How I Lost it All in the stock Market

This is a reprint of a letter sent to us in 2003. Its as relevant today as it was then.

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February 2, 2003

To: investingforincome.com

From: DRG

Finally someone agrees with me or better me with them!

I have been playing around in the marked for more than 25 years. I made some I lost some . I lost my whole house on a stock (Abacus) of a company who was building the Edmonton shopping mall. At the recommendation of my broker who was very friendly to me (he bought me coffee quiet often) I borrowed as much money as I could to buy the said stock.

Now, he worked for a reputable brokerage house, so I felt fairly good about my investment. I had 2000 shares @5.00 a piece. Thats what my house was worth in the early 70's. My broker told me he knows the people who were running the company, don't worry. Well the stock kept sinking and sinking. I questioned him (over another cup of coffee) what is the meaning of all of this. O, all stocks fluctuate up and down, he said. I figured, he should know, he is the "professional", and I don't know anything. When they dropped to 40 cents I asked him: "Don't you think I should buy some more, after all that is a excellent stock , is it not"? He hesitated and said, "well, I think, you got enough, lets not become greedy". I got him to buy me another 3,000 @ 45 cents, anyway. What a good average I had achieved, I was so proud of myself.

A little while after that, I turned on the TV and I heard the word Abacus.-- Close to bankrupt.-- I was sick, and yes I lost the whole works. I paid my house off a second time and left the market alone until 15 years later. In time the broker had been ?invited to court?, but left the country instead.

O'how I missed my coffee. I had to think of retirement and managed to get a couple houses to rent out. A friend told me about income producing stocks (units). I have never looked back since. I borrowed again from the bank, a house worth. As of today my holdings are $ 250,690 and I got paid at for January 2003 a total of $3,470. That is twice as good as getting rent, even after paying almost a $1,000 to the bank, and the interest to the bank is deductible. No houses to fix up, no painting, no complaints.

Sure I still have some property, diversification is good, but as far as income is concerned, you can't beat the income funds. When I got your e-mail (from a friend) about the different recommendations I was glad to see that those were exactly my choices for the last three years. It feels good to see that I finally got paid back from the school of hard knocks. I hope it lasts for a while.

DRG

Freehold Royalty Trust is Another Buy and Hold Security that Yields 11.70%

Freehold Royalty Trust - Symbol: FRU.un on the TSX

My 12 month target is CDN $16.00 /unit

Freehold Royalty Trust is roughly 65% weighted to oil, which will protect it from variation in natural gas prices.

It has a Low level of foreign ownership and a strong balance sheet.

Its presently trading at $15.39 per unit. It pays a $0.15 distribution per month ($1.80 per year) which results in a yield of 11.70%.

You won't get rich with this one but you won't go broke either.

The Yield fits nicely into our investing for income strategy. I feel this is a buy and hold type of security.

I don't own any units at this time.

Arc Energy Trust is a Great Buy and Hold Income Producing Security

ARC Energy Trust - Symbol: AET.un on the TSX

My Target is CDN $22.50/unit over the next 12 months

ARC's assets are diversified throughout the Western Canadian Sedimentary Basin and production is balanced between oil and natural gas.

One of the more attractive investments in the Canadian royalty trust sector due to asset quality and longevity, an experienced management team and reasonable valuation relative to the peer group. Arc is a favourite of the institutional investors.

Arc has small production growth potential with Carbon Dioxide flooding in the old fields. I suspect that some of the "socially responsible" and "green" funds may use this as a rationalization to acquire units.

Arc Energy trust is trading at $21.70 and pays $0.20 per month ($2.40 per year) yielding 11.6%.

I don't have any units at this time.

Why Baytex Energy Trust is One of My Top Picks

While Baytex’s Q2 financial results were impacted by higher costs and lower realized heavily oil prices, we were encouraged by the solid production numbers. In particular, development of its Seal heavy oil asset is progressing well.

Unlike some other operators in the area that are having inconsistent results from new wells, all of Baytex’s Seal wells continue to meet expectations. The lack of infrastructure is constraining major development at the property due to high transportation costs, but infrastructure investment by other operators appears to be ramping up.

I believe that as development of Seal progresses, further value will be attributed to the asset and reflected in the trust’s unit price. Furthermore, the Seal heavy oil reserves could he worth over $40 a share to a major Oil company like Shell.

In the meantime Baytex is paying out $0.18 per month ($2.16 per year) for a yield of just under 12% while you wait for the big buyout offer.

Now that's investing for income at its best!

Can I generate $15,000 per Month Income?

Can I generate $15,000 per Month Income?

On November 1, 2006 I had major losses from the Canadian Government's about face decision to tax income trusts. I stayed up night after night worrying. Have any of you stayed up all night worrying? Have any of you had insomnia positions that threatened your sleep that destroyed your relationships and eroded your self-esteem? I have and I can tell you right now that holding and hoping is a recipe for disaster, both financially and personally.

I finally sold out on November 15, 2006 and reinvested my remaining funds in SDT.Un and EIT.UN. These are still my largest holdings.

Just because my income investments got clobbered does not mean that the underlying investment philosophy of investing for income is wrong.

I plan on rebuilding my income portfolio and I plan to share my experience with you in the coming months and years.

My Goal is to generate $15,000 per month income net of intererst costs and taxes.

Stay tuned.

Top Pick Verenex Energy VNX-T Presently Trading at $12.30 with a 2008 target of $18

Verenex Energy (VNX-T) is 45% owned by Vermilion Energy Trust(VET.UN-T). They are drilling in Libya. Drilled 2 wells so far. The first one flowed 10,000 BOE a day and the second flowed 20,000 BOE.

Verenex hit an all time high in August of $17.63 but has pulled back considerably since the ORCA well drilled by Bordeux Energy (BDO-X) off the coast of France (they had a 30% interest) came up dry.

I normally only accumulate dividend paying stocks and stay away from risky stocks such as Verenex because its purely an oil exploration play in Libya. However, they have struck oil and I expect that in in 2008 Verenex will also become a production company too. Once this happens it will attract different investors and valuations.

I feel that it will reach $18 by the end of 2008.

I picked up 2,000 shares.

Please do your own due dilligence before acquiring any securities.

Natural Gas and Oil Prices Showing Unexpected Strength

Crude Oil

After 4 days of losses, crude roared back to move into positive territory. Backs were even stronger up $1.70+ in most terms. Products were also up sharply. There was not a lot of bullish news to prompt the move though the USD was marginally weaker. Rather, this appears more technical in nature: the market tested but held support just under $79.00 which has encouraged funds to jump back in for a move higher again.

Natural Gas

Today's 57 BCF injection was bullish vs. expectations that were largely around 65 BCF. Beyond that, the trend of injections has been supportive: since 2000 the average injection for the past six weeks has been 73 BCF, this year we have average 56 BCF. We remain near all time records but have been losing ground. Meanwhile, with the weekend looming and a (weak) storm in the Gulf some more strength may be in order. Liquefied Natural Gas imports have slowed to under 1 BCF per day. if this keeps up natural gas prices should continue to strengthen.

