Crashing in Canadian Energy Trusts
Posted by Frugal on November 1st, 2006
Unbelievable! The trusts were hammered due to a governmental tax law changes, which will be fully in effect in 4 years.
I got hammered, but I decided to pick up more.
ERF, PWI, PWE, PVX, PDS, PGH all got hammered. The higher yielding stocks appeared to got hammered less than others. I guess yields always have its use.
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November 2nd, 2006 at 12:46 am
Wow, it is pretty amazing that a country with a developed economy can have such large loopholes in their tax laws, and the closure of those loopholes can cause such turmoil in their financial markets.
I guess you are buying more because the proposal may not become law? Because if it does become law, this is probably just the beginning of the slide.
November 2nd, 2006 at 1:15 am
I believe the stocks have fallen almost enough. But I could be wrong. In any case, the risk of my investment is covered slightly thru the higher yields. So if things don’t work out, at least holding them 1/2 year should give you back 10%/20% of your money.
I think a fall of 15% is roughly fully reflecting the tax effect that will be effective 4 years from now (2011).
In the meantime of these 4 years, it is possible that this law be reversed or partially reversed. But I don’t hold out the hope for it.
Maybe I’m buying too soon as you said. I think the real problem is contagious fall and pulling out of capital. Otherwise, fundamentally the price should already be close to fully corrected.