The trajectory of US consumer demand proved unsustainable, and what we now know is a tenuous financial structure has buckled. With each new piece of economic data, with every trading day, the implications of that reality become more obvious and more painful. Leaders of the G-20 got together last weekend to talk it out, issuing a seven-page compendium of declarations, commitments, agreements, principles and promises that boils down to this: See you after Jan. 20. 

World leaders agreed to work together to plug the gaps and weaknesses in current financial regulatory systems that precipitated the collapse. And though the Nov. 15 G-20 communique was as opaque on the topic as the web of interconnected obligations at the middle of the financial crisis, subsequent public statements and follow-up actions by participating leaders leave little doubt that governments will spend to stimulate their respective domestic economies.

Specific measures are still to be determined. But Canadian Prime Minister Stephen Harper, for example, took to a set of microphones at his nation’s Washington, DC embassy Saturday afternoon to announce he’s prepared for a budget deficit if that’s what it takes to mitigate the effects of the slowdown. Canada has been in surplus for a decade, so this is no trivial matter.

The Prime Minister benefits from certain political realities that make it easier for him to pivot so abruptly from long-held views on fiscal responsibility–first of all, North Americans have had their fill of campaigns and elections.

And a fast, firm response could also prove good tactics for the notoriously shrewd Mr. Harper. The willingness to entertain an imbalance is a good measure of the gravity he assigns to the problem, and his country is, by way of its prudence, on good footing to make such commitments. He’s not necessarily “buying” votes. And if indeed federal intervention it is, should it prove temporary, targeted and effective, Harper might finally earn his cherished majority government.

Wednesday’s Throne Speech kicking off Canada’s 40th Parliament included a pledge to aid the auto sector, but that still depends on consultations with US policymakers about a possible bailout package. The speech also included a pledge that the government will “provide further support” for the Canadian manufacturing sector, particularly the auto and aerospace industries.

Harper used the occasion to issue a head’s up to Canadians, saying the government is likely to go into deficit early next year. A “strong fiscal foundation is not an end in itself,” read the speech, “but is the bedrock on which a resilient economy is built.”

Finance Minister Jim Flaherty backed away from his comments last weekend indicating a package would be cobbled together in time for inclusion in a statement on the economy he’ll deliver next week; in fact, rather than consolidate spending programs in a mini-budget before the end of the year, stimulus or industrial-aid measures will be included in the formal budget early next year.

Among other specifics, Harper committed to creating a common national securities regulator, offering incentives to business to make capital investments and making it easier to develop a northern natural gas pipeline, a reference to the long-delayed, CAD16.2 billion Mackenzie gas pipeline.

Harper also said that by 2020, 90 percent of all electricity generated should be from clean or renewable sources. Nuclear power will be a critical element in meeting that target. Harper’s recent talks with provincial and territorial leaders likely included the need for infrastructure spending and the possible timing of various projects.

Assistance for the Big Three automakers from Canada depends largely on what Washington ultimately decides to do. The debate in DC seemed to break down Wednesday, but reports late Wednesday night suggested China’s Shanghai Automotive Industry Corp (SAIC) and Dongfeng “have plans” to buy GM and/or Chrysler assets. That may explain in part the late Thursday talk of a compromise that will allow the Big Three to tap into USD25 billion in loans originally set aside for the automakers to retool their factories.

The story in the link above quotes a China-based 21st Central Business Herald report that cites a “senior official of China’s Ministry of Industry and Information Technology–the state regulator of China’s auto industry–who dropped the hint that ‘the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.’” That’ll give them the chance to sell China-built cars with globally marketable brand names–without the labor/legacy costs plaguing GM, Chrysler and Ford.

Harper promised during his election campaign to put another CAD200 million into Canada’s CAD250 million Auto Innovation Fund. President-elect Obama is in favor of rescuing the auto industry and its 3 million jobs. That’s a lot of jobs and a lot of consumption vanished, and that’s another log on the deflationary fire.

As we’ve noted in other contexts, these are no ordinary times. It’s useful, for example, to distinguish a prudent distribution cut from a desperate stab at hoarding cash. As well, spending into the red to stimulate aggregate demand is distinct from building in structural deficits. The global financial crisis has made balance sheet strength fashionable again when it comes to evaluating companies. It’s what will allow those that have it to survive.

Countries that entered this extraordinary period with sound finances are similarly positioned to weather it better and emerge from it stronger relative to not-so-prudent nations.

Earnings season has finally closed for Canadian trusts, and the results, particularly in light of carnage in other corners of the market, have been of great comfort. That’s not to dismiss the seriousness of the global economic situation or to discount the difficulty of the road ahead.

