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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks
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To: WINDSURFER50 who wrote (45)3/7/1998 7:39:00 AM
From: Peter W. Panchyshyn  Read Replies (1) of 11633
 
To All:
Have recently made contact with Tomas concerning a post he made to one of the newsgroups - misc.invest.canada. He directed me to
this discussion group.
I have been investing in REITS (REF.UN) and other trusts (ERF.G and PGF.UN) for quite some time, since they first came out. I have accumulated over the years quite a large amount and have been quite satisfied with the performance and returns. Over the years the prices of these units have at some time taken a substantial hit for one reason or another. By following closely the trading activity of these and making additional purchases I have done rather well.
As a primer for discussion I submit the following observation in regards to these trusts.
The past year or so have seen quite an explosion in the numbers and types of these high yielding trusts. It is my opinion that the investment community (brokerages,brokers,money managers and some companies) have used the recent period of low interest rates to try and capture some of the money out there that have been trapped in
low yield GICs and the like. People began to be fed up with a 3% or 4% return and jumped on these trusts. Many of these trusts showed some good appreciation at first. The more of these trusts that came to the market began to spread that money kind of thin. With the shock to the financial markets as a result of asia and the rise of short term interest rates some of these trusts showed losses of between 20% and 40% from their highs. People, many on the advice of brokers, had taken quite a substantial capital hit. Further many of the trusts recently have forecasted 98 earnings lower as a result of a drop in oil and gas prices for those related trusts. Again it is my opinion that many of those who got into these trusts had far too high expectations, chasing after the stated high yields, not realizing just what could happen. Hopefully most of those unfortunate have already made their break and have sold out.
Do not get me wrong I am not down on these trusts. By following closely the trading of many of the newer ones I have picked up a few (EIF.UN, EIT.UN, NCD.UN, LUS.UN, LIF.UN, OPT.UN) at some very cheap prices. Some have already recovered nicely. The others I am confident. My confidence stems from the fact that interest rates should stay low or just slightly higher. Buisness climate is good with many US retailers coming to the Canadian market to set up shop. Commercial real estate is on a rebound with many new projects in the works. Meaning the commercial real estate trusts should do well. A few are even talking of purchasing some US properties to add to their holdings. In regards to the oil and gas trusts. Lower prices (for oil) at present should spur consumption thusly increasing demand. If the trusts can increase production they should be able to offset the price fall at least somewhat. It is also important to point out that oil and gas are not a renewable resource. At some point sooner or later supplies will be squeezed and prices will rise. A recent series of articles in SCIENTIFIC AMERICAN on oil and gas points to the idea that the probable reserves stated by some companies maybe grossly exaggerated and as a result we may see much higher prices in as little as 10 years. As an aside look in the future for a consolidation in the number of oil and gas trusts, a few may have to merge or be taken over.

Peter

ps hope this will spur some conversation.
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