TSX Trading Strong: Time to Buy Canadian Shares?

While some watch the spread between the Canadian dollar and the greenback, others monitor the difference between benchmark stock indices in Canada and the United States.

While the two currencies traded at par this past spring, recent strength in the U.S. dollar has widened the gap. The opposite is true for the S&P/TSX composite index-Dow Jones Industrial Average spread.

On May 9, 2008, the TSX was at a premium of more than 1,775 points versus the Dow at 14,521 and 12,745, respectively. As of Thursday’s close, that gap had closed to roughly 400 points, with the TSX at 10,900 and the Dow at 10,482.

And that has some, like market commentator Dennis Gartman, considering an investment in The Great White North.

In Friday morning’s version of The Gartman Letter, Mr. Gartman said:

Perhaps we need to consider being ready to buy Canada and to sell the U.S. in the not too distant future. As commodity prices have tumbled, Canada’s premium to the U.S. has narrowed materially.

Mr. Gartman also said he might consider buying Canadian bank stocks soon, while selling the broader U.S. market short.

Comments

[I need a ba...:]

Canada has a politically and economically stable economy. Canada is running a budget surplus ... a refreshing idea in the world of increasing government deficits. US investors may also benefit from the coming decline in the US dollar. There is no housing crisis in Canada. The best kept secret about CDN equities is the number of offerings that have paid dividends well over 10% for years. Canada offers some great opportunities for those US investors wanting to get away from a country in financial distress at this time (USA).

2008 Oct 05 09:29 AM

[andyn:]

Is there a ETF to buy the TSX? either listed in the US or the CDN market?

2008 Oct 05 01:05 PM

[Rumpole:]

I'm a Canadian and, while I'm proud of my people generally speaking and while I'll wave the Maple Leaf loud and proud, you should bear something else in mind. Canada has tied much of its economic future to that of the U.S. And the ties are strong. So as the downturn in the U.S. intensifies, it'll have more and more impact in Canada. And while we haven't entered a housing crisis like the U.S., house prices are softening up here now too. And our levels of consumer indebtedness are not that much different than in the States. But because of their relative conservatism, the Canadian banks are probably more of a safe haven than in the States and elsewhere.

2008 Oct 05 01:54 PM

[specks:]

I agree with Rumpole. Just have a look at Potash Corp. And it comprises a big chunk of the TSX value as do mines.
Plus, Garth Turner, A well-known Canadian financial author recently wrote "A Greater Fool" wherein he talks about the Canadian real estate industry. There are major centers where prices were bid from somewhere around $150k up to around 450k. We are just at the beginning and we will follow the USA although perhaps not quite so severely. Caveat Emptor!!

2008 Oct 05 03:14 PM

[January Thaw:]

One must also bear in mind that Canada does not always remember its
promises to investors...I learned that the hard way. While I am bullish
on Canada, I would advise that a risk premium is necessary.

2008 Oct 05 05:17 PM

[zenman:]

playing canada? tryEWC , ytd up 3.6%

2008 Oct 06 01:57 AM