My sincere apologies. You obviously know what you're talking about. Funny thing though, given your "elevated" level of knowledge and expert advice, you LOST money this week. Go figure.
Apologies accepted. No mystery - there is a random stochastic component to nature that pervades all things - including the markets. But we are thinking creatures well suited for adaptation. The key to success is never giving up and adapting in a way that is more advantageous to the cards that are dealt. Sometimes that means folding your hand and trying a different game. Other times that means betting small until the trend changes. If one applies a Kelly strategy ( http://en.wikipedia.org/wiki/Kelly_criterion) to their portfolio to not over bet/invest their capital in any one position then there is NO real way to lose unless the entire market collapses. The problem most people have is over investing in one thing and getting wiped out early and not being able to ever recover within the limited confines of the mortal life span due to time limitations. Basically its all statistics and random motion and surfing the trends. TS
Tradernick - give it a rest dude. Your persistent personal attacks and slander are just so weak and sophomoric dude. Now you resort to name calling? Listen I am sorry if you don't agree with me and have disgraced yourself with these persistent tirades. Please just grown up. If you don't agree with something just say "I don't agree " and state why and move on. In the interim please grow up. You are bringing the maturity level of the board way down. Does this system have an ignore feature? If it does, for the sake of others, I'd suggest we BOTH use it. TS
Good - I found a Canadian patriot. This is all just a little experiment I am doing on a bet - honestly. I actually like Canadians very well. It's their socialist gov that gets me all fired up since I don't want to see the neighborhood go to hell when that reaches its logical conclusion. The answer is "yes". Most of us Americans have fallen from grace thinking lustfully of Canada's Celine Dion Maybe I should not speak for the women folk though but I suspect some of them too. TS
Lol, that's the best thing you've said yet. We've been apologizing for Celine Dion for years. Well we can agree that these criticisms are directed towards governments and not the people. It's when governments cease to represent the will of the people that problems arise. As for the income trust issue I am amazed that even Canadians were taken by surprise as these trusts have received so much media coverage here. I am sure that fueled the craze. I had a small bit of exposure (maybe $20,000) to these trusts but that's a very very small portion of my investments. I remember watching a piece about BCE and Telus converting into trusts and wondering what the heck was going on. The whole thing seemed ridiculous. In the end, something had to be done to end the migration or every company in Canada would end up structured as a trust. I consider myself a capitalist hippie. Oxymoron? Maybe. Don't discount socialism, it's influence is necessary to prevent pure capitalism from running over much of the population. Best of luck.
OK guys - lets try to back of the personal stuff and get back on track about Canadian Trusts. There is potential opportunity here from a knee jerk reaction and money can be made if people are smart about it. Advisers gave me some remarkable insight today. Current thinking is that Canadian gov actions have done and will do more harm than good for the Canadian government if left unchecked. There is a chance that this may change when they get the investors perspective. If not then Canada will likely lose their discounted trusts to private global equity. We Americans might just find ourselves buying up all of Canada's trust production through mega private equity that we have access to. For current Canadian investors in trusts its pretty much a wash (except for the massive losses in principal by the stampede out lol). They actually get a little tax break from 46% to 45.5% (hahah it is a tax cut after all ). BTW - Americans would have a cardiac at the notion of paying more than our 15% here. Right now, the tax liability for non-taxable or tax-deferred Canadian pension or retirement accounts is zero. And with the new changes, the result will be a net rate of 31.5 percent. This means the Ottawa government is hiking taxes on retirees in their own country (including union members and other tough voter groups) by that 31.5 percent. Politically this is going to be devastating for Canadian Gov. The troubled public-sector pension funds will now have to be topped off by Ottawa one way or another, given the trillion-dollar shortfall in current liabilities. Trusts were closing that gap helping to reduce the cost to the government of that trillion dollars, which, if this tax law stays, will now have to be paid. Basically gov gets a little cash now but has a huge liability later and only a fractional net gain in total tax revenue by this action. Any American who has trusts in IRA retirement accounts now is FORCED to liquidate since the 41.5% tax rate is not deductible in US retirement accounts. Massive capital will leave Canada. If Canada wanted to chase Americans out of Canada's finance this worked - but that in turn opens up a scenario for foreigners, most notably Americans to take over ownership of these trusts. With fireside sails on the quality trusts those are now RIPE FOR TAKEOVER!! US and offshore private equity investors and funds will pick off trust shares and pull them into their portfolios of big cash-generating businesses. And with the revenues running against leveraged debt costs, it will be quite easy to not only take over control of Canadian companies by private equity firms but also to run the books to cut out the Canadian Dept of Finance from taxable profit streams. haha - Canadian Gov just made it possible to give away Canada's most valuable resources and capital generators to foreigners. Bottom line - this is SO going to backfire on Canada gov both domestically and internationally and Americans will be running most of these companies with no government control on their books. TS
the real bottom line what is the direction of the stock prices of canadian trusts short term and long term?
