Sunday, April 5, 2009

Income trusts outperform Warren Buffet and ManuLie over 5 year period

Featured above is the five year investment performance of Income Trusts managed by Dynamic Funds versus Berkshire Hathaway (i.e. Warren Buffet) and the two guys who lobbied Flaherty to kill income trusts, namely Angelo from ManuLie, and Ed Clark from TD Bank. Ed Clark is also infamous for his role in being the architect of the NEP, in the same way as Mark Carney is infamous as the architect of the TFP. Major screw ups in Canadian public policy are always rewarded with appointments to head banks?

$100,000 invested five years ago, is today worth:

With Angelo of ManuLie: $89,600 (despite being unhampered by a new 31.5% tax)

With Warren Buffett : US$115,600 (despite being unhampered by a new 31.5% tax)

With Dynamic Funds (Diversified Income Trusts): $125,260 after a 31.5% retroactive tax

With Ed “NEP” Clark: $147,053 (despite being unhampered by a new 31.5% tax)

With Dynamic Funds (Energy) : $150,833 after a 31.5% retroactive tax

This lays to waste the BS that you read in the Globe and Mail frpm people like Eric Reguly, Andy Willis and Derek DeCloet about income trusts being bad for investors.

High yielding equities have always outperformed the market. This is further evidence of that. It also underscores why ALL trusts, and not just energy trusts need to be fully restored.

The fact that income trusts can outperform large cap dividend paying corporations like TD Bank and ManuLie is why these operators wanted to kill the income trust model in the first pace. They were threatened. Having the gutless managers of corporations instructing Ottawa on sweeping tax policy is like having foxes rule the hen house. The owners of corporations, i.e. the shareholders and not the managers, should decide what model is best for the company they own. Meanwhile, what we had was the managers do an end-run around their owners and go to Ottawa and get Ottawa to change the rules so that the managers could have their self-serving way.

Does this not strike you as an abuse of Ottawa, by vested interests? The net effect of which was to screw the true owners. Any manager or director of a Canadian company that lobbied Ottawa for this income trusts tax was acting in direct opposition to the interests of their shareholders and against their fiduciary duty to shareholders which is to maximize value. Apart from Paul Desmarais Jr., I would like to know who these other Benedict Arnolds referred to in this Globe piece were. They should all be fired and/or sued fo gross conflict of interest and acting contrary to shareholders interests. It is my understanding that one of these illustrious jerks was Gwyn Morgan, who while sitting on the Board of Encana, learned of Encana’s plans to convert some of their mature assets into a trust to maximize shareholder value and deploy assets in higher growth exploration, i.e. a good thing. Having leaned of this inside information in his capacity as a Board member, Gwyn Morgn ran to Ottawa and lobbied his good buddy Stephen Hapless to kill the trust model in order to thwart the pending plans of the Board of Encana. He is proud of that role he played, and crowed about it on BNN in an interview with Amanda Lang. She smiled throughout and nodded her head in total beguilement.

So just who exactly are these traitors described here who acted against the interests of their shareholders:

“High-profile directors and CEOs, meanwhile, had approached Mr. Flaherty personally to express their concerns: Many felt they were being pressed into trusts because of their duty to maximize shareholder value, despite their misgivings about the structure. Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada, even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico, and told him he should act quickly to stop the raft of conversions, according to sources.


Dr Mike said...

The little guy gets "forked" again just because he does not have the aggregate dollars Or the political juice to make any changes.

Until these guys in government get down from their high horses & realize that they are employed by us , nothing will change--the guys with the inside track because of their position as head juicers at corporate Canada will continue to have all of the say.

Most people I know & that includes my family see me as an alarmist who sees a political conspiracy behind every bush.

The truth of the matter is that there are a few of us who took a closer look at what is going on inside politics because we were forced to open our eyes by Jim Flaherty & his incredulous unfounded Tax Fairness Plan.

Jimmy singlehandedly did more damage to the Canadian economy by raising the cost of capital for the business world in one fell swoop making the recession bite just that much harder.

It all comes down to cost of capital when running any business & this is obviously something that Big Jim fails to realize.

An ineffective opposition has not helped --they have the means to force a change in the Tax Fairness Plan to reverse some of the damage --so why have they done nothing.

Maybe the cost of capital is beyond their scope as well.

Here`s hoping not.

Dr Mike Popovich

Kephalos said...

The Income Trust Debacle is not about taxation. It is about the perversion of Canadian democracy.

If Flaherty had tried to do his T-eF-P in the USA, he he sharing a prison cell with one of the other big white collar criminals.

Americans are different. They tried a President for lying about whether a blowjob is a sex act. Imagine what they'd do to a Treasury Secretary who caused $35 billion of market losses AND who lied to a Congressional hearing AND like Nixon covered-up the evidence.

Canadians should be deeply ashamed that the federal minister lied before a committee of Parliament but has not yet been held accountable for his deception.

So Canada, let's cut a deal. I'll take my losses and you investigate that bum, give him a fair trial, and them throw him in jail.

Dr Mike said...

Maybe I am not the only one who sees stuff behind bushes!!!!!

Dr Mike