Thursday, April 9, 2009

Not all coupon clippers are treated alike. Not all fraud artists are treated alike

Back during the 2006 election, when Stephen Heartless was campaigning for the votes of Canada’s 2.5 million income trusts investors, he said some very nice things about us, as a group. Talk about how he was going to protect our nest eggs from the rabid pillaging of the Liberals and the NDP. What a nice guy.

Having secured the votes of this enormous block of voters. Stephen decided that there was new girl in town. Her name was Dominic. Dominic was friends with Grin Morgan and the band of thugs that he represented from the oil patch. Together they were able to cast their magic on Stephen Hapless, and this Economonster bought into all their BS arguments about tax leakage and the like.

At that point in time, Stephen did his Dr. Jekyll and Mr. Hyde number on the former love of his life, namely income trust investors and called them every name under the sun and told them that they were at the root cause of everything bad that could happen to Canada. The term that struck me as most derogatory, was when these investors in Canada, representing some 10% of the TSX and some 50% of new capital raising activity in Canada’s public markets, were called “COUPON CLIPPERS”.

Coupon clippers. Evidently to be one had now become the worst thing imaginable. Shills in the press like Terry Corcoran and Eric Reguly, who subsequently called for anyone who questioned their “wisdom” to be either vaporized and/or encased in concrete and thrown into Lake Ontario. These two and their chorus of sycophants in the wings were fear mongering about some nonsense about tax leakage (that was non existent) and some lame argument that Canadians saving for retirement were about to turn Canada into a “nation of coupon clippers”! Better I suppose that we turn Canada into a “nation of stick speculators.” These two were implicitly and explicitly touting the wares of Manulife and the banks as the better places to put one’s hard earned savings. Right this way folks, have I got a deal for you.

Just look were that bad advice would have landed you two years later.

So here we are 2 years later and the economy has stalled because there isn’t enough investor capital. Banks are bolstering their balance sheet with billions in new capital, that is nothing more than tax deductible equity. Take a look for yourself. Ottawa treats this new bank capital as “equity” and yet allows the banks to write off the interest as if it were “debt”.

HEY! THAT SOUNDS LIKE INCOME TRUSTS! What hypocrisy on the part of the Department of Finance. Does the DoF even have a clue what they do from one day to the next?

And who is coming to the rescue of these banks at the time of their greatest need......those now, not so low life, COUPON CLIPPERS

The other completely arbitrary and hypocritical distinction that Harper and Flaherty have divined amongst the group of Coupon Clippers, is that once subset, gets clobbered and the other gets bailed out? One losses billions due the government, And the other gets billion from that same goofy government.

One of the other terms used to denigrate income trusts investors was the false accusation that income trusts were ponzi schemes. The media (BNN, Globe, Natinal Post) gave all sorts of free air time to the lunatics out there who were trying to foster this completely false notion, meanwhile missing three of the largest Ponzi schemes the planet has ecer seen.

As such, all of these spurious and patently false arguments, including Ponzi scheme, resulted in the faux justification to tax income trusts and inflict $35 billion of investor losses,

Contrast this to the treatment by the Harper regime of Asset Backed Commercial Paper. ABCP is not a ponzi scheme (techically speaking) but it sure comes close. The better description would be that ABCP is a croos between financial alchemy (trying to convert fixed interest payment stream into floating interest rate schemes, and a large elaborate cheque kiting scheme.

So who gets punitive tax treatment and who gets a bailout. You guessed it. In Harper’s topsy turvy world of He knows best, that knows least. He taxes the day lights outs out of income trusts that are a real investment in Canada’s economy and he bails out the latest synthetic piece of nonsense? The real irony is that both of these investments came about in response to the fundamental need on the part of investors for income.

So Harper destroys the good product that addresses that need and bailout the bad product that attempted to address that need. So now that they are both gone, what do you thing the odds are that the next brain storm to come out of Bat Street will be. Good or bad. I shudder to think.

As for fraud artistsm why did Madoof get thrown intp jail for his investor fraud, but to date Flaherty has not. Flaherty’s $35 billion fraud was the sole cause of his phoney tax leakage argument. An argument he knew to be false and knew would inflcit huge permamnet losses on investors. Don’t blame me if that meets the definition of fraud. Go talk to Flaherty. Maybe he can do something to drop the tax.....or change my Funk & Wagnalls.


Dr Mike said...

If Flaherty had not taxed trusts what would things look like today.

Some trusts would falter as they were poor businesses but most would be huge success stories producing high yields & happy investors.

Outfits like Manulife , BCE & the likes would of had to spruce-up their business models to just compete & not be the largesse-laden drags on society they are now.

The market model of income trusts was a good one & the weak would have been weeded.

Other corporations would have modified their workings to compete or disappear.

Gov`t interference was unwarranted & ill-thought-out.

Flaherty & al get a "F" for this one.

Dr Mike.

Anonymous said...

Also, where is the much vaunted increase in government tax revenue that was supposed to occur when this source of tax leakage was plugged? Since Flaherty announced his tax on trusts that trade in the public market, we have seen a number of them taken over by corporations and pension funds, and some have already converted to corporations. But government tax revenues are falling, not rising. So where is the big payoff in government tax revenue that was the basis for the trust tax in the first place?


CAITI said...


Where’s anything for that matter?.....starting with their back of the envelope tax leakage bumblings!

We demand Flaherty's back of the envelope bumbling analysis.

True democracies require that back of the envelope bumbling analyses be made public!

Kephalos said...

"Gov`t interference was unwarranted & ill-thought-out"?

Unwarranted, yes. But it was thought out. If you go back to the 2005 Consultation papers by Rise N. Urkhard and Mintz, you see that they recommended a small tax.

Remember that in Nov 2005, Goodale was thinking of a 5% "tax adjustment".

I mention these points to remind us all that the 31% was fully thought-out as a killer of income trusts.

Who benefits from killing trusts?

Who benefits from foreign take-overs of trusts?

Why will seniors be double-taxed, when foreign investors can now enjoys zero-tax?

This government is not stupid, but it is malacious against seniors and Canada.

Anonymous said...

Yeah this CON government and their CON supporters are very malicious people.
As for Terry Corcoran and Eric Reguly - who the hell helps inspire these ideas of vaporizing or encasing people in concrete and throwing them in Lake Ontario - Paul Bernardo? Sounds like these two deserve to be put on the Dangerous Offenders list.

Totally agree if Flaherty had not taxed trusts things would be very different today. Unfortunately Canada's future is not looking good these days.