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Thursday, March 29, 2007

Plexmar Resources PLE-V

I am having a bad week. My junior mining stock Plexmar Resources took a dive due to delay in drilling.

I am still holding on and I am considering increasing my stake.

In the meantime click here to read a telephone interview with Plexmar's CEO.

EIT.UN-TSX and SDT.UN-TSX Clobbered

My two largest holdong Enervest and Sentry Select Diversified Exchange Traded income funds got clobbered today.

This is primarily due to the government announced they will tax Hotel and Retirement REITS operating income.

I am anxious to see the Net Asset Values of these two trust ETF's tomorrow morning.

I suspect the NAVs may be up.

Tuesday, March 27, 2007

Firm Crude & Natural Gas Prices May Boost Energy Trusts

Firm Crude Prices May Boost Energy Trusts

Firm oil prices should provide the catalyst to kick-start the next upleg in energy stocks.

Oil and Natural gas prices have remained remarkably firm over the past few weeks despite declining growth expectations and increased market volatility. Recent price action suggests that, after dropping 35% from its July 2006 high, oil prices may have completed their corrective phase.

While a slowing U.S. economy remains a risk, strong Chinese demand should help maintain the floor under crude prices.

If so, investor confidence in this commodity should begin to restore as global growth concerns ease, providing the catalyst to trigger another rally in energy plays.

After consolidating for almost a year, the energy sector does not exhibit the overbought properties of most other markets. Bottom line I am going to start loading up on energy trusts.

Saturday, March 24, 2007

Income Trust Tax not as bad as some think

The income trust taxation announced by the Canadian Government on halloween 2006 is somewhat misunderstood.

1) Canadians in the highest tax bracket who hold their trusts in a taxable account will see little if any decline in after tax income. However, Canadians with little or no taxable income (ie the dividend tax credit is non-refundable) will feel the full effect of the trust tax. This Trust tax actually screws the low income investor and investors who have retirement accounts.

2) USA investors with trusts in the non-taxable accounts will find that there will be no more 15% withholding tax on distributions that will go into that account, reducing the net effect of the Trust tax up to 50%.

3) USA investor placing certain trusts into a retirement accounts, they will be hit with little or no tax (except for tax paid by the income trust under the new trust tax regime) and no 15% withholding tax, which is somewhat better than investing in the current income trust structure.

4) Some investors are under the mistaken impression that the distributions of all trusts will decline by 31.5% starting in 2011. That is not necessarily true. There are oil and gas, pipeline, power and other infrastructure income trusts that will pay no tax or minimal tax for years after 2011 due to tax pools and depreciation allowances on assets.

5) It appears the income participating units (units that consist of a common share plus a bond "stapled" together) will not be affected by the trust tax. If this strtucture is allowed I think we will see some existing trusts convert to this structure and new IPO's issued using this structure.

Tuesday, March 20, 2007

Harvest & Crescent Point Energy Trusts Have High DRIP Participation

I was reading an RBC report today and noticed that Harvest and Crescent Point Energy Trusts have the highest DRIP (Dividend Re-Investment Plan) participation rate of the Oil and Gas Trusts.

Crescent Point has 30% of their dividends re-invested and Harvest Energy has 43% of their distribution re-invested.

This tells me that the shareholders have long term confidence in the management of these two trusts.

This is another reason why both of these trusts are my top picks.

Monday, March 19, 2007

Sold 1,000 Units of EIT.UN today

I sold 1,000 Units of EIT.UN today.

I wanted to free up some cash to invest in some oil & gas trusts during the shoulder season correction.

Please note that I may not always tell you what I am buying or selling.

Please perform your own due diligence and refer to our disclaimer on our web site.

Bought 1,000 Units of Harvest Energy Trust Today

I bought 1,000 units of Harvest Energy Trust today in my RRSP account. Harvest yields almost 17% and since the distribution is most likely 100% taxable I have decided to let the distributions compound tax free in my RRSP until 2011.

Sold my GMR-N today For a small profit

I sold my General Maritime Corp stock today for a small profit. I decided not to wait for the $15 special dividend because I wanted to free up some capital to acquire more income trusts this this week.

