And with good reason. The United States has a bigger and more-troubled financial sector than most countries. It also has a bigger overhang from the housing bubble, has a bigger balance-of-payments deficit and has a budget deficit that’s fat enough to stall the recovery.

It would be nice to have an economic recovery to invest in that didn’t have all of these problems.

Truth be told, such an investment play does exist. What’s more, the market I have in mind is advanced enough for us to invest in it without having to go through all the rigmarole of American Depository Receipt (ADR) investing. Nor will you have to make a potentially risky foray out onto some foreign stock exchange to buy the shares, because they are almost all listed here.

The country I’m talking about is Canada. Think of it as being like home – but without the problems that our home market (the United States) currently suffers from.

Our Healthy Neighbor to the North

When the recession struck, Canada was hit by it quite badly, but for different reasons from its southern neighbor. The Canadian housing market was nowhere near as overheated as its U.S. counterpart. So Canada’s housing downturn wasn’t as deep.

And what about the banking systems? To be sure, Canadian banks received a bailout, but it was less than $20 billion in total. Compare that to the veritable alphabet soup of U.S. bailout programs ranging from “TARP” and “TALF” that have injected more than $2 trillion into the U.S. financial system.

On the other hand, natural resources prices crashed last autumn, which had a major effect on Canada’s resource-based economy. A number of large projects in the Athabasca Tar Sands region were cancelled, for example – since this region has oil reserves around the size of the entire Middle East, its development is crucial to Canada’s future.

The “loonie,” Canada’s currency, declined from around “parity” to the U.S. dollar to an exchange ratio of C$1.30=$1 U.S. In effect, this was a “flight to safety” into the dollar and U.S. Treasuries. And it affected Canada as it did other countries.

In 2009, however, Canada and the United States have traveled down totally different paths. Canada did very little “stimulus,” so its state budget is in much better shape. The deficit for the 2009-2010 fiscal year $53 billion (C$56 billion) is only about 4% of gross domestic product (GDP). For the 2010-2011 fiscal year, the deficit is expected to be about $42 billion (C$45 billion), or 3.2% of GDP.

Energy Powers the Rally

The bounce in natural resources prices has really helped power up the rebound of Canada’s market.

Investment in the tar-sands region has picked up again, with a big merger between the two largest tar-sands-extraction companies: Suncor Energy Inc. (NYSE: SU) and Petro-Canada. The rising gold price hasn’t hurt either – mines are appearing all over the place! All this new activity has made the loonie bounce, so it’s back to about C$1.07=$1. While interest rates are as low as the United States, the Bank of Canada hasn’t done much “quantitative easing,” meaning that inflation isn’t too much of a worry.

The strong loonie helps here, too.

Canada seems to be recovering nicely. Its index of leading indicators jumped 1.1% in August, while manufacturing sales grew 5.5% in July. The country presently runs a modest current account deficit, but it’s only 2% of GDP. That’s much lower than even the current U.S. deficit, let alone that of 2007. It had a little more public debt than the United States in 2008, but given current U.S. deficits, those two lines almost certainly have crossed by now.

There are two caveats. The first is an obvious one: If commodity prices crash to earth, Canada will have some difficulty because commodities are a large part of its economy. Personally, I don’t see that happening. It’s notable that PetroChina Co. Ltd. (NYSE ADR: PTR) has just invested $1.7 billion in a Canadian tar sands project, so China must not think so, either.

The other risk is political. The current minority Conservative government of Stephen Harper has done a good job, but the opposition Liberals have withdrawn their parliamentary support. That means there may be an election this autumn. A Liberal majority government would be no disaster. They might be a bit sticky about oil-drilling permits, but would not otherwise rock the boat.

However, a Liberal coalition with the leftist New Democrats could push public spending and the deficit up, and there’s no guarantee against that. (One of the problems with multi-party systems like Canada’s is there is an almost infinite variety of possible governments after each election, some of which can be fairly alarming from a business perspective.)

However, Canadian elections are a much smaller risk than you get in most countries, and the commodity/oil price crash, if it happened, would help the U.S. economy and, presumably, your U.S. portfolio. So it’s worth having some Canadian exposure, perhaps with the Canadian market exchange traded fund (ETF) iShare MSCI Canada Index (NYSE: EWC).

