Canadian Income Trust Massacre of 2006
So I took the contrarian view along with other analysts that oil/natural gas was headed higher because of foreign demand, middle east tensions, deficits, US recessionary talk and the inflated US dollar. At about the same time the Canadian Government decided to tax income trusts at the corporate rate of 31.5% starting in 2011 instead of using the flow through entity trust tax structure which transfers all income to the unitholders, which the company can deduct for taxes. With this new tax rate as a corporate entity the company would have less cash on hand to distribute as dividends, plus they'd have less cash to purchase existing oil fields to stay alive. Anyway, as a result there was a "Canadian Income Trust Massacre" on the Canadian exchanges and some Canadian energy trusts lost almost 1/3 of their values and they looked very attractive because not only would these trust securities rebound if their oil/gas assets increased in value, interest income would increase to US holders as the CAD/USD conversion would boost the Canadian denominated interest income.
This in fact occurred, the sell off was overdone because the tax would not take effect until 2011 and the underlying commodities were bottoming out. Today the Canadian Dollar is at about parity with the US Dollar 0.98, and CAD/USD hit a high of 1.09 in late 2007. Oil recently hit a high of $147!
The tax decision was shocking because Canadian Prime Minister Steve Harper said they wouldn't tax these trusts and billions of retiree money was destroyed. Eventually these trusts were bought out or merged, and Canetic Resources got taken over by Penn West Energy Trust for $16.67. If you got in at the panic $12 lows you'd have a 41% gain in a year.