Investorial

I’m glad someone else saw the light! After my latest blogs warning about recent legislations to cut federal dividend taxes and Income Trusts avoiding additional tax burdens. My stance was that deciding if you wanted to earn income through dividend-paying companies or Income Trusts is still very premature due to the political turmoil gripping the nation.

I share with you an article describing the instability and unpredictable nature of law changes. Even if dividend cuts do come to fruition (which it most likely should), I prophecize that we have not seen the last debates about Income Trusts taxation yet!

There are two other matters to consider if you’re swayed by the dividend tax cut, one of them being the fact that this measure has not yet been passed into law by a parliamentary vote. The Canada Revenue Agency will start applying the lower rate for dividends paid in 2006, but a federal election would prevent a vote. In that case, the party forming the next government would have to decide whether to follow through or eliminate the tax reduction. If it’s eliminated, then the old dividend tax rate would apply and the price of dividend stocks could fall.

This is a very technical article by long time Globe writer, Rob Carrick. Normal readers should concentrate on the paragraphs that do make sense to them in plain english. Now that Prime Minister Paul Martin has dissolved parliament and set a vote for January 23rd, it is inevitable for many to wonder what will the future government decide; in favour of investors or tax revenue?

GlobeAdvisor.com: ‘Trusts versus dividends’ by Rob Carrick [via Stingy Investor]

As soon as Ralph Goodale’s decision to not interfere with Income Trust taxation was official, the predictable masses started to valuate trust securites to higher worth on the stock exchanges. I see this as a ridiculous, irrational reaction to media attention. A long term investor would know better than to jump in and out, especially when the news could potentially turn out to be only a temporary stay of execution.

I guess it’s human nature to jump on bandwagons. But I wonder, do people believe good news more, or bad news more? Personally, I am more easily convinced by bad news in the financial world simply because most good news are either sales tactics or merely serve to promote an industry where the customer must be sold. So let’s get in a timely article by the Toronto Star warning about the stability of Income Trusts. Enjoy!

Editor’s Note: Do remember that this article only talks about business trust. It helps that it’s the trust type that I’m most familiar. I’ve also previously blogged that I feel too many businesses are converting to trusts that have no reason to utilize such a structure in the first place!

TheStar.com: ‘Income trust study raises red flags’ by James Daw [via Stingy Investor]

As the dust settles, Income trust investors are temporarily victorious over the federal government in the issue of Income Trust taxation. Turmoil has gripped the investment community ever since finance minister, Ralph Goodale, announced that he was re-examining the issue and suspended advance-tax rulings to companies that wanted to convert to an income trust structure.

Today, in a blatant pre-election move, Ralph Goodale succumbed to political and the financial community’s pressure, and announced that no taxes will be planned on trusts. Certainly, the pressures were more political in nature as the minority government prepares to be defeated in the House of Commons in the near future.

The finance minister, still looking for ways to level the playing field for corporations, cut dividend taxes - a move that has been much demanded by shareholders for a while. A winter election is inevitable and making the public happy with favourable tax policies is a survival tatic that must be employed by the Liberals.

My two cents? I am certainly in favour of (more…)

My posting frequency has slowed down a lot in the last few days for both Investorial and my personal blog VinceChan.net. I’m currently working on a project that has been occupying most of my waking hours. The fact that I’m posting this blog at 2:04 am is proof enough I hope!

Besides that, I feel a need to reach out to my fellow bloggers. I am implementing a new feature to accept story submissions. If you are enthusiastic about how financial information is presented, or if you saw some article/media that you would like me to comment, please use the new “Submit a story” link located just beneath my picture on the right side-bar.

I will start by moderating these submissions, and I will definitely include full credit and links to your sites if you wish. Perhaps we can even bring you on board as a blogger on this site!

So don’t all of you rush to submit stories now! But I hope to hear from you!

Continuing the bubble watch series on real estate, I just want to point out a recently published article by The Globe & Mail regarding the real-estate scene in the United States. The article does not single out any particular region but takes a national overview. The numbers mentioned in the article are significant and serve to remind everyone that housing prices are really getting out of hand! Considering the interest rate trends these days, it is becoming more than tempting to stay on the side-lines. Eventually, consumers will start thinking better of it. However, never underestimate the power of the American Dream - owning you own home!

Globe&Mail.com: ‘Fewer can buy a house’ by Roma Luciw

Since November 03, 2005. Fidelity Canada has brought over its popular LifeCycle fund line-up from the United States. The fund line-up is called ClearPath. This blog is not a recommendation to buy these funds, but rather it is a news-worthy announcement meant for educational purposes.

What are LifeCycle funds? They are actually a different way to approach asset-allocation strategies with time as a major consideration. Initially, ClearPath funds (called the Freedom series in the States) will start with a very agressive asset-allocation strategy. The allocation strategy is then adjusted over time to become more conservative until the traget “retirement date” has hit.

Fidelity Canada has become more consumer oriented as of late with an advertising blitz. They are starting to bring over ideas from their American counter-parts. Are the LifeCycle funds a good idea from a business point of view? Certainly, they have been very popular in the States and has already been around for a decade. We Canadians are very much northern hillbillies when it comes to investment innovations. Among my biggest pet peeve is having to pay approximately $25 for equity trades. Why doesn’t Fidelity bring their $8 trading brokerage business up north??

Watch for the Canadian financial community to monitor the reception to these LifeCycle funds, and come up with their own versions if it proves to be popular. The personal finance scene is still dominated by the banks. Fund companies will have to find ways to partner with these behemoths to secure any marketshare.

Chicken Little is not just the newest Disney movie, it is defined as a confirmed pessimist, particularly one who warns of impending disaster. (Courtesty of Answers.com - a great web resource!).

Normally, people who constantly cry that the “sky is falling” can be very annoying and subject to my dismissal. But some of these “chicken little prophets” actually have many good things worth taking note. Case in point, I wish I had known about Herb Greenberg early in my investing career. Trust me, you want this guy on your side! Herb is an excellent writer whose main topics act as a watch-dog over the under-belly of the financial markets. He brings to light governance issues, accounting problems, suspicious earnings claims with various companies. Most notable is his on-going tussle with Overstock.com CEO Patrick Byrne.

If you are a investing novice, reading Herb’s articles will shorten your learning curve because you will be familiar with what to look for in financial statements and company news releases. If you are a seasoned investing veteran, you may want to subscribe to Herb’s newsletter ‘Herb Greenberg’s Reality Check‘ as his research is extensive and will definitely help you in your stock selection.

It might not be easy to find that flower that truly smells nice in a bed of roses, but Herb can certainly point out which ones are stinking and rotting.

MarketWatch.com: Recent articles by Herb Greenberg

More often than not, stocks, mutual funds and investments are ’sold’ to the general public. Investments is not like the furniture business where customers look for what they want. All the public has to do is say ‘I’m interested’, and there’ll be hordes of information waiting to sell you and tell you what you need.

Take a look at this article about managing risk through diversification. It is a sound article except for the sales tactics and overtones that fail to leave the article. I’m not saying that the author is trying to sell you something, rather I see that he is regurgitating the same sales talk from financial institutions and advisors alike. Let’s examine this closer!

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