For years it was almost fashionable to dismiss Canada from an economic standpoint. Now, however, that may well be where the smart money would like to go. As an economy, Canada is competent and stable.

It’s the kind of country that looks to be a good place for some of our money.

The bank has a market share of 8 percent in terms of assets. It has 1,026 branches across the country and more than 4 million customers.

Pakistani stocks have fallen to their lowest level in almost 14 months on rumors involving political instability surrounding President Pervez Musharraf potential resignation. It also didn’t help that militant Islamists blew up the Danish embassy. Six Pakistani civilians were sacrificed to avenge the perceived blasphemy committed by Danish cartoonists two years ago.

The Karachi Stock Exchange’s 100-share index has dropped to lows not seen since early April, 2007, losing about 25 percent or nearly 3,000 points from a record high in April. The Pakistani rupee has lost more than 10% of its value during the last two weeks, while the Pakistani trade deficit has exceeded $10 billion, due to rising oil prices.

Bank stocks in particular have plummeted. Pakistan’s United Bank Ltd. has fallen more than 50% since mid-March, MCB Bank dropped almost by the same margin since February.

Which is surprising. MCB is Pakistan’s most profitable bank, with return on average equity of 38 percent and loan profitability of 8 percent. The bank has a market share of 8 percent in terms of assets. It has 1,026 branches across the country and more than 4 million customers.

In fact, MCB is so attractive that Malaysia’s biggest bank, Malayan Banking Bhd, agreed to pay over $920 million for a 20 percent stake, at an 11 percent premium to MCB’s May 2 closing price. Malayan is paying 5.1 times book value, twice the average 2.2 times book value for Pakistan banks.

Yes, MCB Bank was one of the stocks that did bounce back with the overall Karachi stock exchange.

We profitably applied a crisis investing strategy using Pakistani ADRs in the aftermath of the assassination of Benazir Bhutto. We think this is a good time to reprise it.

Buy MCB Bank (MCBBI) at current levels around $8, with an upside of 20% by September.

The ADR represents two original shares. The pricing typically moves with a 24-hour delay to the Karachi stock. For some reason, you cannot track the ADR on Google Finance… just the Pakistani stock. To track the ADR, refer to Bigcharts.om.

Source: Use MCB Bank ADRs to Leverage Political Crisis in Pakistan

In pretty short order, all the charge-card companies boost his credit limits, cut the interest rates he’s paying on his outstanding balances, offer him new credit lines – and even make him eligible for various “rewards” programs that give him all sorts of freebies for spending money.

Brazil finds itself in that situation because uber-debt-rater Standard & Poor’s just boosted the country’s credit rating to “investment grade” in recent weeks, moving its rating from BB+ to BBB-. Why should we care? After all, isn’t Brazilian debt bought mostly by institutional investors? That’s true. But with the increased debt rating, Brazilian shares also should benefit – provided the government doesn’t embark on a big spending binge.

Brazil was included in the “BRIC” (Brazil, Russia, India, China) group of rapidly growing emerging economies that was created by Goldman Sachs Group Inc. (GS) back in 2003. At that time, it really didn’t deserve the distinction. Long-term growth since the 1970s had averaged less than 2% per capita, and the country had narrowly avoided bankruptcy only the year before. Long-term interest rates were above 20% (around 15% in real terms), which hardly encouraged companies to make capital-spending commitments that might grow the economy. Most alarming, a left wing socialist named Luis Inacio Lula da Silva had just been elected president.

Brazil got lucky. First, Lula proved to be surprisingly moderate, not much to the left economically of previous Brazilian governments, perfectly willing to welcome foreign investment, generally friendly to the United States and not at all like his socialist neighbor, Venezuelan President Hugo Chavez. Second – and probably even more importantly – 2003 was the year in which energy and commodity prices began the long climb that has brought them to their current (astronomical) record levels. Third, since Brazil was not an oil exporter, there was no single source of new wealth that the government could just seize. Instead, revenue flowed to mining companies, the oil company Petroleo Brasileiro SA (usually referred to as just Petrobras) (ADR: PBR), and numerous agri-business operations that benefited from the rise in agricultural prices.

