The third session of the 40th Canadian Parliament draws to a close this week, with members sauntering from party to party, celebrating the holiday season, some contemplating what could be a majority-making campaign for Prime Minister Stephen Harper in 2011, others hoping against hope for a leader worthy in the eyes of voters to run a government.

Love him or hate him, Mr. Harper has proven himself on that latter point. And, compared to the turmoil surrounding other governments in North American and beyond, Canada seems an oasis, where just the right amount of financial services oversight, for example, prevented a property-driven credit bubble.

When the global economy hit the skids Canada participated in coordinated monetary and fiscal stimulus efforts, Prime Minister Harper advocating on behalf of Keynesian solutions to the Great Recession. It was a moderate package that took the federal budget back to deficit after 10 years in balance, but a realistic back to fiscal responsibility is already cleared.

On international issues, too, the prime minister has moderated, making great progress back from a rocky start to his management of the increasingly important Sino-Canadian relationship. He’s exposed a bit because of his commitment to extending Canada’s involvement in the war in Afghanistan, but that move solidifies still-critical ties with the US.

All in all, from an American perspective, Mr. Harper has proven a solid leader. Even the income trust tax has been mitigated by his government’s commitment to reducing the overall corporate tax burden. In many ways he’s been just right for investors, no longer too hot, showing signs that he’s no longer as cold politically as he was in 2006.

Last fall around this time Mr. Harper blew away onlookers and pundits by doing vocal-and-piano duty on a cover of the Beatles’ “With a Little Help from My Friends”–with a little help from Yo Yo Ma–at a National Arts Centre Gala in support of the National Youth and Education Trust. The Tories opened up a double-digit lead over the leading opposition Liberal Party after this rare show of personality from the “cold” Conservative leader but couldn’t sustain it for long.

This year it was the Rolling Stones’ “Jumping Jack Flash” at the Conservative Caucus Christmas Party, but, according to the most recent polling and the results in three recent by-elections to fill vacant seats in the House of Commons, the bounce had already started before the Canadian prime minister did his Mick-and-Keith thing. Recent surveys indicate the Conservatives would, in the least optimistic of three samples, win minority control of the government by a slimmer margin. The better Conservative scenario, from Ipsos-Reid, suggests Mr. Harper’s precious majority could be within reach. A Nanos Research poll concluded that with the right issue focus in particular clusters of ridings–the Canadian equivalent of Congressional districts–the Conservatives would win a majority without having to sell out to Quebec, where the party holds just 11 of 75 federal seats.

Province-by-province data from Ipsos-Reid suggest the Conservatives would win 25 seats in British Columbia, 28 in Alberta, 20 in the Prairies, 54 in Ontario, nine in Quebec, and 10 in Atlantic Canada for a total of 147, 13 more than the projection from Ipsos-Reid’s last poll. The Tories have gained ground in every region, according to Ipsos-Reid. The Liberals would win nine seats in British Columbia, none in Alberta, six in the Prairies, 41 in Ontario, 14 in Quebec, and 22 in Atlantic Canada for a total of 94, three fewer than they won in the October 2008 election.

In Canada–like in US presidential elections where electoral votes determine the winner–it’s all about the ridings. John Ibbitson of the Toronto Globe & Mail summarizes the math in the crucial area around Toronto:

The Liberals currently hold 26 seats in the region. As a rough yardstick, winning a riding while garnering only 45 per cent or so of the vote leaves an MP vulnerable. There are 10 such Liberal ridings in the Greater Toronto Area. At current levels of support, the Tories should be able to pick off some but not all of them. There are a few seats up for grabs in Atlantic Canada and in Greater Vancouver, for a national total of about 20 possible gains, but in Quebec and elsewhere there are seats at risk. So winning the 12 additional seats needed to form a majority government is an odds-against proposition.

What’s the use of having an election that delivers the same result? If Mr. Harper can craft a budget that defers the worst of the spending cuts for a later day or agree to a more generous harmonized sales tax agreement with Quebec, the Liberals or Bloc Québécois might be mollified, leaving the government safe for another year. Mr. Harper insists he wants to continue governing. If he’s serious, there might be ways.

The Conservatives, following wins in the two Nov. 29 by-elections, currently hold 142 seats. The Liberals are at 77, the Bloc Québécois 47 and the New Democrats 36. There are two independent members, and four seats remain vacant. The magic number is 154, half of the 308 seats in the House of Commons.

Potential pitfalls for Mr. Harper include border security legislation that integrates Canadian enforcement operations with US efforts in a way sure to invite protests that the prime minister has compromised Canada’s sovereignty.

And Afghanistan remains a sensitive issue, as Mr. Harper championed and won extension of Canada’s mission in Central Asia. Controversy lurks in the government’s handling of the file on Canadian soldiers’ treatment of Afghan detainees captured on the battlefield.

Mr. Harper hung up on a provision of proposed human smuggling law that would effectively criminalize behavior by those pay smugglers for transit from political persecution. The prime minister is arguing for extended detention, delayed citizenship and potential deportation for individuals who, whether seeking asylum or not, knowingly pay smugglers to carry them.