Furthermore, with the recent market weakness the value of GMR may drop more than the $15 dividend after the record date. So I decided to cash out.

Please perform your own due diligence.

Oil Storage Down More Than OPEC Cuts

This is an interesting post from an participant in an Investor Village Message Board

If this analysis proves correct then I would definitely hold on to my "oily" income trusts such as Harvest and Crescent Point.

---------------------------------------------------

According to March 13, 2007 Wall Street Journal the size of the drop in Oil storage levels have been:

1) IEA - Q4 93 million drop
2) EIA - 100 million in US since Oct
3) CGES - 160 million drop world in 6 months

It looks like all the estimates agree with each other, and in 6 months we fell 160 million.

How much of OPEC cuts made up that drop?

It takes 6 weeks for a drop in production to reach the market, so in the 10 weeks of 2007, only 4 weeks worth of cuts at 1 million a day are in the data. At 1 milion a day of lower production that will be about 30 million reduction reaching the market.

The other 6 weeks of 2007 had cuts from the end of 2006 and were at .5 million a day, so add another 20 million.

In 2006 we then had 3 months at much less than .5 average, but I will use .5 for this analysis, or 45 million.

Total OPEC cuts reaching the market are at best 95 million barrels (I suspect I am 20 million too high), while world inventories during this time dropped by 160 million.

If OPEC had been pumping at their max rate, world inventories would have dropped by 65 million barrels over the last 6 months.

What this says is that this winter world oil demand was higher than max world oil production capacity for the first time ever!

For 2007, world oil demand is projected to be up by around 1.5 million barrels a day, while production growth appears after depletion to be having a problem to grow.

OPEC has engineered a drop in stroage level such that going into 2007 Q3 this year without a storage cussion. With growth in overall demand, and cycle demand coming in during Q3/Q4, the swing in demand could be 3 to 4 million a day by Q4.

With 1 million of spare capacity, and questionable net growth in production, next fall will be interesting.

Sunday, March 18, 2007

Sound Energy Trust-Very Tempting

Sound Energy Trust (SND.UN : TSX : $3.96)

Sound reported Q4 and year-end 2006 results.

Q4 production was 10,536 boe/d. Q1 production levels are estimated at approximately 10,100 boe/d. 2007 production guidance is 10,200 boe/d. Management estimates their payout ratio to average approximately 50% for the year.

Based on price assumptions of US$55.00/bbl WTI and $7.00/Mcf AECO, their cash flow projections for 2007 are $78.1 million. These funds will enable to cover distributions of approximately $43.0 million and capital expenditures of $31.3 million without issuing additional equity or increasing our debt levels.

Year-end total net debt amounted to $113.0 million against an available bank line of $146.5 million.

Sound's net asset value (NAV) based on a year-end report by the trust's independent engineers, GLJ Petroleum Consultants is $5.05 (using a 10% discount rate) per unit. That's over 20% below the reported NAV.

Saturday, March 17, 2007

Canadian Energy Trusts May Get a some sort of break on the Trust Tax

Richard Lehmann on PBS show NBR thinks Canroys may get a reprieve
Below is a portion of the transcript from the Friday March 16, 2007 Nightly Business Report Market monitor interview. I don't know where he is getting his information.

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Full Transcript http://www.pbs.org/nbr/site/onair/transcripts/070316c/

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Partial Transcript

YASTINE: Really. Well, tell us which ones that you like best here. One area I know that you like are Canadian energy trusts. What are those?

LEHMANN: Canadian energy trusts are actually stocks, but they're income secured because they pay monthly dividends. And they -- they differ from the U.S. energy trusts in that Canadian trusts are allowed to continually replenish their reserves so they never go out of business. And the second advantage of them is that the dividends from them is qualified dividend income, so it's only subject to a 15 percent tax rate.

YASTINE: Do you have a first pick?

LEHMANN: Yeah, the biggest and best energy trust is EnerPlus Resources (ERF). And --

YASTINE: It has a 10 percent yield.