Goldman Sachs on the Marginal Price of Oil Being Over $70 Per Barrell

Last night I picked up comments on the Investors Village CWEI board comments on the latest Goldman Sachs report on oil. I felt I should share this report with you. If Goldman Sachs is right then our income investing philosophy will be rewarded because some of the largest dividend paying investments are related to the oil and gas industry.

However, I caution readers on Canadian Oil and Gas Trusts because they are more sensitive to Natural gas prices (except Canadian Oil Sands Trust) and unless the oil:gas ratio improves along with the rising price of oil then the Canroys will continue to struggle.

The Goldman Sachs report talks about a lot of the issues we've discussed. Most interestingly, they believe that the long-term price of oil is determined by the marginal cost of oil production. Marginal cost is defined as the average of the highest cost (or bottom quartile) producers. Their study concludes that marginal costs are now close to $70/bbl. Furthermore, there are no more than 4 million b/d of current production that have a cost greater than $70/bbl, meaning 4 million b/d of extra capacity costing under $70/bbl to bring the long-date price down.

The report is the best I've read. It is the most technical, most numbers based. I've included a couple quotes below. I think oil is going down over the next few days as the dollar has a little bit of a rally here. If it goes down enough, I might add to my already significant positions in preparation for what could end up being a long, hard winter.

Excerpts from the report;

"In July, we argued that a significant increase in Saudi Arabian, Kuwaiti and UAE production by the end of the summer was critical to avoid prices spiking above $90/bbl this autumn. Last week, OPEC announced that it would increase production by only 500 thousand b/d by November 1. We believe that this will be too little, too late, baring an outright collapse in demand, and now expect inventories to draw to critical levels this winter."

"Despite only modest demand growth this past year, anaemic oil supply growth, due to disappointing non-OPEC supply increases and OPEC production cuts, has pushed the market into a significant deficit, which pushed the oil forward curves back into backwardation, creating the first cyclical bull market since 2003 that will likely carry into 2008."

"The current structural bull market, or investment phase, has entered its sixth year; however, the industry has added very little new, low-cost, production capacity as it has run into technological and political bottlenecks that will likely take years to resolve, supporting our view that the investment phase will likely last another five to 10 years. Further, costs have continued to rise, pushing marginal costs closer to $70/bbl, leading us to raise our 5-year forward WTI forecast to $70.00/bbl from $67.50/bbl... "

"Crude oil production during these summer months was nearly 1.0 million b/d below the level a year ago, while demand was averaging more than 1.0 million b/d higher than the level a year ago. This sharp imbalance prevented the normal seasonal build in inventories and has even set the stage for a third quarter draw on stocks, which is a rare event typically associated with significant winter spikes... "

"Net, we now expect inventories to decline by 1.5 million b/d during the fourth quarter versus a seasonal norm of 0.5 million b/d, which will likely cause prices to spike above $90/bbl this winter as inventories are drawn down near critical levels. It is important to emphasize that the current market deficit is being driven more by supply shortages than by excess demand, which is why upside price risks are so high despite significant economic growth concerns. We estimate that during the fourth quarter, demand growth would need to be 1.0 million b/d below our forecast, nearly 1.25%, to create a balanced market with a normal fourth quarter draw of 0.5 million b/d... "

"Given the inability of non-OPEC producers to significantly expand conventional production, we have argued for some time that oil at the margin is no longer pricing conventional oil but rather non-conventional oil such as synthetic crude oil, renewable fuels, and synthetic fuels... "

"1. The energy, water, and labour bottlenecks in the Canadian tar sands are severe and will likely prevent significant scaling up of the supplies at an oil price of $70/bbl, while a substantial change in Canadian policies in order to incentivise the use of nuclear power in tar sands production, and facilitate immigration of much needed foreign engineers appears unlikely in the near term;

"2. The nationalization of the Orinoco belt assets by Venezuela has led to a sharp decline in non-conventional output and no further foreign input of capital;

"3. Biofuel production has substantially driven up agriculture prices, pushing the subsidized cost of many of these fuels anywhere from $65/bbl to $150/bbl with a further scale-up likely to push agriculture prices even higher and hence raise biofuel production costs;

"4. ExxonMobil abandoned its gas-to-liquids (GTL) project due to high costs, the Sasol GTL plant in Qatar has run into technical problems in the ramp-up phase, and the Shell GTL project is significantly over budget, all of which suggest that GTL is off the table at an oil price of $70/bbl...

"If OPEC wishes to push the long-dated oil price down, it would need to offset almost all of the high cost production. However, as the group only has 2.0 to 3.0 b/d of spare capacity at most, it cannot displace the high cost production that supports the long-dated oil price. Instead, it can only control inventory levels, which ultimately controls curve shape..."

"Over the past five years, volumetric exports from the (Gulf Cooperation Council) region have been flat as demand growth has absorbed all of the supply growth..."

"If Saudi Arabia, UAW, and Kuwait ramp production up by 1.0 million b/d, the world would be left with very little spare capacity, which is politically dangerous for the GCC countries as they would have less of a negotiating position that the spare capacity provides, and would be economically dangerous for the consumer countries."

Canada Under Seige: Thanks Harper and Flaherty

The Trust tax hoisted onto Canadians is facilitating the transfer of our wealth from Canadians and hard working Americans who invested in our income trusts.

We at investingforincome are not just a bunch of malcontents about getting screwed by our government. But everyone is getting screwed. What is really sad is that part of the reasoning behind the "Tax Fairness" was that our American friends were benefting from the trusts and they called that "tax leakage". Our reflex anti-Americanism has resulted in our wealth being transfered to an Arab government.

Below is a copy of Diane Francis's BLOG on this issue. If you click the title of this post you will be taken to her BLOG.

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By Diane Francis

Canadian policies are facilitating the buyout of Canada. Canadian energy trusts are bought with 100% financing borrowed from foreign lenders or entities. Interest payments are made from Canadian cash flow which used to be distributed to trust unitholders and taxable.

The interest payments to foreigners are also exempt from the 15% withholding tax. This means that taxable cash flow has become tax-free mortgage payments to buy energy assets.


Abu Dhabi pounced first and in months will be the biggest oil company in the land, financed in this way by taxpayers. To boot, not one share of its oil entity in Canada, TAQA North, can be owned by a Canadian under Abu Dhabi law.

Harvest Energy Trust Recommended by Change Wave

Change Wave investments has put out a buy recomendation on Harvest Energy Trust. Click the title of this post and it will take you to the video interview.

What is interesting here is that they believe some of the Canadian Energy Trusts will start converting to the US Master Limited Partnership (MLP) structure.

I have written about this in previous posts and I quoted from a research paper written by UBS.

I plan on sending out this report to my email subscribers some time next week. If you want a copy please sign up on our list at www.investingfforincome.com.

I will be following this issue closely over the coming months.

Don't Underestimate the USA

Max Whitmore: Inflation? Who Said Inflation?!

