Conservatives Plans News Tax on Trusts

[Figleaf]

Your dozens of sources ...[blabber blither self-humiliation]

Morgan Stanley?

How about the BBC?

http://news.bbc.co.uk/1/hi/business/4562488.stm (under the heading "Reputation")

Or the Guardian? Idiots, right?

http://www.guardian.co.uk/comment/story/0,,463724,00.html (first paragraph)

Certainly Business Week doesn't have anything to do with finance, I guess?

http://www.businessweek.com/magazine/conte...47050_mz011.htm (first paragraph)

http://www.businessweek.com/magazine/conte...13/b3725074.htm (second to last paragraph)

Or how about MarketWatch on this very subject:

http://www.marketwatch.com/news/story/45zN...dist=TNMostRead (tenth paragraph)

So, Rickster, what further idiocies would you like to share?

[Riverwind]

Morgan Stanley?

I don't see the point of arguing terms. Like dotcom companies, trusts were overvalued because people had unreasonable expectations. There was a correction this week but that should be seen as a buying opportunity because income trusts are no longer subject to political risks.

[Figleaf]

Morgan Stanley?

I don't see the point of arguing terms.

I hope you're not talking to me.

[Figleaf]

I don't agree. Advisors were perfectly right to tell people to include some trusts as part of a diversified portfolio, and advisors had no more reason than anyone else to think the tories would go back on their promise in such a shocking and destructive fashion.

Any advisor who understood the economics involved should have expected the gov't to act the day BCE announced its conversion.

You mean the government that said unequivocally that it would not?

[Riverwind]

You mean the government that said unequivocally that it would not?

A competent advisor would have warned clients that such as promise could not counted on since trusts were eroding the gov'ts tax base.

[Figleaf]

You mean the government that said unequivocally that it would not?

A competent advisor would have warned clients that such as promise could not counted on since trusts were eroding the gov'ts tax base.

A fact known to the Conservatives when they made their promise. A tax base producing excessive surplusses.

Surely advisors and investors were not crazy to rely on the tories' promise under those circumstances.

[Riverwind]

Surely advisors and investors were not crazy to rely on the tories' promise under those circumstances.

Advisors are paid to educate people on the risks of the investments that they recommend. The political risk existed and could have happened at any time. It turned out that the tories were the ones to make the change but it could have been the Liberals a year from now. Bottom line is: competant advisors would have warned clients of the political risk. If you weren't warned you should fire your advisor.

[August1991]

The stock market is a zero-sum game so one person's loss is someone else's gain.

You didn't provide the full quote of my post, figleaf.

I went on to add that the net benefit stock transactions provide to society is subtle.

The derivatives market is a zero-sum game. Stocks have real value that can grow or diminish without someone else experiencing an obverse gain or loss.

Derivative markets are zero-sum in the sense that another party must take an opposing position - just like secondary stock markets. But derivative markets provide net value to society in the same way a stock market does.

The value of a stock is based on the net present value of the income stream it will provide (including capital appreciation/loss and dividends). This is a real (though potentially changing) value. The people who bought them on October 30 bought on the expectation of a certain income expectation. The price on Nov. 2 was based on a lower income expectation. August, do you believe that the study of Finance is based on real knowledge, or is it just made up?

Now we're getting somewhere.

Figleaf, you don't seem to grasp that changes in tax policy have the potential to transfer value between private individuals. I believe you made the argument that to collect $500 million, Harper destroyed $20 billion. That is entirely false. Harper's decision, on balance, created value. There's no doubt that holders of income trusts feel poorer now than they did last week. Other people happen to feel richer.

IOW, Figleaf, you seem to be looking at this purely from the perspective of finance and not from the perspective of economics. Harper and Flaherty didn't take their decision from the standpoint of financial economists, they took it from the standpoint of political economists. What would have happened if they hadn't acted? Well, they did and in "real" terms, lawyers and tax advisors are now going to devote their efforts to finding better financial instruments rather than finding new ways to avoid taxes. This is the gain to society.

In a stock market, for everyone who buys, there is someone else who sells. The loss to one person is a gain to someone else. A stock market's net benefit derives from the information it provides. Clearly, everyone now knows that income trusts are not such a good investment.

[Figleaf]

Surely advisors and investors were not crazy to rely on the tories' promise under those circumstances.

Advisors are paid to educate people on the risks of the investments that they recommend. The political risk existed and could have happened at any time.

Except the tories had promised not to. I don't get how you can keep overlooking that.

[Riverwind]

Advisors are paid to educate people on the risks of the investments that they recommend. The political risk existed and could have happened at any time.

Except the tories had promised not to. I don't get how you can keep overlooking that.

Any advisor that recommended an investment strategy based on promise made by a politician during a campaign is an idiot.

[Jerry J. Fortin]

Hey Riverwind, Figleaf is right! They did campaign against meddling with income trusts. As I recall they were calling the Liberals bad names for considering it prior to Harpers' arrival at 24 Sussex Drive.

[Ricki Bobbi]

Hey Riverwind, Figleaf is right! They did campaign against meddling with income trusts. As I recall they were calling the Liberals bad names for considering it prior to Harpers' arrival at 24 Sussex Drive.

They promised to protect seniors.

They have.

[Higgly]

They promised to protect seniors.

They have.

Tell that to the guys in the oil patch who paid for their rise to power. I see I real ugly future for somebody.

[Ricki Bobbi]

Tell that to the guys in the oil patch who paid for their rise to power. I see I real ugly future for somebody.

OK, I'll do it tomorrow at work if any of my fellow 'oilpatchers' complains about it.

Ohhh that's right I'm not a senior exec.

Take a look at the COnservative's donor list. Might hurt them a little but not as much as you are going on about.