As we often note and will always remember, Stephen Harper, via Finance Minister Jim Flaherty and then bureaucrat Mark Carney, broke a campaign promise to preserve income trusts’ tax-advantaged status. He wiped out a lot of wealth and hurt a lot of investors. At the same time some consequences of the Halloween Massacre of 2006, unintended or not, have been positive. For one thing, far from a “death knell,” the Conservatives’ changed tune signaled the evolution of income trusts into a new class of high-dividend-paying equities. As always the sustainability of any corporate payout depends on the underlying business, so the same discretion applicable in the income trust case works with this new breed of Canadian wealth-builders, too.

Other conscious decisions Mr. Harper’s government has pursued have had far more salutary effects for investors. The Canadian prime minister’s brand of conservative politics, contrary to his south-of-the-border cousins’, did not obviate an active government response to a near-catastrophic decline in private demand. His case–as well as the effectiveness of the spending measures undertaken–was no doubt helped by the fact that Canada entered the global downturn with a decade’s worth of balanced budgets and debt reduction under its belt.

The current government is likely to announce along with its budget package that Canada’s budget will return to balance earlier than previously forecast because of higher-than-projected federal tax receipts. This unexpected revenue position is the direct result of Canada’s relatively robust rebound from what was, for it, a mild recession.

Granting that ours is a narrow perspective–we’re interested in what’s good for US-based investors with exposure to Canada-based companies–Mr. Harper is far and away the best available option for prime minister. Unfortunate though it is, in recent years Western governments have exercised far more influence–direct and indirect–on the economy than at any time since the 1930s and ’40s.

Stephen Harper has now led the longest running series of minority governments in Canadian history. He’s led during one of the most tumultuous periods in global economic history. Whether it’s mere circumstance or skill the prime minister deserves at least some credit for not fouling up Canada’s turn as a global ideal. And as Mr. Harper and his party build toward their long-held ambition, the Canadian economy continues to strengthen. Capacity utilization in the third quarter was up for the fifth straight time, Canadian railway traffic rose 22 percent and November housing starts in the Great White North surprised to the upside.

The Roundup

We’re coming up on the end of 2010 and the transition to that big, bad year, 2011. Not really. As was made entirely clear in the December issue of CE, the most important changes to come in the days following Jan. 1, 2011, will be to Toronto Stock Exchange, New York Stock Exchange and US over-the-counter symbols following conversions by 54 income trusts. We’ll track changes and update How They Rate and the Portfolio tables on the CE website as quickly as we can.

In the meantime, here are fourth-quarter and full-year 2010 reporting dates for Portfolio companies. All dates are estimated, except where noted otherwise. Note as well that Consumers’ Waterheater Income Fund (TSX: CWI-U, OTC: CSUWF), which was recently re-introduced to the CE Portfolio as an Aggressive Holding, hit a 52-week high in Friday trading.

In other Portfolio news, TransForce (TSX: TFI, OTC: TFIFF) has acquired same-day delivery and logistics services provider Dynamex (NSDQ: DDMX) for USD25 per share in cash, a total purchase price of USD248 million.

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–Mar. 11, 2011
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–Feb. 9, 2011
• Canfor Pulp Income Fund (TSX: CFX-U, OTC: CFPUF)–Feb. 4, 2011
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Feb. 24, 2011
• Consumers’ Waterheater Income Fund (TSX: CWI-U, OTC: CSUWF)–Mar. 1, 2011
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–Mar. 2, 2011
• Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF)–Feb. 25, 2011
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Mar. 2, 2011
• Parkland Income Fund (TSX: PKI-U, OTC: PKIUF)–Mar. 2, 2011
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–Feb. 18, 2011
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–Mar. 9, 2011
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–Mar. 10, 2011
• Phoenix Technology Income Fund (TSX: PHX-U, OTC: PHXHF)–Mar. 3, 2011
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–Mar. 11, 2011
• Vermillion Energy (TSX: VET, OTC: VEMTF)–Mar. 3, 2011
• Yellow Media (TSX: YLO, OTC: YLWPF)–Feb. 11, 2011

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Feb. 23, 2011
• Artis REIT (TSX: AX-U, OTC: ARESF)–Mar. 16, 2011
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Mar. 29, 2011
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–Feb. 3, 2011
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–Mar. 11, 2011
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–Feb. 9, 2011
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Feb. 24, 2011
• Cineplex Galaxy Income Fund (TSX: CGX-U, OTC: CPXGF)–Feb. 11, 2011
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–Mar. 4, 2011
• Colabor Group (TSX: GCL, OTC: COLFF)–Feb. 24, 2011
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–Mar. 2, 2011
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)–Mar. 17, 2011
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–Mar. 22, 2011
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–Feb. 11, 2011
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–Feb. 18, 2011
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–Mar. 2, 2011
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 17, 2011
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Mar. 3, 2011
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Feb. 9, 2011
• TransForce (TSX: TFI, OTC: TFIFF)–Mar. 2, 2011 (confirmed)