The Fed did their thing last week and there was a torrent of words from every corner of the globe about how they had: (1) done exactly the wrong thing; (2) done exactly the right thing; (3) went weak-kneed and gave in to Wall Street; (4) Wall Street failed to get the Fed to do its bidding; (5) Bernanke is a rooky and is making rookie mistakes; (6) Bernanke did a brilliant job; . . . and on and on!!

The only sure thing most agreed on was that the Fed took action to get the confidence of the investing and banking business and to overtly assure the investing public that it was ready to do whatever was required to make sure that the country did not experience undue hardships and possibly a recession. (Bernanke believes that recession is the outcome of bad management, not an inevitable economic outcome no one can control.)

Today, seeking to apply every available tool of good management, the Fed uses just about every type of high-tech computer program available (and many programmed by their own staff) to “run scenarios” that help predict recession or other undesirable economic outcomes if no preventative action is taken today.

Then, a study of these undesirable outcomes is made to see just what different types of present actions “plugged in” to the program might help prevent or mitigate these undesirable outcomes down the road. This computer “looking forward” study helps the Fed to zero in on just what the best action might be today.

It is from these “looking forward scenarios” that the action on the Sept. 18 was framed. The FOMC statement alludes to just this technique. For example, here are some of the key phrases of the FOMC statement of Sept. 18: “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”

I believe it was the use of the above mentioned computer programs that led the FOMC to lower rates as much as they did. I do not recall any time in the previous 18 years of the Greenspan Fed that the steps taken were to “forestall” disruptions, as was clearly noted in the FOMC statement.”

Note that the phrase “to promote moderate growth over time” was spelled out, too. In my opinion, this was to salve the frayed nerves of investors worldwide. I think it also was to address the inevitable inflation questions.

The FOMC statement then directly addressed inflation in the next paragraph, again in my opinion, to pre-empt criticism some would level at it as a result of the drop in rates. They said: “Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. ….The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”

They obviously felt it was necessary to cite the moderation of core inflation to clearly tie the reduction of rates to the goal of promotion of long-term growth. But, they also added that they would be “carefully” monitoring the situation regarding inflation “to foster price stability“. To me this paragraph really was the basic purpose of the entire FOMC statement. It is inflation that now has everyone on pins and needles!

I find it most interesting that inflation is the one outcome that everyone seems to expect. I think I would be fairly accurate if I said that ALL the articles I have read addressing the FOMC action are unanimous in predicting or fearing that inflation was the next outcome. There can be no other outcome they believe. Well, I don’t believe those predictions for a minute. The last thing that usually happens is what everyone expects — the last thing!!

In my view, this is akin to the world believing that interest rates rule the world’s economic health. I have said over and over that it isn’t interest rates, it is money supply. Read my last 3-4 articles again and you will see why.

Basically, because Bernanke’s research papers and essays about the Great Depression — research covering periods as far back as the 1890s — over and over clearly spells this out.

Additionally, he also points out on page 250-51 of his book “Essays on The Great Depression” his take on inflation. In his words, “Theory suggests instead that inflation will be determined by current and expected money supply and demand.” This statement is made as part of an argument about unemployment in the Depression, but clearly again makes the case that control of the money supply is a better control device that any other for inflation.

My own view on this matter goes to a simpler way of stating the situation. Inflation due to a lower value of currency — a condition typically precipitated not by actual conditions but by fear — requires (1) that import levels remain the same, but at higher prices and that (2) internal production capacity of the country is either at or very close to full capacity or that the ability to produce goods to replace the higher cost imports (but at a more competitive price than the imports) is lacking for any variety of reasons.

My own expectations are that imports will substantially moderate in the next 12 months. U.S. buyers of imported goods will find it more competitive to buy USA goods instead of imports. This condition will exist, in my opinion, because this country is a sleeping giant, as Admiral Yamamato of Japan, once observed. If you wake it, it will beat you at every turn.

I see this country going on a production binge not seen in many years. I look for exports to soar, production for our own consumption to flourish, and for the huge foreign investments made by many U.S. companies to become the proverbial albatross about their necks.

I have no way of knowing if Bernanke senses this same scenario, but I would be surprised if he didn’t. The loss of hundreds of billions, several trillions, of our sovereign wealth over the last 30 years occurred because we let it occur.

As a nation, we did not, primarily for political reasons, combat the unfair positioning of many nations against us on the economic playing field. These countries set their currencies — especially China — well below our dollar and used low paid sweat labor to produce goods to sell to our nation at prices we just could not match under such circumstances.

Now, the lower dollar is biting our competitors back in a big way. To continue selling to us, they must sell production at a loss, as the peg of their currencies to our dollar now is having negative consequences for their economy. How long will they do that?

That depends on how serious they think we are in fighting back. We have just seen the biggest increase in U. S. exports in decades during the past 19 months. For the first seven months of 2007 (August numbers not included yet) the U.S. is running at an annual rate of $1.6 trillion (annualized) in exports, versus an annual rate of $1.44 trillion in 2006 (Jan-July 2006 $822 billion vs. Jan-July 2007 $915 billion). That is a handsome +11 percent increase over last year and with the dollar favoring us even more in world markets recently, I expect we might even challenge the +14-15 percent gain year-over-year. (Source of data is U.S. Census Bureau, Foreign Trade Div.).

All this export increase means more and bigger paychecks landing in U.S. households. Now add to this higher income from what I think will be a huge increase in U. S. production for U.S. consumption — at prices better than those offered by imports — and I just don’t see inflation. Instead, I see healthy economic expansion, likely well above our long-term rate of expansion of 3.5 — 4 percent per year.

To have inflation, we would need (1) a Fed not keyed on “carefully” watching inflation and using money supply to moderate it — but our Fed is “carefully” watching — and you need (2) an American business community that passes up the golden opportunity of competing with imports on its own home turf (and winning this time) — but, that too, will never happen!!

Will I be right? I think so. But, I expect that the argument will rage on for the next 6-10 months as investors start an “inflation watch” and slowly come to the realization that the stock market has it right so far.

Stock index prices are climbing and not because of anything except an overall investor consensus that the Fed is right on target. To me my Super Chart Keyline now becomes the front line of this terrific battle. I will be watching it with baited breath. It should be a fascinating few months!

God Bless America

"LET'S BE PERSONAL" Broadcast June 5, 1973 CFRB, Toronto, Ontario

Topic: "The Americans"

The United States dollar took another pounding on German, French and British exchanges this morning, hitting the lowest point ever known in West Germany. It has declined there by 41% since 1971 and this Canadian thinks it is time to speak up for the Americans as the most generous and possibly the least-appreciated people in all the earth.

As long as sixty years ago, when I first started to read newspapers, I read of floods on the Yellow River and the Yangtze. Who rushed in with men and money to help? The Americans did.

They have helped control floods on the Nile, the Amazon, the Ganges and the Niger. Today, the rich bottom land of the Misssissippi is under water and no foreign land has sent a dollar to help. Germany, Japan and, to a lesser extent, Britain and Italy, were lifted out of the debris of war by the Americans who poured in billions of dollars and forgave other billions in debts. None of those countries is today paying even the interest on its remaining debts to the United States.