But Canadian Edge Portfolio recommendations are basically on sound financial footing because of solid balance sheets, adequate access to credit and still-healthy cash flows.

Here’s the final set of earnings summaries.

Artis REIT (TSX: AX-U, OTC: ARESF) is the only REIT in the CE Portfolio with significant oil patch exposure. But investors can take comfort in the numbers. The third quarter payout ratio sank to just 64.3 percent as the company saw a 10.5 percent jump in distributable income per share on a 35.1 percent increase in revenue. Occupancy surged to 97.3 percent, and the shares have enjoyed a huge wave of insider buying of late. Coupled with their low price, that takes the risk out of owning Artis REIT now, which remains a strong buy all the way up to the mid-teens.

Atlantic Power Corp’s (TSX: ATP-U, OTC: ATPWF) third quarter report appears to have raised a few eyebrows, as the payout ratio rose on a scheduled plant shutdown as it waits on an acquisition to close. Management, however, continues to affirm the payout, noting currency hedges put into place last month basically lock in dividend covering cash flows at least through 2014. Further, the payout ratio for the first nine months of the year is just 72 percent and Atlantic eliminated two other potential points of exposure by selling its auction rate securities at par and locking in natural gas supplies for several years at another plant. Atlantic Power Corp remains a solid buy up to USD10.

Canadian Apartment REIT (TSX: CAR-U, OTC: CDPYF) and Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported strong third quarter results. Both came in with solid rent increases and occupancy rates, and held down leverage as well. Those are the key building blocks of REIT growth.

The Canadian property market is showing some signs of slowing, particularly in housing prices. Meanwhile, the red-hot oil sands property market may also be on the verge of taking a breather, as activity there slows and expansion plans are scaled back.

Neither Canadian Apartment nor Northern Property is significantly exposed to this region. In fact, both have demonstrated records of weathering difficult times, which is why I picked them for CE earlier in the decade as that country’s property market was coming out of a more than decade-long slump. Canadian Apartment Property REIT is a buy up to USD20, Northern Property REIT up to USD25.

Energy Savings Income Fund (TSX: SIF-U, OTC: ESIUF) has been relying on the US for the lion’s share of its recent customer growth. The good news is that the trust has been able to continue adding customers on both sides of the border, despite a higher attrition rate in the US. That’s likely one reason insiders are buying and management remains adamant the distribution is safe now, and should be sustainable well past 2011 as well. The third quarter payout ratio exceeded 100 percent including all marketing costs. But the key metrics still look healthy, and this one is pricing in some pretty bad news that hasn’t happened yet. Energy Savings is a hold for those who already own it and a buy all the way up to USD20 for those who don’t.

Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF) certainly didn’t disappoint, rolling up a 132 percent increase in third quarter earnings as it added new infrastructure and enjoyed robust activity on its existing base. The trust remains on the hunt for more acquisitions and has affirmed its intention to pay big dividends well past 2011. Keyera Facilities Income Fund is a buy up to USD20.

Macquarie Power & Infrastructure’s (TSX: MPT-U, OTC: MCQPF) cash flows came in right on target, with distributable cash flow per share rising 9.4 percent in the third quarter. The payout ratio surged to 133 percent, as is usually the case seasonally. But management affirmed its target of 100 percent for the year, which includes capital spending. Macquarie Group continues to be under intense scrutiny in the financial press; this enclave of the empire, however, is segregated from the troubles of the parent, which have yet to play out anywhere close to what some have suggested. Macquarie Power & Infrastructure is still a buy up to USD10.

Advantage Energy Trust (TSX: AVN-U, NYSE: AAV) results revealed rising production combined with debt reduction and aggressive hedging for a 54.4 percent payout ratio, and no mention of a potential dividend cut.

Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) reported much the same with a 44 percent payout ratio on a 17 percent boost in production. It’s even more aggressively hedged than Advantage, and management stated once again that the current dividend rate was sustainable.

Provident Energy Trust (TSX: PVE-U, NYSE: PVX) turned in a 61 percent payout ratio on modest production gains and higher energy prices, despite lower midstream profits. The dividend cut of 25 percent this week appears directly related to management’s desire to slash the debt taken on in recent years for expansion. That was also the goal of the sale of its US operations in the BreitBurn Energy Partners, which has now been challenged by buyer Quicksilver Resources. At this point, it’s too early to tell how deeply Provident–which was named as a secondary party in the suit–will be affected. At a share price well below where it traded when oil was under USD20, however, Provident is definitely pricing in a lot. I’m sticking with it, but until we get a few more quarters of results, this one should be considered one of my more aggressive plays.

Buy Advantage Energy Income Fund up to USD14, Paramount Energy Trust up to USD10 and Provident Energy Trust up to USD14.