LEHMANN: It has a 10 percent yield, ticker ERF and it's about 50-50, oil and gas. So it's not only just in exploration. They produce from a pool of reserves.

YASTINE: And you have a second one.

LEHMANN: The second one is PennWest Energy (PWE). And this, too, is a very large company with over nine years in reserves and a lot of unexplored properties as well.

YASTINE: And this one, both of these have come down quite a bit from 43 to 27. On PennWest you expect these to go back up in addition to the yield?

LEHMANN: Yeah. The trusts suffered a big drop in November when the Canadian government announced that it was planning to start taxing them in four years. But since then, the government's found that they don't have the votes in the parliament to pass this legislation, so the chances are that there will be some sort of compromise settlement, and my expectation is it's definitely going to be for the better, and so we'll see some spike in the price while you're collecting this dividend.

Tuesday, March 13, 2007

Sound Energy Trust-SND.UN-T

I have 5,000 units of Sound Energy Trust and the unit price is collapsing. I have decided to hold on because the net asset value at a 10% discount rate (click here to see table from their recent press release) is $5.05 per unit. At a recent price of $3.60 this translates to a 28% discount to Net Asset value. It is now yielding over 17% with a payout ratio most likely below 50%.

The market is discarding all small Canadian royalty trusts at any price.

I do not recommend anyone buy it because its hard to catch a falling knife. However, I highly recommend you conduct your own due diligence because this may be a "ruby" in the rough.

Sunday, March 11, 2007

Crescent Point Energy Trust CPG.UN-TSX

Last week I purchased 1,000 units of Crescent Point Energy Trust in my wife's RRSP account.

I am slowly acquiring units in the four "Top Picks" listed on my web site.

Please perform your own due diligence.

Saturday, March 10, 2007

Investing in Dividend Paying Stocks

I was recently interviewed for a press release through a financial question and answer format. One of the questions asked of me in the interview was:

Where do you think the stock market is headed over the next five years?

My Answer!

Charles M. O’Melia: No one knows! There is an old Chinese proverb that goes something like this: “He, who could foresee events 3 days in advance, would be rich for thousands of years.” On a long-term basis I have only witnessed expansion and progress. I believe that to be the nature of our American economy and our American way of life. And as our economy goes, so goes the stock market and I see no reason to change that belief.

Who would have thought the expansion in China would generate 5 billion dollars of business for GE? The US companies listed on the New York stock exchange have the ability to profit throughout the global expansion of business around the world. And, an investor can profit without the necessity of having to own an overseas fund or companies to profit.


Up until that question, the thought of what the market was going to do tomorrow (or for that matter, 5 years from now) have never concerned me. I never gave it a thought (Well, maybe a little!). There just isn’t enough concern on my part whether we are heading for a bear market or a bull market, or if the markets are heading sideways.

When you own a portfolio filled with companies that have a history of raising their dividend every year, and a systematic approach of adding more shares to the portfolio through the dividend reinvestments every quarter, plus having a simple savings plan with an opportunistic buying approach of adding even more shares to the portfolio every quarter, it really doesn’t matter. I am always buying more shares.

Sometimes I pay too much for one of my companies; sometimes I receive a great bargain. But no matter which, bargain or expensive, my income from those companies always continues to grow and grow and grow and grow and grow.

Sometimes, the dividend yield of one stock may be 5.15%, and the following year or two (even with two dividend increases during those two years) the dividend yield would drop to less than 3%. This, for example, may mean the stock price would have risen from the 30 dollar range to the 60 dollar range. I have found that when that 5.15% dividend yield drops to around 1%, the company’s stock in question becomes so high that the company usually has a stock split, as well as a dividend increase.

Right now, the DOW seems to be having trouble breaking that 11,000 barrier. And, right now, I can’t help thinking back, way, way, back.

For those of you who don’t remember the late 1960’s, early 70’s, the DOW barrier was 1,000.