When the franc was in danger of collapsing in 1956, it was the Americans who propped it up and their reward was to be insulted and swindled on the streets of Paris. I was there. I saw it.

When distant cities are hit by earthquakes, it is the United States that hurries into help... Managua Nicaragua is one of the most recent examples. So far this spring, 59 American communities have been flattened by tornadoes. Nobody has helped.

The Marshall Plan .. the Truman Policy .. all pumped billions upon billions of dollars into discouraged countries. Now, newspapers in those countries are writing about the decadent war-mongering Americans.

I'd like to see one of those countries that is gloating over the erosion of the United States dollar build its own airplanes.

Come on... let's hear it! Does any other country in the world have a plane to equal the Boeing Jumbo Jet, the Lockheed Tristar or the Douglas 107? If so, why don't they fly them? Why do all international lines except Russia fly American planes? Why does no other land on earth even consider putting a man or women on the moon?

You talk about Japanese technocracy and you get radios. You talk about German technocracy and you get automobiles. You talk about American technocracy and you find men on the moon, not once, but several times ... and safely home again. You talk about scandals and the Americans put theirs right in the store window for everyone to look at. Even the draft dodgers are not pursued and hounded. They are here on our streets, most of them ... unless they are breaking Canadian laws .. are getting American dollars from Ma and Pa at home to spend here.

When the Americans get out of this bind ... as they will... who could blame them if they said 'the hell with the rest of the world'. Let someone else buy the Israel bonds, Let someone else build or repair foreign dams or design foreign buildings that won't shake apart in earthquakes.

When the railways of France, Germany and India were breaking down through age, it was the Americans who rebuilt them. When the Pennsylvania Railroad and the New York Central went broke, nobody loaned them an old caboose. Both are still broke. I can name to you 5,000 times when the Americans raced to the help of other people in trouble.

Can you name me even one time when someone else raced to the Americans in trouble? I don't think there was outside help even during the San Francisco earthquake.

Our neighbours have faced it alone and I am one Canadian who is damned tired of hearing them kicked around. They will come out of this thing with their flag high. And when they do, they are entitled to thumb their nose at the lands that are gloating over their present troubles.

I hope Canada is not one of these. But there are many smug, self-righteous Canadians. And finally, the American Red Cross was told at its 48th Annual meeting in New Orleans this morning that it was broke.

This year's disasters .. with the year less than half-over… has taken it all and nobody...but nobody... has helped.

ORIGINAL SCRIPT AND AUDIO
COURTESY STANDARD BROADCASTING CORPORATION LTD.

(c) 1973 BY GORDON SINCLAIR
PUBLISHED BY STAR QUALITY MUSIC (SOCAN)
A DIVISION OF UNIDISC MUSIC INC.
578 HYMUS BOULEVARD
POINTE-CLAIRE, QUEBEC,
CANADA, H9R 4T2

The Dirty Little secret About the Prime West Energy Energy Trust Buyout by the Arabs

Today an Arab country bought out Prime West Energy Trust for a 30% premium. The dirty little secret is that Prime West will now become a "private" flow through entity and will not be subject to a the "Trust Tax".

This is absolutely insane and I am amazed how our media and the public are so naieve that they cannot see what hyprocisy this tax is.

Remember, the "Tax Fairness" policy was designed only to Tax publicly traded Trusts.

This is patently unfair.

Ironicly, the Canadian Minster of Finance sometimes advertises the tax fairness plan on this blog. What a Croc!

Unloved Natural Gas

Contrarians should consider investments in the natural gas sector.

After a mini-mania in 2005 as hurricanes temporarily crushed supplies, natural gas prices have settled into a broad trading range and have disappeared from many investors’ radar screens. Sentiment has been extremely negative in the past 18 months, similar to the environment early in the decade, even though prices are well above the levels seen in 2001. Industry investment plans have been steadily pruned, which should ensure inadequate supplies down the road given the relentless uptrend in demand. Thus, the contrary call is to be bullish from a long-term perspective. Temporary weather and hurricane effects aside, we expect prices to grind higher in the coming years.

Article taken from BCA Research

Dividend Investing

Why dividends are important.

Dividends set a floor price – Dividend stocks tend to trade within their yield range, and rarely do they yield much higher than Treasury bill.

Dividends account for over half of the long-term real return – If you own 100 shares of BMO and receive 4% of dividends, you can DRIP your dividends to buy another 4 more shares. If you keep up the DRIP for 20 years, you’ll have a handsome 219 BMO shares in your portfolio. Even better, some Canadian corporations offer 5% discounts through DRIP.

Companies with long-term track records of stable and raising dividends show quality of the managements – Managements show commitment to shareholders by improving fundamentals and sharing profits.

Dividends cannot be manipulated like earnings – Dividends are real hard cash in your lap. Earnings can be faked by creative accounting.

A stable stream of dividends reward investors even during market down turn – Management pays you to wait even during market setbacks.

Dividends are more tax efficient than regular incomes and capital gains – In British Columbia, if you can make $66,000 in dividends, you pay $0 tax. In regular incomes, you pay $16,880 in taxes. In capital gains, you pay $5,097.

You can safely spend your dividends without harming your portfolio – If you think in terms of income streams instead of portfolio size, you can consume 100% of your dividends without hurting your portfolio. If instead you go for capital gains, consuming your capital during a depressed market will harm your portfolio immensely.

Receiving dividends are passive – Dividends and increases are given to you each quarter automatically without any action on your part. On the other hand, to receive capital gains, you must monitor the share prices continuously.

High dividend paying stocks have historically out-performed low-yield stocks – In David Dreman’s Forbes column (April 2004), he cited that between 1970 and 2003, the top fifth highest yield stocks returned 14.5%, while the lowest fifth returned only 8.8%.

Dividends are more predictable than capital gains – Suppose BMO averages 10% over the long term with 4% in dividends and 6% in capital gains. In a given year, you can count on seeing the 4% in your brokerage account, but the 6% capital gain is less dependable.

Your investment return depends on the company’s fundamentals, not the market’s temperament- You may think a business is wonderful and its stock is outrageously undervalued, but if market doesn’t share your excitement, your effort won’t bring you fruition, and you’re needlessly squandering away precious time. On the other hand, if dividends and dividend increases are your investment objectives, you don’t need the market’s blessing to celebrate. This is one fundamental advantage of dividend investing. When you buy dividend-paying stocks, there’s a strong linkage between your analysis and your reward, and this linkage isn’t compromised by market psychology.

Dividend investing forces you to think in a healthy frame of mind in terms of buying low - I bought Harvest Energy Trust last year. I bought it again this year. I will buy it next year, and possibly for the next 20 years. Why would I want my initial purchase to rise at the expense of penalizing my next 20 purchases? The next time you see dividend-paying stocks tumbling down, please come and give me a high-five.

Max Whitmore: They Are All Watching The Wrong Numbers

Below is a newsletter written by Max Whitmore. I find his writings different then all the gloom and doom you hear about.