Most startlingly, Brazil’s ethanol program, which had been a hopeless boondoggle for a generation since it started during the oil crisis of 1979-82, suddenly became the envy of the world. Rising oil prices made Brazilian sugarcane the world’s cheapest and most economically and ecologically efficient source of newly fashionable ethanol. At a $20 per barrel oil price, the ethanol-from-sugar program was a typical example of misguided Third World government planning; at $120, it is a bonanza.

Brazil’s debt position has improved in three ways:

• The amount of outstanding debt has been reduced through modest repayments.
• Its ratio of debt to gross domestic product (GDP) has dropped sharply, as GDP in dollar terms has shot up with the revaluation of the Brazilian real against the dollar.
• And Brazil’s interest costs have dropped along with the country’s improving creditworthiness and with the generally low level of global interest rates.

With more income, a stronger currency and lower debt, it’s not surprising that Brazil’s credit rating has improved. As with an individual consumer on whom the credit card gods suddenly smile, what happens next depends on what use is made of the improved position. If a person reverts to their earlier spendthrift ways, they will quickly max out the new credit limits, actually making their position even worse than before.

Fortunately, the Brazilian government appears to have learned the difficult lessons of the last 25 years, and is remaining both careful in its spending and welcoming to foreign investment. That will bring down Brazil’s debt costs further, as will recent favorable developments like the discovery by Petrobras of about 36 billion barrels of oil in an offshore Brazilian oilfield.

Now, don’t get carried away. This isn’t China – with its 10% annual growth rate, apparently repeatable ad infinitum. Brazil had such growth rates for a brief period in the 1970s, but they disappeared around 1980 in a blizzard of unpaid debt. Brazil’s growth rate is currently around 5% – but it looks far more balanced and stable than it did in the 1970s. Brazil’s improving credit position is likely to make growth persist, and future political risk appears minimal. When Lula goes, a politician of the center-right could well replace him.

Another good sign for Brazil – there are more than 30 Brazilian companies with full American Depository Receipt (ADR) listings on the New York Stock Exchange, plus 40-50 more that are traded in the over-the-counter market. Here are a few attractive examples to consider:

Banco Itau Holding Financeira SA, referred to usually as Banco Itau (ADR: ITU), has a Price/Earnings ratio of 14 and dividend yield of 2.4%.  Brazilian banks earn very high returns, primarily from domestic market lending in reals. Including Banco Itau, there are three large ones listed on the Big Board in New York; the other two are Banco Bradesco SA (ADR: BBD) and Uniao Bancos Brasile SA (Unibanco) (ADR: UBB). However, Itau is the cheapest of the three, though only slightly.

Companhia Vale do Rio Doce, now referred to only as Vale (ADR: RIO), is one of the true global blue chips, with a market capitalization of almost $200 billion. An iron-ore company with ancillary operations in gold, nickel, copper and other metals, its shares trade at a reasonably valued 13 times earnings, though its dividend yield is only 1.2%.

Petrobras (ADR: PBR) is one of the few emerging market oil companies with access to modern technology – and the willingness to work with the oil majors. Its shares are up 168% in the past year, but the stock’s P/E still is only 16. It has a 1.3% yield. The possible upside: It finds another gigantic offshore oilfield. The possible downside: Oil drops back to $50 a barrel. If the world’s monetary authorities get serious about imposing higher interest rates to fight inflation, PBR and RIO would probably suffer as commodities prices fall back to earth.

Companhia de Saneamento Basico (Sabesp) (ADR: SBS) is the water and sewage system provider for Sao Paulo. Now that’s a growth business, and not dependent on commodity prices. With a P/E of only 9.2 and a yield of 2.7%, this is one stock I have to say I love.

TNE (ADR: TNE) There are a bunch of Brazilian cell phone companies, but TNE appears to be the cheapest. It’s concentrated in the populous southeast and northeast regions of Brazil, with a P/E ratio of only 7 and yield of 4.25%.