I am getting away from betting on trends and am getting more and more into hedging strategies with options and spreads etc. Unfortunately most of the trusts do not have a public options market or their options are very thinly traded. However, the high yield that some of the better trusts are paying and the long track record (of the established ones) suggests that one can get a complete return on principal in 4 - 5 years (at the untaxed yield) on some of these as long as they do not collapse before then. Any principal and dividend flow remaining after that is pure gravy. Unfortunately if things fly heavily south (Canadian perspective) in the next year or so to tank prices then this tends to have a cascade effect as it scares people and cascades prices down even more (and yield up BTW). Those with the intestinal fortitude to buy up more on price declines capture even more yield (all things remaining constant). So higher yields get us to 100% principal capture sooner. This is a perfect play for a long term buy and hold investor like a retiree since if they don't care about price fluctuations and keep getting their checks each month they could care less. For more aggressive investors this may be too long a contingency play. In a sense it may be better to look at these trusts as a bond or preferred stock. The most difficult thing though is accurately accessing the "quality" of the bond/trust. Given the real political risk just demonstrated in my mind the quality has just dropped from about A to B- etc. and trending in the direction of "junk status". But junk bonds pay the highest possible yield and are often no where near as risky as the category implies. I don't think Canadian Gov could do anything worse than it just did to trusts - so I suspect degradation of quality is pegged here at its bottom. The good news is that those that are not in yet might wait for a moderate further trend down and pick up HUGE yields. Such can then get paid handsomely to wait for an exit on the first major up mini-cycle in 6 months to a year. Bottom line - I can't answer your question and I doubt anyone can since trends are so fickle with respect to macro environmental issues outside the control of governments and peoples. The one thing that was damaged badly recently in trusts is the very semantic of "trust". Most current investors feel that Canadian gov betrayed them completely and violated the "trust". So if one looks at them as normal low quality bonds the thing that will drive prices up or down is the risk-reward and yield relative relationship to any other low quality or junk bond equity. That will take some time for the market makers and investors to assess. If Gov wanted to help and offset the problem they would immediately step in with some kind of "guarantee" that trust taxes will be eased if trusts start to become insolvent as investors liquidate. As it is only time will shake out the de-facto "quality" or rating of trusts as hybrid "bonds". My bet is that there will be some more dips in price (higher yield) then a general trend up in price as overly discounted again regains respect and attention. The wild cards are if some of these trusts convert to traditional corporations or when trusts are taken over by private equity and pay trust owners a large premium to get the deal done. I also predict a lower interest rate trending globally and this will also push up prices. I guess what I am saying is that I am net bullish for those getting in here over the next 6-12 months and it would not be too bad to be forced to hold longer if prices tank further and one just collects yield payout & gets out before the foreign tax kicks in. For Canadians I am truly at a loss to see a winning situation since your tax rate is so damn high you are being penalized for making money. That is just insane to me given that you would spend or invest those those profits better than gov and help your local economy and fellow countrymen with more capital in circulation. Regards, TS
This is how it always is. The more they think they know, the bigger the bet, the bigger the fall. LTCM had the same problem. The Almighty bet that Man would turn out better, he's still licking his wounds and he knew everything.