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Whitmore: They Are All Watching
The Wrong Numbers

So, the wait for next week's FOMC meeting begins. And the power of the suspense is like nothing we have seen for years! Will the FOMC group lower rates or leave them unchanged? Will they change the FOMC statement implications? Will it be bullish or bearish? Will the Fed bail out the "bad guys?" Will we go into recession? Will my new suit be back from the cleaners in time for me to go to next Saturday's wedding?

Oh come on!! This is all bordering on the silly! Most of the questions that are being asked are superfluous to the real question before the nation. That real question is, "Are we seeing the beginning of a major decline in the stock market."

All the other questions are of little importance. If the market buyers have lost confidence, they should be exiting the market by the millions. Are they? Hardly! Will they? Well, that one requires a bit more examination, so let's look at this last question and see what really solid information we can glean from what is going on.

First of all, the major money investors are not running away. Yes, we are seeing a correction. That is as sure to happen in the stock market every now and then as it is that they will ring the opening gong at the NYSE every weekday morning at precisely 9:30 a.m.

I have shown you many times in the last six to seven weeks that my SUPER CHART KEYLINE is still well below the current market activity. As I write this column on Sept. 11th, my KEYLINE for the DOW closed at Dow 12,017 and the KEYLINE for the S&P at S&P 1369. The actual Dow closed today at 13,308, above my KEYLINE by 1,291 points!! The S&P closed today at 1, 471, above my KEYLINE by a huge 102 points!

Now, you may ask, is this final proof that we will not see what I term a Major Market Reversal — in this instance a crossing below my KEYLINE for six weeks in a row. The answer is clearly no. But, the KEYLINE has only been crossed up and down a total of 16 times since 1963. It crossed UP the KEYLINE in June 2003 at DOW 9120. The S&P crossed up at 988. With current prices so far above the KEYLINE, it only tells us that any near term reversal is clearly not in the card for many weeks, so long as some sort of totally unexpected political or societal event does not intervene. The financials DO NOT call out any danger at this point at all.

OK, you ask, why are so many financial writers suggesting a huge collapse is near? Why are some even predicting a recession? To be honest, I just don't know. What they read as indications of such a disaster is beyond me. All I do is read charts. Charts are dispassionate, absolute, totally uninfluenced evidence of what EVERY investor is thinking today. At the end of each day, ALL these investors have made up their minds that things are either very bad, very good, or somewhere in between those two opposite poles. At the moment, it is clear they do not see a market collapse in the near term — a period I usually define as three to five months.

Understand this. The market as a whole cares little for what the just released data says. Yes, they do respond to monthly employment data and such, but be clear that this constant release of data requires a CLEAR TREND to be emerging before a TREND in the stock market occurs. The current stock market TREND is still UP or the selling would be far greater and my KEYLINE would clearly be in the process of being challenged. Today, it is a long way from being challenged in any way.

So, what does the coming FOMC meeting really mean? Isn't that where I started when we began the column today?

Well, to me it means this. The world of investors (but not all) are watching the interest rates as if the financial world will rise or fall on what happens to interest rates. How far from the real truth this is. Oh my, how far!

Do you really what to know where the market might go in the next three to five months? Then, I would point you to this Web site: http://www.federalreserve.gov/releases/h6/Current/. What's there? Well, in Table 2 a bit down the list (look at the "week average" column under M-2) you will see that the data released the week of Sept. 6 shows that for the week ending August 20, the M-2 increased from the week before by a total of about $48 billion.

It also shows that the M-2 money supply for the next week ending August 27 increased by $65 billion, ASTOUNDING!!! I do not recall any such HUGE two week increase for all the years I have been in this business. It may have happened, but I can't recall it and the data I can get hold of as I write this does not go back to 1967, the year I began my stock market career. Folks, it is all about MONEY SUPPLY — MONEY SUPPLY — MONEY SUPPLY!!

What so astounds me is that the Fed has just kicked in $112-113 BILLION to the money supply at a time when it seems to be conservatively approaching the interest rate question and sending all the pundits off on a wild goose chase about where interest rates are going and thus where the economy is going. Want to really know where the economy is going? With what the Fed just did, it is about to get a kick in the pants that will send it into a HUGE stock market rally and a huge prolonged economic boom!

Do I sound a bit over the top to you? Well, believe me I am standing on the most solid ground there is — the words of Dr. Ben Bernanke himself, the Fed Chairman, the one guy who can make it all happen.

Take a moment and read this quote from his book published in 2000. The title of the book is "Essays on The Great Depression." On page 34 under the paragraph heading titled "3. Conclusion" line 3 to line 7 of this paragraph reads: "Comparative studies of a large set of countries have greatly improved our ability to identify the forces that drove the world (my bold) into depression in the 1930s. In particular, the evidence for monetary contraction as an important cause (my bold) of the Depression, and for monetary reflation (my bold and note: meaning adding money to the economy) as a leading component of recovery (my bold), has been greatly strengthened."

Today, this is precisely what is going on — Reflation! Notice that Dr. Ben never mentioned interest rates as even a consideration of being important. To be fair, he does suggest in one of the later essays that confidence of the population in the steps being taken to improve or stabilize an economy is important, too. In other words, if the money supply goes up, but no one wants to use it, there can be problems.

While some writers suggest that is happening now, I need only look at the chart to see that, so far, that is NOT happening — not even close!

So, what is the bottom line for me? Simply this. Corrections like this one, with charts remaining strong, are the time to accumulate good stocks at bargain prices. I called for a MAJOR BUY last week and stand by that call. I said that only if the SUPER CHART KEYINE were broken to the downside would I change that call. After all, I can't see more than the current chart shows and it usually is a look into the future of three to five months, as I said above, and every now and then even as far as six to eight months. Right now, my opinion is that the three to five months look is what I am seeing.

So, go ahead and read the doomsayers if you want. But, do do this. Watch the charts, too. When the major averages begin to break major supports (we are a LONG way from this at the moment) then get concerned. Want to protect your portfolio cash until you know if I am right? Well, you might use stock index's (short selling or puts) to "freeze" your portfolio values (I wrote about that three weeks ago). Or if your not sleeping well at night, go to 80 percent cash and just wait.

The other 20 percent? Well, half in bonds, which I see continuinge to climb, and the other half into big cap major corporations (again, see last week's column — I suggest defense and major consumer goods types).

You know, all this seems to me to be the fulfillment of a very old Chinese (no pun intended here) proverb my good friend uses now and then, "May you live in interesting times." Boy, you couldn't ask for more interesting than these!!

So, that's all for this week. Hope your coming investment week is a good one. Meanwhile, you keep in touch. I do! See you next week.

Trust Sector Offers Upside With MLP Convergence

The Canadian Income Trust sector offers upside with MLP convergence.

The following is an excerpt from a UBS report issued in June 2007.

If you want a copy of this report then please add your email address to our list at www.investingforincome.com.

The report will be made available in upcoming mailing.

