As we got deeper into the companies we cover, we also developed a better understanding of Canada’s financial system, what makes its economy tick, the way its government works.

What we’ve learned is that an effective regulatory structure on top of deposit-focused banking, the good fortune of abundant resources, and a decade of balanced federal books puts a country in good position to outperform during this unfolding recovery as well as to withstand a second-half 2010 relapse by the US into recession. (And this–a “double-dip” recession–is, as even those guys touted for their dourness acknowledge, less-than-even possibility. Elliott Gue has the history, which suggests more “remote” than “less-than-even.”)

Now, Canada is actively pitching its story to the rest of the world, on one hand in a subtle way consistent with its modest reputation, on the other with pointed comments by officials about fiscal sanity.

In a move at least in part intended to draw attention to the many favorable characteristics Canada boasts in the global economic context, the federal government plans to issue a euro benchmark bond of at least EUR1 billion. It’s a ripple in the global scheme of things, but there important repercussions for the issuer.

According to Bloomberg News, the sale will be managed by a syndicate including France-based BNP Paribas (France: BNP, OTC: BNPQF), Switzerland-based Credit Suisse Group (NYSE: CS), Germany-based Deutsche Bank (NYSE: DB) and London-based HSBC Holdings (NYSE: HBC). A banker involved with the deal told Reuters that it will be a 10-year issue; a second banker said it will be priced later this week.

The Department of Finance said the proceeds of the euro bond issue would help “further diversify” the government’s foreign-exchange reserves. Doing so now, while the Canadian dollar is strong relative to the euro, also means its cost of capital will be lower. The value of these new bonds could approach the USD3 billion Canada raised in a September 2009 US dollar denominated offering, which was done to satisfy International Monetary Fund requirements.

This new issue, however, marks the first time Canada is making an initial bond offering in euros. Canada last tapped the European bond market in 1998, issuing deutsche mark bonds and franc-denominated medium-term notes. Both issues were redenominated into euros in 1999.

It’s certainly not an absolute good that Canada is tapping foreign lenders so it can keep up day-to-day government functions. But, after more than a decade of budget surpluses, a sound fiscal position means it can do so cheaply. There are certainly no questions about Canada’s credit quality; Standard & Poor’s gives the country its highest investment-grade ranking, AAA, while Moody’s Investor Service also hands Canada its top mark, Aaa.

At the same time, going abroad to issue debt gets the Canada story in front of new investors. Rising commodity prices and expectations that it will lead economic growth among the G-7 in 2010 are already raising Canada’s profile. This is reflected in the continuing rise of the loonie, which hit its highest point since October 19 this morning at 96.46 US cents.

Were it the intention of Canadian officials to clip the loonie’s wings, the central bank would have simply sold Canadian dollars in exchange for other foreign currencies; it could have intervened to slow the currency’s rise at the same time it diversified its foreign reserves. They chose not to do so, which is loonie-bullish, in the sense that they implicitly rejected intervention.

Currency effects did wonders for Americans owning Canadian assets in 2009; the reasonable case is that the loonie has room on the upside based on what the early evidence suggests will be the nature of the global economic recovery. Canada’s economy and its currency are, now more than ever, resource-based.

The price of oil, based on new demand from emerging economies, has reached a permanently higher range that favors countries, like Canada, with significant exploitable reserves. A new demand profile, altered to account for rising China and India, will help keep the loonie in the greenback’s neighborhood; if all the contributors to that demand profile get back to normal growth in the year ahead we’re looking at parity and beyond.

Finance Minister Jim Flaherty laid a message a little less subtle than a euro-bond offering in highlighting Canada’s attractions relative to its developed-market peers during an interview with Bloomberg News just before Christmas.

Remarking on the possibility that large foreign currency reserve holders will diversify away from the US dollar, he said, “It does not surprise me that China and Russia would take greater positions in the Canadian dollar than they have previously. I would expect countries looking around the world to invest in market currencies that are reliable.”

