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Tuesday, November 29, 2005

A matter of trust

Trust2_01_1 Good post over at Conservative Life on the income trust scandal developing "Post details: Did John McCallum's friends make millions on the backs of seniors?" complete with a chart showing the spike in trading the day before Goodale's announcement. Here Goodale replies.

h/t Blogging Tories

Added: Okay Canadian bloggers, here's your chance. We have a public statement by Goodale in the Post article:

When pressed about the increased trading volumes on Wednesday afternoon, Mr. Goodale reminded reporters he had hinted on Tuesday of last week about the possibility of issuing a ruling in an attempt to bring "certainty" to the markets in the face of an election.

"I served broad public notice in a forum for all of the public to hear and listen to that an early announcement was indeed a possibility," he said.

Can anybody find any evidence that Goodale's hint was "broad" and "in a forum for all of the public to hear and listen" or is he lying? Don't exclude exonerating evidence. I'm looking. Ready set debunk.

051129postgraph Addition: This is the Post's graph that went with their editorial. Those are my arrows. Ignore that big spike in the graph. That's what happened on Thursday morning after Goodale's announcement on Wednesday after markets closed. The two red arrows indicate the period the Post speaks of, from Tuesday to Wednesday. The big black arrow is roughly where forensic auditor Al Rosen told the CBC he suspects the insider trading went on, from 2 pm to 4 pm. Did I say suspects? The quote is, "Clearly, there was a leak between 2 and 4 [p.m. EST]," he told CBC News.

Posted by Kevin Steel on November 29, 2005 in Canadian Politics | Permalink


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» Wednesday Trading from small dead animals
Conservative Life links to a bluntly worded National Post editorial and is hosting "an image of income trust trading last week" in advance of Ralph Goodale's announcement. More at the Shotgun, where Kevin Steele is requesting assistance.... [Read More]

Tracked on 2005-11-29 8:23:22 PM

» Wednesday Trading from small dead animals
Conservative Life links to a bluntly worded National Post editorial and is hosting "an image of income trust trading last week" in advance of Ralph Goodale's announcement. Another Wednesday "spike"... And another. Obviously, the volume differs. But the... [Read More]

Tracked on 2005-11-29 9:13:36 PM

» Wednesday Trading from small dead animals
Conservative Life links to a bluntly worded National Post editorial and is hosting "an image of income trust trading last week" in advance of Ralph Goodale's announcement. Another Wednesday "spike"... And another. Obviously, the volume differs. But the... [Read More]

Tracked on 2005-11-29 9:16:20 PM


You're a mean one, Mr. Grinch. Thanks for the link!

Posted by: asdf | 2005-11-29 3:24:59 PM

If Goodale hinted on Tuesday, then the Montreal Gazette didn't notice because this op-ed ran Wednesday morning.

Income-trust issue has Liberals on the run
Montreal Gazette
Wednesday, November 23, 2005
Page: A25
Section: Editorial / Op-Ed
Column: L. Ian MacDonald
Source: Freelance

In the fall of 1983, the Conservatives unleashed a guided missile called Taxpayer Rights on the unsuspecting Liberals in the House of Commons.

Day after day, the Tories pounded the Liberals in the House for abusive treatment of taxpayers, citing little old ladies whose homes had been seized. Day after day, Conservative revenue critic Perrin Beatty asked when the Liberals would treat taxpayers with respect. Dripping with youthful sincerity, Beatty was the perfect choice for the role.

Brian Mulroney later said that sitting across from Pierre Trudeau in the House, "I could tell they had no idea what was coming or the harm it was doing to them." The Conservatives then conducted cross-country hearings chaired by Beatty, where widows eagerly came forward with tales of being badly treated by the Revenuers.

"It was found money," says Geoff Norquay, who then worked on the file in the opposition leader's office, "and it inflicted serious damage on the Liberals."

The Tories even unveiled a Taxpayers' Bill of Rights, which basically made the point that Revenue Canada worked for the voters, not the other way round. And in government, the Conservatives implemented it.

It was the first indication that the Conservatives, under a new and untested leader, had the Liberals on the run. And it was about two tests of governance: competence and fairness.

The tables were turned on Mulroney in the spring of 1985, when the Conservatives, in Michael Wilson's first budget, capped indexation of seniors' pensions, renewing long-held suspicions that Conservatives were a bunch of cold-hearted accountants. When Mulroney made the mistake of greeting a group of seniors demonstrating on Parliament Hill, a woman named Solange Denis famously said to him: "Say goodbye, Charlie Brown."

In the last days of 2005, in the dying breaths of this minority Parliament, the Martin government has been similarly caught completely unawares on income trusts. As in the Taxpayer Rights episode, the government looks incompetent and heartless.

When Finance Minister Ralph Goodale announced on Sept. 19 the government was deferring tax rulings on companies converting to income trusts, he triggered a huge sell-off in the income-trust sector, which in the next month lost more than

$23 billion, or more than 13 per cent of its market capitalization. There were also huge losses in the broader market, especially among companies rumoured to be considering conversion to income trusts, which pay significant monthly dividends to unit holders.

