I have a retired friend who has proved to be a shrewd investor. He invests exclusively in income trusts and he's proud as punch of his portfolio.

Like many investors, he views income trusts as a port in a storm. But more importantly, the monthly cash distributions from his portfolio of income trusts are his and his wife's bread and butter.

Ralph Goodale, arch-enemy of the income trust investor, needs to meet my friend. It may provide some useful perspective for the man who has rained on the income trust parade.

In a matter of days, the finance minister has removed the safety net from what investors believed to be a conservative investment vehicle. Thanks to Goodale, the income trust sector is no longer a comfort zone. That port in the storm turned out to be pirate ship. My friend may as well have invested in a speculative play on nanotechnology for all the peace of mind he's getting these days from his income trusts.

Thanks to the government, trust investors such as my friend have been unfairly hung out to dry and left to squirm, sitting on pins and needles as they await Goodale's next speech or pronouncement, wondering how the trust investment landscape might change in the coming months.

The government should have dealt with this issue years ago before trusts became such a crucial investment vehicle for Canadians and particularly elderly investors. But Goodale and Co. have chosen to drag their feet on the issue and only recently began to rain on the income trust parade with a review on the issue of tax implications for trusts and by voicing concerns over lost tax revenue from the booming $170-billion income trust sector.

Trusts don't pay taxes at the corporate level but distribute part of their earnings to unitholders, who pay taxes on that income.

The red flag went up on the sector recently when Goodale took action against companies that had been planning to convert to the income trust structure. Then, the feds sent the "future" trusts into a tailspin by announcing they were postponing the practice of providing advanced tax rulings for companies on the verge of converting to trusts, essentially freezing what had become a stampede into trust conversions.

One of the trust candidates, CI Fund Management (CIX), took an 11-per-cent hit on the day of the news, but existing trusts have also been hammered as investors perceived Goodale's latest move as a sign that his sights are squarely set on the trust sector. Investors fear that drastic measures may eventually be taken in dealing with the tax system that currently favours the income trust structure.

In just two days, panic selling gripped the S&P/TSX Income Trust index, which plunged 4.8 per cent in that time, and even the trust darlings such as Yellow Pages Income Fund (YLO.UN) fell out of bed with selloffs in the 10-per-cent range.

What the government's next move will be is anybody's guess, but irreparable damage has already been done to the income trust sector. Goodale's rumblings over income trusts have reversed sentiment in the sector and created mass confusion and anxiety. And those are the kinds of emotions that could send the trusts into serious downtrends as the feds fiddle over the issue.

In targeting income trusts, the government has caused chaos in the investment community and blindsided retired investors such as my friend who rely on these investments for mere sustenance. And, in this low interest-rate environment, many of those people don't have any other investment alternatives that generate decent income.

The government's tax system created this monster known as the income trust model. Now it's high time the feds promptly laid the cards on the table so trust investors can make informed decisions on their investments. After all, while my friend was building his conservative portfolio of quality income trusts, no one told him he'd wind up in a game of Russian Roulette with Ralph Goodale.

* GAS PAINS: Consumers could be in for another energy shock this winter. At least that's the word from McLean & Partners Wealth Management.

The Calgary firm believes natural gas prices that have already soared to the $13 range could spike over $20 US per mcf (thousand cubic feet) this winter.

In a recent report, McLean & Partners senior research analyst Lex Kerkovius writes: "We now believe that gas prices could seriously shock consumers in the dead of winter. So where do we think gas can spike to this winter? We hope you're sitting down, as this may hurt. We think that if the winter turns out more normal than it has been in the past few years (which were near tropical), then spikes over $20 (yes, $20!) in January are a very real possibility."

McLean & Partners isn't as bullish on oil prices, cautioning that there may be downside risk to the $50 US per barrel level.

The firm also cautions that the risk of a recession "has increased significantly" as a result of high energy prices.

"We strongly believe that (the energy shocks) will have a major impact on consumers, especially in the G7 industrialized world," writes Kerkovius. "While it may take some time to manifest itself in consumer behaviour, we believe it will come to pass and will slow economic growth. Clearly, in our eyes, the current situation is not sustainable. We must actively manage for the risk of an adverse outcome and not wait for the 'grim reaper' to arrive, for by then it will be too late."

Energy fund manager Peter Linder of DeltaOne Capital Partners, whose DeltaOne Energy Fund boasts an astonishing return of 112.9 per cent (through August), provides his views on the issue in Pro's 3 Stars (See Page 14).

* HUGO MANIA: Hugo Chavez is a man who loves power, so surely the president of Venezuela must have had a chuckle over the way he has been able to manhandle stocks in Canadian companies with interests in his country, particularly Crystallex International.

Chavez recently dropped a bombshell in the laps of shareholders of Crystallex (TSX:KRY) when he pronounced in a televised speech: "Las Cristinas (the rich gold mine that Toronto-based Crystallex is developing) belongs to Venezuela. We will create a national mining company there. Companies from any part in the world who don't like what is happening here, who don't want to pay taxes or who don't want to answer to environmental damages, they can pack their bags and leave."

Shareholders of Crystallex watched their shares tank as much as 52 per cent in one day to $1.50 based on those comments, but Chavez made some serious money for savvy traders. If you caught the panic selloff near $1.50 and sold when the stock opened at $2.36 the next day after Crystallex issued the expected "business-as-usual" press release, you booked a return of about 50 per cent.

That turned out to be a sucker rally as the stock was hammered back to $1.60 the following day.

Las Cristinas is one of the world's largest untapped gold deposits and, as long as gold prices continue to soar to new 18-year highs, don't think you've heard the last of Chavez on this matter.

As Canaccord Capital put it in a recent note: "As for Crystallex's claims that their relationship with Chavez is solid and their operating contract is still valid, don't take it to the bank. Assume the worst and wait for more clarity."

* SAGE WORDS: "The love of money as a possession - as distinguished from the love of money as a means to the enjoyments and realities of life - will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease."

Hot Stock

Oncolytics Biotech TSX:ONC $4.48 Up $1.24 (+38.1 per cent) on 663,949 shares (based on week ending Sept. 30 for Canadian stocks over $1)

You want action? Take a joy ride on a battered and beaten biotech. There are plenty of them kicking around. Calgary-based biotech Oncolytics finally broke its long-term downtrend on news that it was enrolling patients for a U.S. clinical trial on Reolysin for treating cancer. Of course, the burning question is whether Oncolytics, which traded as high as $20 four years ago, can sustain the uptrend.

Cold Stock

Global Railway Industries TSX:GBI $2.05 Down $1.35 (-65.9 per cent) on 444,800 shares (based on week ending Sept. 30 for Canadian stocks over $1)

All it took was a one-sentence press release from Global Railway to derail the stock. The Calgary railway equipment manufacturer said two directors, Robb Thompson and Dale Owens, had resigned, giving no explanation. Shareholders, still smarting from some discouraging financials earlier this year, weren't waiting for answers. Global's stock is now 66 per cent off its 52-week high of $6.

- Author John Maynard Keynes.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)