Warren Buffett was recently featured on CNBC where he discussed oil depletion and the fact that we could be close to peak oil production.
He says that we’ve been “sticking straws in the ground” since the 1850s and all of the easy to reach oil has been tapped. We’re consuming 85 million barrels of oil every day and the demand from countries like India and China is just increased. Existing production is maxed out and the fields seem to be in sharp decline.
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Even though the markets were down today, my stock portfolio was up 3%. This was mainly because I’m heavily weighted in Oil and Gas Canroys and they were all buoyed today on news of a major takeover. Abu Dhabi’s state-owned utility company, National Energy agreed to buy out PrimeWest Energy(PWI) in a deal worth $5 Billion. PWI was up 30% on the news and all other canroys were up around 5% as well.
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The last time I wrote a post about investing in Canadian Royalty Trusts was a few months ago. Since then the price of Canroys has increased and the yields have dropped. If you missed that opportunity to invest, you might have been put off by the lower yields.
However, today’s 200 point drop in the Dow Jones Industrial average has provided another a good opportunity to buy them. Its also a good opportunity to invest new money into them.
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Posted in Investing, Canroys on Mar 19th, 2007 9 Comments »
Canadian Royalty Trusts, also called Canroys, are a subset of a class of investments called Canadian Income Trusts. Royalty Trusts invest in oil and gas resources. But Income Trusts can invest in businesses, real estate and utilities.
In terms of taxation, they get similar treatment as US REITs. They have to distribute most of the profits out to the shareholders (only they’re now called unit holders) and the dividends aren’t taxed at the corporate level. This means that there usually more dividends to pass through to the unit holders. And at the unit holders level, there’s a flat 15% tax.
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