Millions of Canadians, all of them of voting age, have seen their investments shrink significantly. If they didn't see it in the market, they certainly saw it this month when they got their monthly investment statements for October.

What was Goodale thinking? Clearly, he was thinking of Bay St., and the possibility that the banks, led by the Royal Bank of Canada, might convert some or all of their business units to income trusts. Ottawa's concern was that trusts, with their high payouts of profits to shareholders, were not reinvesting enough in productivity improvements.

And in spite of being awash in surplus cash, Goodale was concerned that Ottawa was losing a lousy $300 million in corporate taxes, in spite of the fact recipients pay taxes on other income. Goodale said he would make a final announcement on the status of income trusts after consulting the financial-services industry.

He has been on the run ever since. In the market, he did what markets hate most: First, he changed the rules in the middle of the game and then he created uncertainty. Worst of all, investors saw their portfolios robbed of value by the stupidity of their own government. The government took its eye off Main St., which no minority government can ever afford to do.

Opposition and Liberal MPs alike have been swamped with letters and emails from angry voters. Lee Richardson, a Conservative MP from Calgary, where the energy-laden income trust sector is based, has received more than 1,000 emails from individual investors. He has been putting them into the record of the House on a daily basis.

The Canadian Association of Retired Persons, representing nearly half a million Canadians, has loudly denounced the Liberals for downsizing the value of their members' retirement portfolios. Today, there will be a demonstration of widows and orphans on Parliament Hill.

A blistering research note from Canaccord Capital at the end of October triggered other scornful appraisals from the street. In response, senior officials at Finance have let it be known it wasn't their idea, or even Goodale's, but Paul Martin's. If you follow this dog home, it will lead you right to 24 Sussex Dr.

Of the many emails received here on this subject, the typical tone is that the writer has voted Liberal all his life, but never will again. It's 1983 all over again.

[email protected]

Posted by: Kevin Steel | 2005-11-29 4:10:37 PM

Goodale is referring to something he said on Tuesday NIGHT (see story reference below); if this was after markets closed, it doesn't explain the statement in today's Post "As the accompanying chart demonstrates, there was heavy buying of income trusts beginning Tuesday."

Goodale mulls income trusts update
National Post
Wednesday, November 23, 2005
Page: FP6
Section: Financial Post
Byline: Greg Quinn
Source: Bloomberg News

Finance Minister Ralph Goodale indicated last night he may give an interim update as early as this week on tax policies he's considering for income trusts.

Mr. Goodale said he wants to provide "as much certainty" as possible for income trust investors ahead of an election campaign that may begin next week. The three opposition parties may oust the Liberal government of Prime Minister Paul Martin through a so-called no-confidence vote planned for Monday.

"I'm very anxious to ensure the greatest amount of certainty and I am obviously considering what the implications of a non-confidence motion might be," Mr. Goodale said outside the House of Commons.

When asked whether he planned to give some signal this week on possible tax changes for income funds, Mr. Goodale said: "I will have to come to a conclusion very shortly."

The Finance Department has been reviewing income trusts after reporting in September it lost about $300-million in tax revenue last year because the trusts do not pay income taxes. The government has invited submissions from investors and companies by Dec. 31, and plans to release possible tax changes next year.

The Conservative Party has said it would not tax income trusts, hoping to win support from the more than one million Canadians who own the high-yield securities.

"Obviously the early calling of an election overlaps with a portion of the consultation period so I am thinking through those implications," Mr. Goodale said.

He is unlikely to move up the Dec. 31 deadline for submissions because he's said in the past the consultation process is needed to help the government set policy, said Simon Romano, a securities lawyer at Stikeman Elliott in Toronto. The Canadian Tax Foundation is holding seminars on Nov. 30 in Toronto and Dec. 8 in Calgary to debate trusts.

Income trusts have lost about $20-billion in market value since September, when Ottawa said it would stop issuing advance tax rulings on conversions to trusts, pending the review. The trusts have also suffered from a decline in oil prices and rising interest rates.

Posted by: Kevin Steel | 2005-11-29 4:22:29 PM

I work in the discount brokerage sector. Liberal supporter I know was claiming that someone on ROB TV early Wedensday afternoon predicted that the liberals were going to clear up the confusion on the trusts- and that was what triggered the trading binge. While I have little doubt that there are those who base their decisions on what the talking heads on TV say, not that kind of volume on the stocks. No way.

Can we see a few more trading charts other than BFI?

Posted by: BC Monkey | 2005-11-29 5:20:05 PM

Dr. Al Rosen, (Ph.D., FCA, FCMA, CPA (USA), CFE, FHKSA, CIP, CA.IFA)
in this CBC story
puts the leak at between 2 pm and 4 pm EST Wed. That's pretty specific and would seem to invalidate Goodale's claim that it was all just market speculation. If his musings of Tuesday night had any influence, one would think it would show up throughout the day on Wednesday and Rosen wouldn't be so specific. But then, I'm not familiar with this stuff. The Post implies the leak goes back to Tuesday. We'll see what's in the papers tomorrow, and if the MSM goes quiet, I'll maybe make a call or two.

BC Monkey: I don't know where to get more charts.

Posted by: Kevin Steel | 2005-11-29 6:30:25 PM

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