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Assuming that a trust signals its intent to convert to an MLP sometime this year,we believe there should be further upside for Canadian investors. We are forecasting a one-year total return of 16% for our coverage universe, which includes the average cash yield of 11.0%. Our valuations incorporate premiums for the MLP conversion, biased toward those trusts with NYSE listings and higher proportions of U.S. ownership.

In the absence of our MLP thesis, the stocks appear fully valued today, reflecting an appropriate premium for the income relative to conventional E&P peers. Based on our net asset value analysis, we estimate that the trusts in our sector are discounting commodity prices of US$50-55 per boe, which compares to the 2008 forward strip of US$61.50 per boe.

These commodity prices imply the sector trading at 110-120% of their blow-down net asset values (i.e., a discounted cash flow reflecting the production of only existing booked reserves), which we believe is appropriate based on our conservative NAV analysis.

Will Canadian Trusts Convert to US Master Limited Partnerships?

The following is an excerpt from a UBS report issued in June 2007.

If you want a copy of this report then please add your email address to our list at www.investingforincome.com.

The report will be made available in upcoming mailing.

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MLPs expected to be a catalyst for the sector. We believe that sometime this year, a Canadian trust will announce its intention to convert to an MLP, which should trigger a positive re-rating of valuations.

In our view, the government will be forced to respond in one of three ways, each of which should be good for investors. First, if the government does nothing, most trusts will be forced to convert to the MLP model in order to remain competitive, which should be positive for valuation.

Second, if the government chooses to invoke the GAAR, the structure may be rejected, although we are unsure on what grounds this might be possible. However, it would further highlight the valuation disparity between the two sectors and, we believe, should contribute to further convergence in valuations.

Finally, the government could choose to alter its proposed “Tax Fairness Plan”, in order to encourage Canadian trusts to remain in Canada. We believe that the government would be reluctant to lose a $60+ billion sector with more than 1.0 million boe/d of production—roughly 25% of total Canadian production. As such, we would place greater emphasis on the latter two options, although the issue is really one of politics.

Will the government back down? The jury is still out on this issue (and we have no special insight), but in our view the first conversion announcement will force the government to respond. This should further focus the market’s attention on this alternative structure and the disparity in relative valuations, which should be good for investors.

In our view, the most likely candidates to announce conversion could be Harvest Energy Trust, Pengrowth Energy Trust, or Provident Energy Trust (not under coverage, which already owns a majority stake in the Breitburn Energy Partners MLP in the United States).

COT (Committment of Traders) BLOG

There is an excellent BLOG on the Committent of Traders Reports titled the "COT BLOG " that I suggest you follow.

The link is:

http://cotstimer.blogspot.com/2007/09/cots-loooove-nasdaq.html

Canaccord on Crescent Point

Crescent Point Energy Trust (CPG.UN : TSX : $19.26)
Buy - Target: $22.00
Bruce McDonald

Comment: More of a good thing; Crescent Point announces $400 million acquisition of Innova to consolidates Bakken play.

Crescent Point announced its agreement to acquire all the issued and outstanding shares of Innova Exploration Ltd. (IXL : TSX : C$6.19-HOLD) for $360.1 million. Including assumed net debt of $39.9 million, total consideration to be paid is approximately $400 million.

We estimate thetransaction to be 5% accretive to 2008 production per unit and 7%accretive to 2008 cash flow per unit. On a debt-adjusted basis, the transaction is
only 2% accretive to cash flow. However, we believe the acquired Bakken play asset is world class. While Crescent Point is using almost all of its 2007 "safe harbour" room, which limits its future growth, the Bakken asset presents above-average growth prospects from inventory prospects.

Under the forward strip, pro forma the Innova acquisition, Crescent Point shares are currently trading at 7.0 times 2008E EV/EBITDA, above the smaller cap trust average of 6.4 times, but warranted given Crescent Point's longer RLI.

We maintain our BUY recommendation and 12-month target price of C$22.00. Our target price is based on a 2008E EV/EBITDA target multiple of 7.8 under the forward strip, above our smaller cap trust average target multiple of 7.2 given Crescent Point's distribution stability and large prospect inventory.

Income Investing with Max Whitmore

Whitmore: Buy — Buy — Buy!

Last Friday at about 8:15 am, the stock markets of the world were hit by a lighting bolt! The Fed lowered the discount rate without warning. The S&P, trading on the Globex markets (a 24 hour market) went straight up 72 points in less than 1 minute! Is that unusual you ask? Well, in all my 40 years in this business, I have never seen ANYTHING, and I mean ANYTHING like it!!

I do remember in 2003 when the Fed intervened (of course they denied it, but the charts proved otherwise) and the S&P rallied for over 32 points in 25 minutes. I had never seen anything like it at that time, either. It was engineered to hurt the bears who had taken nearly total control of the market direction.

And hurt it did. It took two more such Fed interventions over several months, but the bears finally gave up. Those bears realized that the Fed had more money and time than they did. The four-year rally from 7100 to 14,000 was the huge upshot of that Fed action.

In the last ten years, commodities — like platinum, oil, and uranium — have been outperforming every other investment. And according to our experts, the boom has many, many years to go. In this free Special Report from the editors of Financial Intelligence Report you'll discover the five best commodities to invest in now . . . and our top five commodity investment funds for 2008. PLUS, why the 1,870% increase in the price of uranium in the last six years is just the beginning, and how much longer commodity expert Jim Rogers (author of Hot Commodities) thinks the commodity boom will last.

The Charts Still Say "Up"!

I have been telling you in my columns for months, often in the face of severe opposition, that the charts DID NOT say it was time to bail out. They DID NOT say that the credit problems overhanging the market were a crisis. A problem, yes, but a crisis, absolutely not!

And the charts further said that we had, as of last Wednesday, still a long way to go to break this huge uptrend that began because of the Fed action in 2003. I put it all in the column last week, plus my Super Chart Keyline to show you why I held my position so firmly.

Now, look, I am just an average guy that over the years has specialized in the creating and reading of stock charts. Like a landscaper, plumber, or painter, I have learned a craft and learned it well. But, I also learned that in any profession you had better know who the masters of the art are. And, I further learned, if they were in positions of power that could affect your work, you better listen carefully to what they say.

Well, in my business, there is only one individual with honest to gosh, real, true power. That individual is the Federal Reserve Chairman, whoever he or she might be. The Fed Chairman is, without a doubt, the most powerful and thus influential person in the world of finance today. And we all live in a world of finance today, don't we?

Bernanke Knows These Waters

Over 17 months ago, Alan Greenspan, then the retiring Fed chairman after 18 years at that post, turned the reins over to a much younger man, a one Dr. Ben Bernanke, Ph.D., a professor by trade, but a proven monetary genius, in fact.

Now, I don't recall if I have ever written that someone is a genius in any column before this. I don't think so. That word can so easily be misused. But, I do not hesitate to tell you that Dr. Ben is just that. I have read his incredible thesis on what is today called the "Great Depression" and not only does he dissect it into understandable segments, but he then critiques those segments and shows exactly what caused the Great Depression. It was the Fed!

