jackstraw wrote:So many people dismiss those of us trying to raise red flags with the argument "What you are saying doesn't apply to ALL trusts therefore it must be wrong."
For all my warnings, I DO own income trusts and have for 20 years. I am confident that ALL the nay-sayers will readily admit there are some trusts that are properly valued and are keeping their assets sustainable. We do not mean ALL trusts have the problems we talk about.
We want others to know that they have to do the same fundamental analysis and valuation calculations for trusts as they do for corporations. Because they refuse to do that, they can't know WHICH are over priced.
It was a revelation to me that you own trusts. It would appear, in that case, that you are not all that more cautious than myself. I only directly own one RT, which is ARC, and 2 REITs. I have a larger position in SDT.UN which gives me a managed, limited position in dozens of Trusts. The downside of a single blowup is small (and in a number of cases has been avoided by Sentry mgt).
I think that where I differ from some is in the belief that there are still many DYI investors out there who perceive no risk with Trusts. I think that concept is getting a bit dated i.e. do these people READ the paper, or not ?? It's not as if we couldn't list off a dirty dozen rather easily, all of which have had some press coverage.
I view Trusts as no better / no worse than Stocks. I can truly say that 90-95% of the Stocks on the TSX will NEVER get even a "look-see" from myself. For Trusts it's also about 90%. So where is the difference ??
I'd like to close with text from the 2005 ARC annual report. I think we need to keep things in perspective:
Inside Cover: "ARC's ... compound annual total returns since inception have averaged 28 per cent."
p.24 "At inception of the Trust on July 16, 1996, the NAV was determined to be $11.42 per unit based on a 10 per cent discount rate; since that time, including the January 15, 2006 distribution, the Trust has distributed $16.23 per unit. Despite having distributed more cash than the initial NAV, the NAV as at December 31, 2005 was $16.62 per unit using GLJ prices and $21.92 per unit using constant prices and costs. NAV increased $5.19 per unit during 2005 after distributing $1.99 per unit to unitholders."