[Higgly]

Actually a lot of people have been trying to do just that. Do you have a link to that donor list? Enquiring minds want to know.

[Ricki Bobbi]

Actually a lot of people have been trying to do just that. Do you have a link to that donor list? Enquiring minds want to know.

Here's a link to the Elections Canada database. It's a royal pain in the arse to wade through but you can find the information you are looking for if you are patient.

[Higgly]

Thanks for the link. I'll have a look.

[normanchateau]

Hey Riverwind, Figleaf is right! They did campaign against meddling with income trusts. As I recall they were calling the Liberals bad names for considering it prior to Harpers' arrival at 24 Sussex Drive.

They promised to protect seniors.

They have.

I don't recall that they promised to protect seniors from broken Conservative campaign promises.

In any event, many affected by the broken promise aren't senior and aren't protected.

[Ricki Bobbi]

I don't recall that they promised to protect seniors from broken Conservative campaign promises.

In any event, many affected by the broken promise aren't senior and aren't protected.

I do recall their promise on income trusts was about protecting seniors.

Broken promises?

[normanchateau]

I don't recall that they promised to protect seniors from broken Conservative campaign promises.

In any event, many affected by the broken promise aren't senior and aren't protected.

I do recall their promise on income trusts was about protecting seniors.

Broken promise?

They promised not to tax income trusts and they broke that promise. The other tax concessions to seniors does not change the fact that they broke their promise to ALL income trust holders.

Rationalizing broken promises did the Liberals no good and it will do the Conservatives no good.

[jdobbin]

Tell that to the guys in the oil patch who paid for their rise to power. I see I real ugly future for somebody.

The Globe and Mail on Saturday had extensive stories about CEOs from oil companies saying they are furious for breaking their promise. One riding president tore up his membership.

[Ricki Bobbi]

The Globe and Mail on Saturday had extensive stories about CEOs from oil companies saying they are furious for breaking their promise. One riding president tore up his membership.

Yeah, that guy from Montreal has already been mentioned. It wasn't an EDA president in Calgary.

[gc1765]

Hey geoffrey,

I think you'll like Gerard Kennedy even more with this:

London ON- Liberal Leadership candidate Gerard Kennedy today dismissed the Conservative's income trust plan as falling disproportionately and unfairly on fixed income Canadians....

...Kennedy also noted that any changes should have included a longer transition period and specific relief for capital losses incurred by individual Canadians.

"It shows the Harper government doesn't understand the importance of maintaining international investor confidence," said Kennedy. "Further, Harper's government ignores most of the real requirements for Canada to have a fully globally competitive enterprising economy, which includes investment in education, immigrant success, R&D and access to capital for emerging businesses."

Link

[geoffrey]

I especially agree with:

"Canadians relied on the Conservatives word to their financial detriment," said Kennedy.

That's troubling. I gambled on Harper keeping a promise, he didn't, he lost my vote. Simple as that. I don't reward dishonesty. The rest is blah blah blah typical campaigning.

If your trying to swing me Liberal on this, it's going to be tough. I won't touch the Liberals unless I'm satisfied that the leadership is changed enough beyond Chretien/Martin. Scratch Dion. I'm not voting for someone that endorses a carbon tax. Scratch Ignatieff. And I'm not voting for a former socialist that believes that economic intervention is a great thing. Scratch Rae. That leaves me with Kennedy.

Other neato Kennedy statements:

Changing the base outlook of Liberals to include, along with social justice and individual rights, a sense of enterprise - addressing the incentives or motivations of people. I don't think we've done a very good job of that and I think Canadians have become complacent as a result.

When I talk about fundamental propositions like enterprise in B.C. or Alberta, I don't have to explain a thing. When I come to other parts of the country, I need to explain it. To me that's a new proposition about how the party is going to work, about how we are going to go to the base incentives for business, for government and so on.

Ooo... he acknowledges Albertans are different cultural then the RoC. Mmm mmm.

Anyways, if Kennedy is leader, I vote Liberal... MAYBE. This board has forced me to rethink most of my social conservatism... I could hold my nose and check off the random Liberal candidate that'll never win in my riding.

[Figleaf]

The value of a stock is based on the net present value of the income stream it will provide (including capital appreciation/loss and dividends). This is a real (though potentially changing) value. The people who bought them on October 30 bought on the expectation of a certain income expectation. The price on Nov. 2 was based on a lower income expectation. August, do you believe that the study of Finance is based on real knowledge, or is it just made up?

Now we're getting somewhere.

Figleaf, you don't seem to grasp that changes in tax policy have the potential to transfer value between private individuals. I believe you made the argument that to collect $500 million, Harper destroyed $20 billion. That is entirely false. Harper's decision, on balance, created value. There's no doubt that holders of income trusts feel poorer now than they did last week. Other people happen to feel richer.

It was someone else who compared the figures, but I agree with the concept. Please explain how the decision created value. I cannot stretch my imagination that far, so help me out.

Harper and Flaherty didn't take their decision from the standpoint of financial economists, they took it from the standpoint of political economists.

Economics is economics, finance is finance. From either perspective they blundered. They will lose tax revenue in the short run from capital loss set offs. They will lose market liquidity from having mucked up trust in the capital markets. They will have to pay more in OAS due to reducing seniors' assets.

What would have happened if they hadn't acted?

Don't get me wrong. I think the difference in tax treatment was driving business choices, which is never good policy. But they did two things VERY badly: 1-made a self-serving promise that induced reliance and 2- failed to make even basic efforts to protect the people who relied on their promise.

In a stock market, for everyone who buys, there is someone else who sells. The loss to one person is a gain to someone else.

You've said that before, but it's just not correct, as I explained the first time.