China, in particular, revealed quite an appetite for Canadian assets in 2009, particularly commodities. PetroChina, China’s largest oil company, stepped into the oil sands with a CAD1.9 billion deal for 60 percent of a project run by Athabasca Oil Sands Corp, and China Investment Corp (CIC), the country’s primary sovereign wealth fund, paid CAD1.7 billion for a 17 percent stake in Canada’s biggest base-metals producer, Teck Resources (TSX: TCK-B, NYSE: TCK).

In December, Prime Minister Stephen Harper, finally acknowledging the necessity of building ties with what’s emerging as a primary driver of global economic growth, traveled to China to secure the Middle Kingdom as a customer for Canadian oil, natural gas, uranium and other commodities well into the future.

If this Chinese hunger for Canadian assets extends and the country shifts, say, 2 percent of its foreign reserves into Canadian dollars, it would mean about CAD100 billion of currency flows into Canada, according to David Watt, senior currency strategist at RBC Capital Markets. That, too, would keep the loonie flying.

Setting aside the events of Halloween 2006 and the question of his integrity, Flaherty is right that investors will seek reliable vehicles for their capital. More and more are looking to the Great White North.

A Visible Hand

The National Association of Realtors (NAR) reported today that pending home sales fell 16 percent in November, which sounds like horrible news when you read it in an e-mail subject line, for example. Depending on your views on government involvement in the economy, the story below the headline is either catastrophic or hopeful.

“Pending home sales” is a measure of the number of contracts signed to buy previously owned US homes. Another measure, existing home sales, tracks the number of closings that take place in a given month. Closings typically occur a month or two following sales-contract signings. Therefore, pending home sales is often viewed as a leading indicator, the number of contracts being a harbinger of one-month or two-months-ahead real estate sales.

Existing sales actually climbed 7.4 percent in November to an annualized rate of 6.54 million homes, the quickest pace in three years. So what explains this dichotomous news from the NAR? While the government do take a bite, in this case it’s giving, at least to the real estate market: Before President Obama signed into a law a bill extending it on Nov. 6, 2009, the deadline to purchase a home and qualify for the federal government’s first-time homebuyer tax credit–based on closing–was Nov. 30, 2009.

Expect pending sales numbers for December to bounce, thanks to a very visible helping hand. The extension allows closings to occur by the end of June as long as contracts are signed by the end of April.

Quote of the Day

“Maybe 4% isn’t such a puny yield in an economy that is still gripped with serious pockets of deflation.” — Gluskin Sheff + Associates Chief Strategist David Rosenberg, in his January 5 “Breakfast with Dave” commentary

The Roundup

News for the week past was light, save the electrifying opening to the 2010 trading season. The S&P/Toronto Stock Exchange Income Trust Index and the broad S&P/TSX Index continued the party into today, even while the major US indexes struggled to stay green.

Below we round up the few items that did perk up during the latter stages of the holiday season and present tentative fourth quarter and full-year 2009 reporting dates for Portfolio companies. We’ll update the list as announcements are finalized, and, as always, we’ll summarize the numbers and important developments for Conservative and Aggressive holdings as well as notable How They Rate companies. There were also a couple happenings in the How They Rate universe.

Welcome back from what we hope was an enjoyable holiday season. And here’s to a profitable and healthy 2010.

Conservative Holdings

• AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF)–February 26
• Artis REIT (TSX: AX-U, OTC: ARESF)–February 12
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)–March 31
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–February 3 (confirmed)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–February 12
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–February 5
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–February 26
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–March 4
• Colabor Group (TSX: GCL, OTC: COLFF)–February 25
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–February 24
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)–February 12
• Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF)–March 16
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–February 5
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–February 18 (confirmed)
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–February 19
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–March 2
• Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF)–March 3
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–February 2
• TransForce (TSX: TFI, OTF: TFIFF)–February 25 (confirmed)
• Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF)–February 12

Aggressive Holdings

Trinidad Drilling (TSX: TDG, OTC: TDGCF) agreed to resume construction on six new drilling rigs destined for Louisiana. The project, delayed last year due to “weak industry conditions,” will cost an additional CAD60 million to complete. Trinidad Drilling he company said. Trinidad Drilling is a buy up to USD8.

