Pennaluna Prospector – Coeur d’Alene, Idaho – November 6, 2006
Special Edition -- Canadian Trust Protest
06 November, 2006
On Halloween, from out of the blue and with no warning, Canadian Finance Minister Jim Flaherty blind-sided income trust investors with one big sucker punch of a new tax scheme.
He abruptly announced a brand new plan to impose large new taxes on Canadian income and royalty trusts – despite his campaign promise not to, and despite the fact many folks relied on that promise when they decided to buy these trusts.
The betrayal was of course piously wrapped in the flag. But the motivation was familiar: the government wants more of everybody’s money.
Details of the new -- har, har -- “Tax Fairness Plan” are here: fin.gc.ca
Price Collapse
Reaction was swift. Income trust prices fell like a rock the next day. Some lost 15% or more. Billions of dollars of wealth were vaporized overnight. Investors were shaken.
Many of our customers trade Canadian stocks. Many own these trusts as part of their retirement nest egg.
Like other income trust owners, these people expected market risk. And they expected currency risk. But they didn’t expect to get rolled by the Canadian government.
After all, Canada isn’t some two-bit banana republic, and the Conservative party is supposed to be, gee, conservative. Well, surprise.
Fighting Back
But the fat lady hasn’t sung yet. The proposed new tax law is not a done deal at this point. There remains the possibility of significant modification, if not total reversal.
The income trust industry in Canada has grown into a strong force. You can expect it to put up a real fight.
And trust investors are pitching in to help. A protest campaign is underway. Investors are registering their complaints with letters, emails and phone calls.
Contact Information
Roger Conrad of www.CanadianEdge.com publishes a newsletter on Canadian trusts.
He has posted an information page on his website that tells investors how they can express their views to Mr. Flaherty and staff about the new tax scheme: office address, email addresses, phone numbers, sample letter, some other tips. He has opened this page to the public.
Investors angry about getting mugged by the Flaherty Gang can find the information here: canadianedge.com
“ Since a politician never believes what he says, he is quite surprised to be taken at his word. ” Charles De Gaulle
Editor: Tom Wobker
Disclosure: Pennaluna & Company is a NASD broker-dealer and market maker. As such, it frequently buys or sells stocks for its own account, or in order to make a market. Consequently, Pennaluna may at any time buy or sell or make a market in any stock mentioned herein, and associated persons may also buy, sell or hold such stock at any time. The firm and/or associated persons may also engage in private placements or other investment banking activities with any company mentioned. Some securities mentioned may be small-cap stocks and subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information; some may be foreign securities and subject in addition to currency, political and other risks. Comments and opinions are solely those of the writer. This publication is intended solely to provide readers with general information and is not a solicitation for the purchase or sale of any security. It is not intended to provide personal investment advice and does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may read it. Mention of a company or stock does not in any manner constitute a recommendation, unless specifically so stated, nor is it a solicitation of any sort. Information is believed accurate but accuracy is not guaranteed.
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