-acre RioCan Centre Vaughan includes a 261,714 square foot new format retail center; the first phase is anchored by a Wal-Mart. RioCan REIT is a buy up to USD16.

Natural Resources

Barrick Gold (TSX: ABX, NYSE: ABX), making a large bet that the price of gold will continue to rise, is removing all of its gold hedges. The company will raise the CAD3 billion it will take to do it through an equity offering.

 “The gold hedge book has been a particular concern among our shareholders and the broader market which we believe has obscured the many positive developments within the company,” said Barrick CEO Aaron Regent.

According to company disclosures as of September 7 its gold sales contracts have a negative mark-to-market value of USD5.6 billion. If the contracts stayed on the books and the gold price went higher, those mark-to-market losses would only increase.

Barrick is also selling 25 percent of the annual production of its Pascua-Lama silver mine, which opens in 2012, for USD625 million Silver Wheaton Corp (TSX: SLW, NYSE: SLW). Barrick Gold is a buy up to USD35.

Information Technology

Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF) raised the size of preferred share offering by a quarter to 7.5 million shares, citing strong investor demand. Gross proceeds from the revised offering will total CAD187.5 million. The fund had announced the private placement of 6 million preferred shares to raise about CAD150 million to repay debt. Yellow Pages Income Fund is a hold.

Food and Hospitality

North West Company Fund (TSX: NWF-U, OTC: NWTUF) posted an 11 percent rise in second quarter income on strength at its discount stores and improved margins. The fund also boosted its quarterly distribution.

Net earnings for the quarter ended July 31 were CAD20.5 million (CAD0.43 per unit), up from CAD18.4 million (CAD0.38 per unit) a year ago. Sales rose 7.3 percent to CAD367.5 million. International sales rose more than 5 percent to CAD120.2 million.

Net capital expenditures for 2009 are expected to be about CAD64 million, compared with CAD49.4 million a year ago. North West said raised its quarterly payment 6.3 percent to CAD0.34 per unit, effective with the September payment due October 15. North West Company Fund is a buy up to USD16.

Transports

TransForce (TSX: TFI, OTC: TFIFF) is buying the Retail Solutions Division of ATS Andlauer Transportation Services LP, which management describes as “an excellent strategic fit with our existing Canpar and ICS Courier businesses.”