Now, I won't bore you with all the details, you can get his book and read it for yourselves. But, stripped down, he pointed to the real estate collapse of 1927 as the initial shock that lead to the final shock called the "Crash of '29." He pointed out that the entire mess could have been AVOIDED!

[Editor's Note: Bernanke Reveals Fiscal Crisis Ahead.]

The problem was that, after the stock market crash in '29, the Fed dropped the money supply level — after all, the economy was slowing down and no one needed the money, did they? And for the entire decade of the 1930s, until a war forced them to do otherwise, the Fed held the money supply in tight rein. It nearly killed the economy, not to mention the country.

I have never for an instant doubted that the strange coincidence of a housing problem in our day, with the possibly of it leading to our own present-day market collapse, was NOT lost on Dr. Ben.

He has been pumping in enough cash to the economy in the last year to choke a horse, as they say. U.S. money growth is running at roughly +12 percent year-over-year, and today this money is providing the grease to clearly restart the frozen credit markets.

But, Dr Ben saw that was not enough. Confidence was being threatened. And if confidence failed (Dr. Ben wrote about this danger years ago in his thesis) then everything might just collapse.

So, last Friday, he stepped in and lowered the bank discount rate by a half percent and said in effect that the Fed was absolutely ready to do all things necessary to keep the wheels of commerce humming, including the housing market sector.

Still Calling Dow 12,500 Bottom of This Correction

When I wrote last Thursday, "I believe that the 12,500 area will hold up as the key support over the next 4-6 weeks," I had in mind that the Fed had a true genius at its helm.

It was no minor thing that Dr. Ben decided to take the step he did on a Friday. Had he waited, the weekend might have generated a financial disaster on Monday. He understands that timing is everything in the markets and the time to cut off a disaster was ripe.

He wrote years ago that confidence lost is only very, very slowly regained. Better to step in now, I figured he would reason, not later. He did. I expected this or something like it from reading his book!

Okay. The deed is done, but what does it mean? Well, it means this: Every major investor in the world knows that the U.S. is 37 percent -38 percent of the entire world's economic activity. That is just a short 12 percent from being HALF of the entire world's economic activity!

We remain, by far, the biggest gorilla in the china shop, and when the most powerful economic individual in the most powerful economic country speaks and says "Enough!" absolutely everyone is carefully listening and starting to make major appropriate adjustments.

Looking Forward Six Months

Here is what I expect to happen over the next 5-6 months. Europe will begin to DROP their interest rates. We will drop our interest rates to at least 4.25 percent, possibly even 4 percent by year end.

The dollar may slide a bit more; making us even more competitive in world markets with our products (I told you weeks ago that I am firmly convinced its drop is an "engineered" move).

[Editor's Note: Cash in on Dollar Slide. Make 25% to 50% in Six Months.]

And I expect the manufacturing sector of this country will begin to rapidly rise like the potential colossus it is in response to its new position as lowest price, best quality supplier of all sorts of goods. Read the headlines all over the world. Quality is now as important as price to just about every buyer!

I expect that the outcome of the lower rates, higher export environment for the U.S. to set off the coming huge three to four year rally I told you about in an earlier column (see my column of May 18 in MoneyNews.com archives for more details).

This rally, I believe, will carry us to the 19,000-20,000 Dow level. When we look back, we will find the rally's takeoff level began right in this time period.

I expect that the international markets, up until now threatened with higher rates, will begin to respond to their lower rates, just like ours. In short, today's Fed action has been a "sea change" that will result in one of the biggest economic worldwide booms we have ever seen.

But, what about the "crisis" in housing and credit you ask? I believe time will show that this problem, while no small potatoes, proved to be only a blip on the radar screen of the huge coming boom.

Don't misunderstand me, however. There will be some pain for many in the markets in the next three to four months, especially for the ones responsible for its creation. That is as it should be.

But, it will quickly fade. If you lived through the 1987 "crash" you know by looking back at the long term chart that that "crash" is but a blip on the charts, despite all the pain it caused at the time.

The bottom line today is that, like the 1987 crash and even the savings and loan problems in the early 1980s, this "subprime" problem will also be quickly forgotten in the light of the coming huge expansion.

[Editor’s Note: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.]

What You Should Do Now

My advice to you is to quickly, say over the next two to three months, develop a strategy for your portfolio that will take advantage of this coming boom. Understanding that the growth I am talking about is at least 50 percent in the Dow, find those industries you think will benefit most and get on their coattails fast.

Be wise in your choices by recognizing how much risk you can tolerate because of retirement needs and family obligations, but be a BUYER!! This is going to be a really fun ride. Not straight up, of course, nothing is straight up, but up nevertheless, BIG!!! BUT . . .

Oh, yeah. And what if I am wrong? Well, I won't be so long as we do NOT break the Whitmore Weekly Super Chart Keyline to the downside (See the Keyline chart in last week's column, which is available in the MoneyNews.com archives).

That line is now at the Dow 11,895 level as of the close on Friday (Aug. 17). Hold it and we make our Dow 20,000. Break it and all bets are off and I will tell you what needs to be done if that unlikely event were to occur.

But, it is still an 8 on my 1-10 scale that the Keyline holds all the way to the Dow 20,000 mark. But, so long as my Keyline holds, by 2010, I expect to see Dow 20,000! As Phil Rizzuto used to say, Holy Cow!!

Well, hope your coming investment week is a good one. In the meantime you keep in touch. I do! See you next week.

The Time is now for Oil & Gas Trusts

I will be picking up oil and gas trusts over the next month because I think the lows are in for the year.

The gassy trusts are a real value at these levels because nobody wants them with Natural Gas storage full and prices in the low $5 area.

Remember, be fearful when everyone is greedy and be greedy when everyone is fearful.

I am still hanging with my portfolio

I sold 10,000 SDT.UN and 2,000 HTE.UN during this last correction in order to raise cash.

I am hanging on right now because the valuations in the oil and gas sector is compelling.

I am considering loading up on natural gas Trusts because they are so beat up.

I have not Changed my Holdings

I have not published in awhile but rest assurred that I have not changed my holdings.

My largest positions are the same picks I have been advocating over the last 6 months.

I own 5,000 Units of Baytex BTE.UN-Upgraded by Cannacord to $25

Baytex Energy Trust (BTE.UN : TSX : $21.35) - Buy - Target: $25.00
Bruce McDonald
Comment: Raising Baytex Energy Trust target price due to accretive acquisition

On May 29, 2007, Baytex announced its agreement to acquire Dominion's assets focused in the Pembina and Lindbergh areas of Alberta for a total consideration of $238 million.

We are now off restriction following the trust's recently closed $149.5 million financing. Baytex is acquiring the assets for an attractive $52,889 per boepd,or $12.14 per proved plus probable reserves. We estimate that the transaction is 6% accretive to 2008 cash flow per unit. This acquisition establishes a new core area for Baytex at Pembina in the prolific Nisku trend. Baytex's netback is also improved with the increase of light oil in its production mix.

Baytex's COO was previously President and CEO of Dominion Canada, and as a result, we believe the company has very good property knowledge. Under NYMEX forward
strip pricing, Baytex is currently trading at a 6.5 times 2008E EV/EBITDA,
below the interlisted average of 7.4 times, despite a lower-than-average payout ratio and D/CF.

