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 â€” from telecom giants BCE and Telus to Yellow Pages, CI Financial, Canadian Oil Sands and Aeroplan â€” 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.