>>Our Christmas present from Canada.
Eplay -- I would really greatly like to share your optimism on the Canadian energy trust situation.
However, studying this a bit, so far I find that I cannot. Here is my reasoning -- please correct my logic/facts... as this was to be the place for my funds after the great gold run up of the early 21st century had run its course... nothing like dividend flow for a comfortable retirement.
Here is a link to "Canada's New Tax Fairness Plan":
fin.gc.ca
Right now I pay a 15% tax to Canada on my royalty trust income, before US income tax.
The article cited says that in 2011 I will pay 41.5%.**
Another way to say this is I currently get 85% of payout, now will be down to 58.5% of payout... or my payout in 2011 will be worth 68.82% of my payout at present.
Therefore, all things being equal, the under lying asset from a payout point of view is worth 68.82 percent of what it was worth on Oct 30 2006, or a drop of 31.18%
Arc energy was about 28, now 22.46 (Friday) loss of aprx 20%
ERF was about 54 now down to 44.26 loss of aprx 18%
So by the above analysis, things have further to fall.
Countering this:
1. No legal change has yet been made. What is likelihood of this passing?
a. as a proposal of the conservative party, and nothing is to right of them, and lots to left, well, probably more likely than not.
b. 3.2 million Canadians have invested in trusts, many for retirement. They will not be happy, and will vote. They will be doubly pissed because they have been lied to, and may have voted conservative to protect their trust income. The conservatives head a minority government, so they can be removed. But replaced by who?
c. Trust industry, includes energy interests, who will have higher cost of capital. They will not be pleased, and certainly don't like their stock options destroyed. They s/b out for blood. But replace with who?
So, all in all, there is probably good logic for bailing.
Respectfully, please convince me otherwise.
RJA |