Oh, what a tough time that DOW 1,000 barrier was! I remember thinking – it’s going to break it this time. Back in 1966 was the first attempt (rose to 985) and it kept on trying to break 1,000 for the next 6 years. When it finally broke 1,000 (it reached 1,050 or so in 1972), it immediately fell back. It took another 10 years before the DOW broke the 1,100 barrier. Six years for the DOW at 985 to break 1,000. Another 10 years to break 1,100. A total of 16 years to add a mere 115 points on the DOW.

So, is the 11,000 barrier in the DOW today similar to the 1100 barrier of times-gone-by? Will 11,000 on the DOW become a 16 year barrier? Could be! Then again, maybe not! I don’t know! “He, who could foresee events etc.”

In the meantime, I will continue watching my dividend income continue to grow and grow and grow and grow and grow!


To find the LINK for the complete financial interview visit:
http://www.thestockopolyplan.com

About the Author:

Charles M. O’Melia is an individual investor with almost 40 years of experience and passion for the stock market. The author of the book ‘The Stockopoly Plan – Investing for Retirement;’ published by American-Book Publishing. The book can be purchased at: http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml

Read more articles by: Charles O'Melia

Article Source: www.iSnare.com

Friday, March 9, 2007

Can the Canadian Income Trust Tax be Reversed?

Up until today I had lost all hope that the Tory Trust Tax would be reversed or weakened. However, Diane Francis's column in the National Post today has given me hope that the grass roots activism may make a difference.

I personally "was" a member of the Tory party. I spoke to them about this fiasco and told them that they will not get my vote the next election. I may sit out the next election or consider voting for the Liberals.

My position is simple.

To level the playing field between income trusts and corporations, the Conservatives could have made divedends tax deductible at the corporate level and fully taxed at the individual level and get rid of the complicated dividend tax credit. Its that simple!

By the way...I noticed that the federal government is advetising on my blog. I was tempted to block these ads but then I would be censoring. I guess everyone has a right to express their position.

The following is Diane Francis's Article in todays National Post:

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All is not well in the Tory heartland
Income-trust tax leading to talk of 'spoiler' candidates
Diane Francis, Financial Post
Published: Friday, March 09, 2007
There's lots of anger in Tory Land, as Calgary MP Diane Ablonczy discovered this week.

Things are getting ugly. Ablonczy's little town hall meeting in her Calgary riding this week turned into a booing session by victims of the ill-advised income-trust debacle.

No media were there, but this is from a witness: "I'm guessing there were about 400 to 500 people there split 50% invited family and friends and 50% furious investors. I was surprised at the number of protesters and how vocal they were. This issue seems to be bigger here than the party wants to admit. The party has greatly upset their foundation. I walked away with a sense that there is more trouble for the Conservatives in the heartland than I had expected."

The vast majority of investors, and successful people, in this country are Tories. So rather than holding their nose and voting for another party, there's talk of running "spoiler" candidates in key, or vulnerable ridings, simply to provide the disenchanted investors with a means of registering their protests and take away enough votes to defeat Tory candidates.

Another suggestion by a New York investment counsellor, whose clients took a bath, is for the energy-trust coalition to field candidates in key Alberta ridings against the Tories.

"I know that employees and unit holders of the energy trusts have been very active and vocal in communicating to their MPs -- via post, faxes, phone calls, and e-mails as well as in person at town meetings -- their profound distress and anger at this proposed legislation," wrote Bob Siegel of Cabot Capital Group in New York City.

"I would recommend that the coalition step up its campaign against Albertan Conservative MPs beyond mere voicing of intense opposition," he said. "Specifically, I would propose that the energy trusts, given their economic and political clout within the province of Alberta, recruit and put forth a slate of candidates who will run against any sitting Conservative MP in Alberta who follows the Party line and votes for this measure."

"The province of Alberta is the backbone of Conservative Party strength. If the Energy Trusts muster their considerable strength in Alberta to make known to Conservative MPs --in this kind of direct, immediate, 'in-your-face' electoral way -- that a vote for this measure will cost them their jobs and, thereby, cause at least some erosion in legislative support for this measure in Canada's Conservative stronghold," he concluded.