• Ag Growth International (TSX: AG-U, OTC: AGGZF)–March 16
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–February 11
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–February 19
• Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF)–March 4
• Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF)–February 26
• Newalta (TSX: NAL, OTC: NWLTF)–March 5
• Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF)–March 10
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–February 18
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–March 10 (confirmed)
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–March 11
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–February 26
• Vermilion Energy Trust (TSX: VET-U, OTC: VETMF)–February 12

Oil and Gas

Bonterra Oil & Gas (TSX: BNE, OTC: BNEFF), in the final step in its conversion, as of January 1 is Bonterra Energy Corp. The Toronto Stock Exchange and over-the-counter ticker symbols remain the same. Bonterra Energy Corp, nee Bonterra Oil & gas, is a buy up to USD30.

Gas/Propane

Arctic Glacier Income Fund (TSX: AG-U, OTC: AGUNF) has negotiated an amendment to its financing agreement with John Hancock Life Insurance Company.

The amendment extends the maturity of the USD60 million senior secured notes from January 4 to March 1, 2010. The extension allows Arctic Glacier additional time to refinance maturing debt; management noted that it’s in “advanced discussions” to refinance the Hancock notes. Sell Arctic Glacier Income Fund.

Real Estate Trusts

Canadian REIT (TSX: REF-U, OTC: CRXIF) has acquired a 50 percent interest in key retail components of an Edmonton, Alberta, shopping center featuring anchor-owners IKEA, Wal-Mart (NYSE: WMT), The Home Depot (NYSE: HD) and Loblaw Real Canadian Superstore for CAD39.2 million.

The REIT will assume a CAD5.7 million first mortgage with an interest rate of 5.87 percent and a term to maturity of 8.2 years and pay the balance of the purchase price in cash. The total leasable area of the acquired real estate, including still undeveloped portions, is approximately 550,000 square feet. Canadian REIT is a buy up to USD25.

Natural Resources

Acadian Timber Income Fund (TSX: ADN-U, OTC: ATBUF) has completed its conversion and is now Acadian Timber Corp.

As of January 4 the stock is trading on the Toronto Stock Exchange under the symbol ADN. We’ll provide the US over-the-counter symbol when it becomes available.

Acadian Timber Corp will pay a one-time dividend of 1.7 Canadian cents a share on January 29 to shareholders of record on January 15 and intends to pay a quarterly dividend of CAD0.05 a share beginning March 31. Buy Acadian Timber up to USD9.

Cameco Corp (TSX: CCO, NYSE: CCJ), the world’s largest uranium producer, completed the sale of its stake in Centerra Gold (TSX: CG, OTC: CAGDF) for CAD871 million. Cameco has also arranged for the transfer of an additional 25.3 million shares of Centerra to Kyrgyzaltyn JSC under an agreement with the government of the Kyrgyz Republic. Once complete, Cameco will be out of the gold business.

A syndicate of underwriters led by CIBC World Markets and RBC Capital Markets purchased the 88.6 million shares at CAD10.25 per. Cameco Corp is a buy up to USD30.

Financial Services

Bank of Nova Scotia (TSX: BNS, NYSE: BNS) has acquired another 13.2 percent of Western China-based Xi’an City Commercial Bank (XACB), bringing its stake to 14.8 percent. Scotiabank has also entered into a definitive agreement for the purchase of additional shares that will raise its total ownership to 18.1 percent. Ultimately, Scotiabank plans to reach the regulator limit for foreign bank investments in China of 20 percent.

Bank of Nova Scotia, among the Big Five the most active in non-North American foreign markets and the best-positioned to benefit from Asian-led global growth, is a buy up to USD50.