Slaughter in the Canadian Markets

Written by The Dividend Guy on November 1, 2006

You can’t have an investing blog in Canada and not write about the blow up that occurred today in our markets as a result of the income trust policy change the federal government enacted. In essence, they have change the tax rules on trusts and the ability to reduce the amount of tax a corporation by converting to a trust. To sum up:

Income trust investors suffered more than $20-billion in paper losses on their portfolios as some of Canada’s best-known companies — from telecom giants BCE and Telus to Yellow Pages, CI Financial, Canadian Oil Sands and Aeroplan — were battered by the rush selling following Mr. Flaherty’s surprise announcement that trusts will be taxed.

I think what this tells us is how vulnerable investors are to changes in government policy. I think to other examples such as the NEP in the early 80’s when the federal government’s policy changes on oil and gas destroyed that industry. Be careful out there - diversify, diversify, diversify.


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5 Comments so far

  1. Kimber November 1, 2006 9:11 pm

    What made me laugh was the talking heads dramatizing on “money evaporating.”

    Money moves, it doesn’t evaporate.
    It moves from one person to another,
    from one investment vehicle to another.

    Personally, I picked up a few trusts today.
    Already made about 15% on the rebound
    (markets always overreact in the short term).

  2. D November 2, 2006 1:44 am

    I enjoy reading your articles and insights, hang in there and your picks will come through.

  3. Canadian Capitalist » What Others Are Saying About Income Trusts November 2, 2006 11:40 am

    […] The Dividend Guy argues that the latest blow up once again shows the importance of diversification. […]

  4. empty spaces November 3, 2006 4:11 am

    Yeah I lost a lot of gains that I had seen in the past few month. I picked up a ton of energy trusts when natural gas prices tanked. I was up 20% in a month and now i’m back down to zero!

  5. Canadian Income Trusts Tax Melt-down » Investments + Editorials: Dissecting the good, the bad, and the ugly of investment / financial media! November 6, 2006 7:09 am

    […] Canadian Income Trusts Tax Melt-down Let’s face it, most investing decisions are made as easily as throwing a dice. I’vebeen told that I have a pretty hot temper, so I make it a point not to jump into things when it comes to investment decisions. This explains why I haven’t covered the recent Canadian Income Trusts melt-down like some of my peers have. There’s been some excellent discussions brewing. Almost a week has past, so here’s my perspective. […]

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