But Alberta is not the only hotbed. Plenty of ridings in Ontario -- where the Tories barely won -- could be attacked successfully by independent "income trust spoiler" candidates. Tony Clement won by 28 votes. Others are equally vulnerable. Same applies in B.C.'s retirement communities.

Another victim e-mailed me his reaction to the "dissenting opinion" posted by the Tories and written by the handful of Conservative members of the finance committee. That committee recently held hearings into the income-trust tax proposal and concluded that it was flawed and should be scrapped.

Obviously, the Tories kept to the party line.

"My family and I are lifelong conservative votes. Not any longer!!" wrote Les Parsneau in an e-mail. "Regarding Tax Leakage? The trusts don't pay taxes, the investors do. And how dare the Ministry of Finance refer to me [RRSPs and RRIFs] as 'tax exempt'. I have just taken more money out of my RRSP to live. I pay individual tax rates on that money."

Last week, another blow to the Tories was delivered by the Canadian Association of Retired Persons, which attacked the tax. It has 400,000 members.

"Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living," said an association statement.

It's reminiscent of the 1980s, when Michael Wilson's proposal to tamper with the Old Age Security met with a firestorm of protest and his Prime Minister was forced to back off from the decision. And they had a majority government.

Instead, this minority government has steamrollered and stonewalled, aided and abetted by a pliant press and in the belief that Tory voters have nowhere else to vote.

But the Internet and imagination are formidable foes. And investors are smarter than politicians.

dfrancis@nationalpost.com

Thursday, March 8, 2007

Canadian Income Trusts: A Screaming "BUY" Opportunity

The following excerpt was from Roger Conrad who has a free (and a paid version) newsletter called "Maple Leaf Memo".

Canadian Income Trusts: A Screaming "BUY" Opportunity

On Halloween day last year, Canadian Finance Minister Jim Flaherty decided that no more companies should be allowed to convert into trusts and that virtually all existing trusts should lose their tax-exemption starting in 2011.

We’ve seen this tax-grab before. The previous Labor government proposed taxing income trusts a year earlier, but ran into such heavy opposition that it was forced to shelve the idea.

Will this latest scare simply be a repeat of 2005’s false alarm? I can’t promise you anything, but we certainly have plenty of reasons not to panic.

First of all, the proposed legislation still needs to be approved by Parliament. All the minister has done so far is to file a notice of intent to table a bill in Parliament. There are no details on when this will happen.

Second, since the proposal provides a four-year grace period before existing trusts are taxed, current trusts will continue to pay their fat distributions.

Third, the proposed law as currently written might never see the light of day. Four years is an eternity in politics. It gives Canadian authorities plenty of time to allow certain businesses back into the income trust fold. (I’m convinced that what they really want is to restrict the format to the natural resource companies it was intended for--not to kill the trust format altogether.)

A year from now, I bet we’ll barely remember this Halloween scare.

And look on the bright side: It’s hard to lose if you buy in now. Trust prices have fallen in the face of uncertainty, giving you a great entry point and super-sized yields. Trusts that were yielding 10% the day before Halloween are now paying 12%. The actual businesses underlying these trusts haven’t changed a bit. Conservatively run, high-quality income trusts are as solid as ever, and I have no doubt they'll prevail for years to come.

Remember, the current yields still hold until 2011. So the owners of Precision Drilling, just to pick one of my favorites, will still receive 13.2% on their capital for the next four years.

And even if they're taxed four years from now, these companies will still be paying yields that dwarf your options in the Dow and S&P. Dozens of trusts now yield more than 10%, some as high as 21%.

Bottom line: I'm pounding the table because there are still plenty of trusts worth buying and holding for the long haul as their businesses grow.

Tuesday, March 6, 2007

How I Plan to Make $15,000 per Month with Canadian Income Trusts

If you have been reading this Blog you realize that I plan to earn $15,000 (Canadian $) per month by building a portfolio of Income Trusts.

On the right hand side of this Blog I list my largest holdings and the amount of monthly cash flow they generate.

