INCOME TRUSTS CAN STILL MAKE MONEY

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  Many people thought the decision of the Conservative government to tax income trusts would be the death knell for the industry. But some trusts continue to prosper despite the pending tax and a few are even talking about retaining their trust status after the tax kicks in on Jan. 1, 2011.

One example is Keyera Facilities Income Fund (TSX: KEY.UN). I originally recommended it to readers of The Income Investor in July 2004 at $12.05. Recently, it was trading at $22.66 and paying a monthly distribution of 13.5c per unit ($1.62 annually) for a yield of 13.4% based on the original price.

Keyera has announced a plan that it believes will significantly reduce the impact of the trust tax when it takes effect. Management says the trust will reduce the use of tax deductions between now and the end of 2010, thereby increasing the tax pools that will be available to shelter distributions from 2011 on. At the start of this year, Keyera had $325 million worth of tax pools available.

In a May statement, the company also said: "With the announcement that provincial income tax rates applicable to Keyera will be harmonized with corporate income tax rates, it is not expected to be materially more costly for Keyera to remain an income trust after Jan. 1, 2011."

Very few trusts have come forward with a statement like that. It's just one more reason why I continue to rate Keyera as a buy, even though the price has almost doubled since I first picked it.

HIDDEN GEMS

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  There are literally thousands of mutual funds and ETFs from which to choose so it should come as no surprise that many good ones are overlooked by investors. Here are two hidden gems that may interest you. http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=3141

PROFITS FROM THE OIL SANDS

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  If you haven't read our free Special Report on 6 Ways to Profit from the Oil Sands, now is the time to do so. All the securities mentioned in the report are performing very well, but there is more money to be made. To get your copy at no cost, go to www.buildingwealth.ca/premium/oilsandsbuildingwealthversion.pdf

DIVIDENDS DO MATTER!

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  There's a growing, if controversial, school of thought in the U.S. that contends dividends are a waste of corporate money. Better to reinvest the cash in growing the business, the theory suggests. To which Internet Wealth Builder contributing editor Tom Slee replies: Rubbish! Read his counter-attack at: http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=3144

SUMMER SIZZLER

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  The lazy days of summer are upon us. What better time to catch up on your reading? And what better to read than financial advice that could make you a lot of money?

Well, here's your chance. We're offering new subscribers a summer trial membership (two months) in our three newsletters for the ridiculously low price of only $19.95 plus tax. Find out how to profit from your investments for less than the cost of a movie and snacks  and get two free bonuses as well. Don't wait - this is a limited time offer. For complete details: http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=621

INVESTING IN EUROPE

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  Iconic billionaire investor Warren Buffett was in Europe last month, looking for bargains in his usual way. He told a press conference that he sees better values there than he can find on North America or the emerging markets. For more on Buffett and the situation in Europe, read the article at: http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=3139

Unfortunately, most Canadians don't seem to have much interest in buying European stocks despite the fact that many of them trade on the New York Stock Exchange so are easily available. One example is the Spanish telecommunications giant, Telefonica SA, which trades in New York under the symbol TEF. We recommended it to readers of our Internet Wealth Builder newsletter in November 2006 at US$58.23 and it was trading this week at US$81.65.

Another stock we like is steel goliath ArcelorMittal (NYSE: MT) which we recently added to our Recommended List. You can read the full story at: http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=3143

For details on a three-month trial membership in the Internet Wealth Builder, go to: http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=562

THE NEW PPN RULES

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  Canadians have fallen in love with principal-protected notes (PPNs) and are pouring billions of dollars into them. Personally, I have never liked them - I regard them as nothing more than an expensive financial security blanket. But the banks and other financial companies continue to spew out new issues.

Now Ottawa has decided that the time has come to introduce new regulations designed to give people a better understanding of how PPNs work, their cost, and the risks associated with them. The question is whether the rules are strong enough to make any difference. Read the full story at: http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=3150

QUESTION OF THE MONTH

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  Tax-deductible mortgages

Q - Do you think the schemes to make the mortgage tax deductible make sense? Can you provide us with some basic information and steps? What are the pros and cons? Any book or websites with detailed information? - Jim S.

A - I see that this concept is now being flogged through free seminars. If you attend, you will find that the event is sponsored by a financial advisor who will be eager for your business. The reason is simple: all these schemes require you to borrow a lot of money and then reinvest it. The idea is to shift your debt from your home (since mortgage interest is not tax deductible) to an investment portfolio, since interest on investment loans can be deducted.

I regard these plans as a lot of smoke and mirrors that mainly benefit the sponsors, who generate commissions from the loans and the investments. Yes, there are books and websites on the subject but you won't learn about them from me since I disagree with the whole idea of encouraging people to use borrowed money to buy stocks or mutual funds.  G.P.

If you have a financial question, send it to me at gordon.pape@buildingwealth.ca and mark it: Investing Today Q&A. We answer selected reader questions each week at http://www.buildingwealth.ca/qa.cfm. The service is free.

ONE OF THE BEST INVESTING BOOKS EVER

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  In the June issue of our Mutual Funds Update newsletter, I wrote an article about a rising new fund manager at Fidelity who reminds me of one of the great investors of all time, Peter Lynch. In the story, I mentioned that Lynchs book One Up on Wall Street was one of the best of its kind that I have ever read - practical, amusing, easy to understand, and packed with great common sense advice.

Afterwards, a number of people wrote to ask about it. The book is still in print so we have added it to our Best Books page where you can order it for only $12.05 plus tax. You'll find the details at http://astore.amazon.ca/buildicaquizm-20