We maintain our BUY recommendation and are raising our 12-month target from C$24.00 to C$25.00 due to the accretion of the transaction. Our target price is based on a 2007E EV/EBITDA target multiple of 7.4 under the NYMEX forward strip, in line with the average interlisted trust target multiple.

Added to my Top Pick Holdings

I have acquired more units of Harvest and Crescent Point Energy Trust last week. I am hoping for a pull back so I can acquire more units.

I also picked up 40,000 shares of Plexmar just for the fun of it.

Harvest Energy Trust Upgraded by Canaccord

Harvest Energy Trust (HTE.UN : TSX : $29.62) - Buy - Target: $31.00
Bruce McDonald
Comment: Raising target price due to rising refinery margins

Refinery crack spreads have been rising significantly due to recent refinery outages. Harvest generates approximately 35% of its EBITDA from the North Atlantic Refinery. We have increased our EBITDA estimate for North Atlantic from $319 million to $377 million. Under the NYMEX forward strip, we now forecast 2007E cash flow of $7.37 per unit, representing a payout ratio of 62%, and a debt to cash flow ratio of 2.2 times.

Based on a conservative multiple of 5.0 times EV/EBITDA, we estimate the value of North Atlantic at $1.9 billion. The upstream business is trading at 5.8 times 2007E EV/EBITDA under the forward strip, compared with an average of 6.6 times for average large cap royalty trusts.

We maintain our BUY recommendation and have raised our 12-month target price from 29.00 to $31.00 due to higher refinery cash flow estimates. Our target price is based on a 2007E EV/EBITDA multiple of 5.0 times for the refinery business and a 6.0 times 2007E EV/EBITDA for the upstream business under the forward strip. Our upstream target multiple is a discount to the 6.9 times average target multiple for large cap royalty trusts, given Harvest's shorter upstream asset RLI.

Bought More Harvest & Crescent Point Today

Today I bought 2,000 units of Crescent Point (CPG.UN-T) and Harvest Energy Trust (HTE.UN).

I also bought 1,000 units of Vermillion Energy Trust (VET.UN-T) too.



Disclaimer;

We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.

Bought 1,000 Units of Harvest Energy Trust today

Today I added to my position of Harvest Energy Trust.

After the market close they annouced that they are maintaining their $0.38 per month distribution. This is one well managed trust.

Plexmar Resources PLE-X

I was very disappointed in Plexmar's press release today. It seemed more like a puff piece. There was no mention of drilling schedules or any other advancement on the property.

I sold all my shares today. I may get back in later. We will see.

Disclaimer;

We are not investment professionals. We often post our own opinions and identify them as such, we reserve the right to change our opinions. The fact that we sometimes disclose when we establish or sell a position in a company is no warrantee that we will publish every trade. We do not warrant that any information that we post is true beyond the fact that it came from whatever source we acknowledge. We may at anytime have or not have an interest in a stock that we discuss. Finally we advise every investor to perform their own due diligence on both the investment products they purchase as well as the people whose opinions or decisions they accept about investing.

Sound Energy Trust-Very Tempting

I presently hold 5,000 units of Sound Energy Trust (SND.UN). I plan on acquiring additional units as funds become available.

However, the "street" does not like management so I would not expect much capital gains in this investment until commodity prices firm up and the company has some reasonable quarterly reports. However, the 18% yield pays you to wait for the capital gains which will eventually come.

Below is an opinion posted on Investor Village message board which reflects my views.

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SND's most recent guidance was EXTREMELY impressive for a company yielding around 18%.

"It remains our objective to be known as a low-payout trust, and with the distribution cut effected beginning in March 2007, we estimate our payout ratio to average approximately 50 percent for the year. Based on price assumptions of US$55.00/bbl WTI and $7.00/Mcf AECO, our cash flow projections for 2007 are $78.1 million. These funds will enable us to cover distributions of approximately $43.0 million and capital expenditures of $31.3 million without issuing additional equity or increasing our debt levels. "

So SND's all-in POR (capex plus distributions) is projected to be around 95% using a very conservative price deck.

I don't know of a trust yielding anywhere near as much with similar sustainability.

Assuming that same conservative price deck, SND is trading for about 3.1 times cash flow (which is about as cheap as any trust in the sector, and tremendously cheaper than most. The only trusts comparably cheap on this basis are THY and TUI, both of which are total basket cases and understandably sector pariahs).

SND's NAV (as calculated by the company using a seemingly reasonable price deck and 10% discount rate) is 5.05, meaning that SND is currently trading at roughly a 23% discount to NAV. I believe that this is one of the very largest discounts to NAV in the sector.

SND will also be one of the best takeover candidates around when/if the Trust Tax is passed, thanks to their extreme undervaluation and very large tax pools. That's another reason to like the trust imho.

It was encouraging to see Chairman Boyce buy 50,000 units last week.
http://www.canadianinsider.com/coReport/allTransactions.php

That buy reinforces my opinion that SND is very undervalued at its current price of $3.92 and pays $0.055 per month distribution.

Picked up 1,000 EIT.UN on Thursday April 5, 2007

I picked up another 1,000 units of EIT.UN last Thursday before the market closed. I could not resist the 13.5% yield and a 14.5% discount to net asset value plus I get a diversified portfolio of over 60 income producing assets.

I am surprised how weak these trusts are but I am still hanging in there.

The Right Market at The Right time

Below is an article published by Roger Conrad an American newsletter writer. I think he is being overly optimistic about Canadian Income Trusts but I figure my readers may find his article interesting.

Some of his comments with respect to the Trust tax legislation are out of date so I edited those portions out.

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THE RIGHT MARKET AT THE RIGHT TIME
by Roger Conrad Editor, Utility & Income
April 4, 2007

Remember when investors could retire and live well on a modest nest egg? Remember when taxes were only 15% a year, and when you didn't have to worry about losing your shirt before the closing bell?

That way of life has gradually been taken from you. But this letter is going to bring it all back, courtesy of the Canadian government.
They've invented a whole new kind of investment, one that's pulling hundreds of billions of US dollars across the border into Canada today.In a nutshell, Canadian Income Trusts are a brilliant structure that allows a business to avoid taxes--all taxes.

That's one pretty obvious reason they're so popular.The other big reason is that by Canadian law, nearly all the earnings from a trust business must flow right through to its investors, which in this case means you.

You no longer have to settle for the bread crumbs we call "dividends" here in the South 50!Here's how trusts work up North: A trust uses what it receives from its product sales to pay general expenses and service any debt, and it also sets aside a little bit for exploration or development. Trusts are very careful to set aside no more than 15% of their gross profits, so at least 85% normally goes directly to your mailboxevery month. In other words, you usually get a check for about 85% of the true earnings. Sometimes it's near 100%!Life doesn't get any smoother than that.

Canadian income trusts aren't structured for the benefit of their CEOs, but their shareholders.

What a concept!

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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.

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.

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.

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.