5 replies to this topic

[SilentOne]

I thought I would post this info in case anyone is unaware. I am sure virtually every Canadian knows what happened to the income trust sector this week, but perhaps foreign investors may have missed this.

When I look at the growth of this capitalization chart, it does strike me as a bubble that has now burst. As some trusts are wound down or bought out over the coming years, the market cap of the sector is certain to shrink.



FYI, the Canadian Government posted its announcement here:

Canada’s New Government Announces Tax Fairness Plan

I'll be looking for opportunities in this space, but I know one will have to tread carefully.

cheers,

john

[PorkLoin]

John, Yeah -- the "threat" of BCE and Telus going to trust status provoked the change. I wish they would have just said, "Okay, that's the end," and prevent further trust formation but not make it retroactive -- good grief, that's changing the rules of the game after the game's begun. Who'd have thought the Canadian gov't would make a move worthy of a third-world tinpot dictatorship? I imagine that after the plunge ends and the volatility dies down, share prices of the better trusts will trend sideways and a little up. I took a hit, but another couple good days in the uranium sector will make up for it. As you said in the other thread, there are many retirees and pension funds now facing a reduction of income in the future as well as considerable destruction of their accounts right now, and that's a real bummer. Best, Doug

[jmicou]

Canadian Energy Trusts article

[jmicou]

a href="http://"www.canaccordadams.com/NR/rdonlyres/1C33384E-0F7D-4740-9264-26728DE70DC8/0/REP_IncomTru_11022006.pdf">The article above references this article about the proposal.

[jmicou]

Look under News, Income Trust Tax Reform

[SilentOne]

jmicou, I agree fully with the Canacord analysis. Income trusts grew originally from the energy sector. They served an important funding purposes, providing a low cost of capital which encouraged much needed exploration and development of mature fields. This fiasco was actually created by the not-so-wise Paul Martin (ex-Finance Minister and PM) during his "watch" when the income trust sector was expanded beyong oil & gas. For a finance wizz, he did a pretty bad job to allow the income trust market expand into other sectors the way it did. Whether the current government is good or bad, they got saddle with a very raw deal in having to sort this out. It should have been done years ago. My only criticism of Harper's gov't is they should have thought this through. But then the capital markets did not give them much time IMO. They were racing to get something in place before the markets got wind of it. cheers, john