Friday, November 03, 2006

Income trusts, a late opinion.

With the recent change to income trust tax law let me say this on behalf of my portfolio, ouch!!!

To say I took a beating is an understatement, but having watched the ups and downs over the years has me less worried than those who recently entered the game. 4 years is a long time for recovery and the already taxed payments will continue to come in.

It was a move that had to be made and in a rare multi-party moment of unity almost everyone agrees that it had to be done. The ugly part of the news was that it was promised during the election that the Conservatives would not tax income trusts, which referred to the Liberals teasing the market by saying they may do it but backed off doing the right thing for political reasons; and do not forget the market did tank, losing 23 Billion in income trust values. Well, to be truthful not everybody lost money, but the RCMP are still looking into this matter.

When Bell and Telus started making noise about going the income trust route with the expected tax loss to government to be more than 1 billion dollars added to the speculation that the banks would soon be next; the situation was indeed different and the government had to take action even if it meant breaking an election promise. Politically this sucks, not because it was wrong thing to do, or that the situation had indeed changed requiring the changes, but because the optics of a broken promise will not be good.

The Liberals are milking it for all they are worth in an attempt to make something stick, but when most Liberals agree that this was the right decision, it makes the strategy a bit lacking.
""We agree with the long-term destination ... what object to is the dishonesty and the process. It was not necessary to have a $25-billion meltdown to get to that destination," McCallum said. As if the months of speculation and uncertainty the Liberals showed on this file in the past was a somehow an example of how things should be done, give me a break.

Last point on all of this was something I had noticed. Every comment I heard on this story when it broke contained a phrase similar to this: 'this decision was unexpected'. Yes it was, and not even those on Scott Brison's blackberry email list were privy to the news in advance this time.

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