Telecomunicacoes de Sao Paulo SA, or Telesp (ADR: TSP) provides the fixed line telephone system for Sao Paulo. Before you sneer, consider this: the company has a dividend yield of 9.8% and a P/E ratio of 10 (which means the dividend is only just covered). And it’s majority owned by Spain’s Telefonica.

Voturantim Cellulose (ADR: VCP) is a pulp and paper company, with a P/E ratio of 14 and a dividend yield of 2.8%. Trees grow fast in the tropics and VCP definitely benefits from that!

Source: Is Brazil ‘Investment Grade’ for Investor’s Money, Too?

What’s more, that result gave a majority to the center-right government of Silvio Berlusconi. Berlusconi, a media billionaire, is pro-U.S. and strongly pro-capitalist. While the forces preventing free-market reform in Italy are extremely strong, he should at least be able to make some improvement in Italy’s economic position, with consequent benefit to the local stock market. While sensible investors have in the past avoided Italy, with Berlusconi in office, it might be worth taking another look.

There’s no doubt that Italy has some weaknesses. By European standards, it is fairly corrupt, ranking 41st on Transparency International’s Corruption Perceptions Index, below the other major European countries (but above such investor magnets as China and India).

Italy has a budget deficit of 3% of Gross Domestic Product, with too much government spending at 50% of GDP, and far too much government debt at 105% of GDP. The country had relatively slow economic growth of 1.9% in 2007.

The home to Rome also has a declining population – not in itself a problem, but since its social security system is generous it creates difficulties in funding Italy’s pension system. It has suffered badly in the past few years from expensive government and expensive labor costs, particularly as it is a member of the euro, which has almost doubled in value against the dollar since 2002.

All this would make you think Italy was a basket case, except for one fact: it has enjoyed very considerable economic growth in the decades after World War II and again in the 1990s. It’s a wealthy country, nearly as wealthy as Britain, France and Germany. And it is famous for high-end design in the clothing and home furnishings industries. Some of Italy’s medium-sized family-owned companies are the best run in the world.

From time to time, investment in the right Italian companies has made international investors a lot of money. With expectations low – the Milan 30 index trades only 30% above its level of five years ago, and on a price-earnings ratio of a mere 11 – and with Berlusconi likely improve the outlook for Italian business, this may well be such a time.

There are only a few Italian companies with full American Depositary Receipt (ADR) listings in the United States – most of firms choose to concentrate on the London market for their foreign capital – but at least a couple of these would appear very interesting investments.

A list of the companies easily investable by US individual investors is as follows:

ENI SPA (E): This firm is Italy’s entry in the Big Oil stakes. Because of Italy’s neutral foreign policy posture, it has the advantage of being able to operate in countries like Kazakhstan, Libya and Venezuela where U.S. companies often have difficulty. On a price-earnings ratio of only 8.4% and with a yield of 5.6%, it currently offers excellent value. Strong buy.

Gentium SPA (GENT): A small loss-making drug company, which has lost investors 67% of their money in the last year. Better pass.

Luxottica Group SPA (LUX): A manufacturer of sunglasses with worldwide operations, Luxottica is a quintessential way to buy into Italy’s superlative design skills. On 14.7 times historic earnings, 13.1 times prospective earnings and with a dividend yield of 2.7%, the firm is also reasonably priced. The only caveat would be that a worldwide recession could badly hit sales of even lower-priced luxury goods. Still, we think it’s a buy.

Natuzzi SPA (NTZ): A medium-sized leather furniture manufacturer, Natuzzi is currently booking losses and pays no dividend, so maybe not.

Telecom Italia SPA (TI): Italy’s main fixed line and mobile integrated telephone company, with a P/E ratio of 11.3 and a historic dividend yield of 10%. However, as those ratings would suggest, earnings dropped 19% last year on price cuts and heavy competition and the dividend is now uncovered. There is also talk of a merger with Spain’s Telefonica. Speculative.

iShares MSCI Italy Index (EWI): And finally, you can buy the Italian market as a whole through this exchange-traded fund (ETF), which has a reasonable market capitalization of $340 million, a price-earnings ratio of 11 and a juicy yield of 5.04%. If you’re excited by the possibility of economic improvement that the Berlusconi election victory offers, that is an attractive alternative. Buy.