For those that are new to the idea I will summarize as follows:

SDT.UN Pays $0.045 per month per unit. You can buy a unit on the TSX for $4.74 per unit. This results in a yield of 11.4%. I presently own 120,000 units. Therefore I receive monthly cheques of $5,400.

EIT.UN Pays $0.07 per month per unit. You can buy a unit on the TSX for $6.11 per unit. This results in a yield of 13.74%. I Presently own 33,000 units. Therefore I receive monthly cheques of $2,310.

If you want to learn more then go to the web site and if you follow my BLOG you can watch me achieve my goal.

This is not a get rich quick scheme. This is getting rich slowly by investing for income.

I only hope I have peaked your interest and I encourage you to perform your own due dilligence.

I am not paid by anybody to promote stocks and I have revealed my holdings to you.

Tune in regularly to see how am doing.

Even Good Stocks Get Clobbered During Selloff

Good investments fall with the bad during a selloff. Some investors were surprised that dividend paying stocks and income trusts fell during last week’s crisis. Normally income producers are a refuge.

The problem is that when there’s a big stock market panic, investors often have to raise cash to pay off margin accounts, and that causes them to sell good dividend paying stocks.

Income investing is still a good place to be in today’s uncertain markets.

My top picks (see the web site) still stand.

General Maritime Corp. GMR-N -What is the Record Date?

On March 1, 2007 General Maritime issued this follow-up press release;

"16:16 EST Thursday, Mar 01, 2007

NEW YORK, March 1 /PRNewswire-FirstCall/ -- General Maritime Corporation (NYSE: GMR) today announced the New York Stock Exchange has notified the Company that the ex-dividend date for both its recently declared special cash dividend and fourth quarter 2006 dividend will be March 26, 2007.

On February 21, 2007, General Maritime Corporation announced that its Board of Directors has declared a special one-time cash dividend of $15.00 per share along with a quarterly dividend of $0.62 per share with respect to its fourth quarter of 2006, each payable on or about March 23, 2007 to shareholders of record as of March 9, 2007."

I find this press release very confusing.

I am not sure if March 9 or March 23 is the record date for the special $15 dividend.

I am trying to contact the company to clarify this press release.

Please conduct your own due diligence on this matter.

Is 2007 the Year for Natural Gas?

One of my favourite private sector weather forecaster Evelyn Garriss of the Browning Newsletter is forecasting at least two hurricanes for the Gulf of Mexico in 2007.

She is also forecasting a hot summer around the great lakes.

If this comes to pass then natural gas stocks and royalty trusts should do well in Q3 and Q4 of 2007.

Saturday, March 3, 2007

Top Picks

Please visit our web site to see our top picks.

Check our web site regularly and join our free mailing list as our top picks will change.

I own all the top picks.

Friday, March 2, 2007

General Maritime Corp. GMR-N Moving Up

General Maritime is one of the few stocks that has been rising during this weeks world wide market correction. I am still holding my position.

They are paying a special $15 per share dividend to shareholders of record on March 9, 2007. If the shares hit $50 before March 9, 2007 I will be selling.

Once again please perform your own due diligence.

Thursday, March 1, 2007

Market Crash? Part Deux

I just came across this quote from Warren Buffet which I have to share with you;

"When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with experience ends up with the money."

Copyright © 2007 by Warren E. Buffett

This explains market corrections.

Harry S. Dent Jr. and Demographics

The following is an excerpt from Harry S. Dent Jr. newsletter (see surprise link on the home page) which I think is a good macro economic view.

"Between now and late 2009 we continue to recommend that investors buy on minor corrections and to focus in the large-cap growth sectors of technology, financial services, health care, Asia, and emerging markets.

Commodities should become more attractive again by late 2007 to mid 2008. Small-cap and mid-cap growth should also be attractive sectors for this last bubble, but the valuations are more attractive now in largecap growth stocks."

However, I think Harry Dent who is famous for his demographic predictions has missed a fundamental outcome of the retiring baby boomers.....they want income!

I think income producing investments will be in a long term bull market. The securities I am buying now will be in greater and greater demand going forward....especially after 2010.
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