I think of the royalty tursts, especailly the US ones, as a depleting asset. Each month we get a cookie from a very big, but not inifinite cookie jar. What's interesting now, is the value & price of that asset has moved up, and is likely to move up more. So the jar has the same number of cookies, but they have become more valuble.
At some point in the future, the price of natural gas will stop moving up, and plataeu again for a number of years.
however, for now, the actual physical scarcity of natural gas in North America, and Uncle Al's printing press creating more dollars to chase that gas, make this a pretty good bet. Also, I don't think you can lease natural gas from a central bank ;-)
The Canadian trusts try to buy more cookie jars at good prices. Most of the Canadian trust have bought properties in the past 2 years or so, when prices tended to be lower.
In effect, they have already made good deals. One risk is that they will overpay for cookie jars in the future.
One nice thing about the trusts is they are up front that they have a depleting asset. Same thing happens with drug companies - the patents for Prozac, or Viagra, or Lipitor, or whatever will run out, and prices & profits will drop.
Even real estate eventually falls down or the neighborhood changes. Of course, real estate can frequently last a couple of human lifetimes. |
