Canadian Trusts 101: It's Not Too Late

From a fundamental perspective, however, investors should think back to the demand statistics the last time oil was at this level. In September, we witnessed a nearly 4% decline in demand for oil, a drop-off that hadn't been seen in nearly 15 years and a statistic that I believe was underemphasized at the time.

There's scarcely a day that man's demand for oil is lower than the day before at all, let alone a monthly drop of that magnitude. I believe that number was important: Those numbers may finally have signaled the point of pain. And before we write it off as merely a Hurricane Katrina-related anomaly, keep in mind that the demand retreat was seen worldwide.

I don't know that $70 ultimately will be the point at which global demand falls off again, but energy is unique in being able to sow the seeds of its own demise. That price does exist somewhere above the current price. Barring political turbulence that causes oil to spike higher, this latest run at $70 may help us determine the top end of oil's new range.

Should oil fail at $70 again and pull back meaningfully, perhaps oil-related energy trusts will hold up as their gas-oriented cousins did recently. To be prudent based on the elevated cost of oil, however, investors should acquire any oil-related energy trusts slowly at this time. If looking north of the border at Canadian trusts, investors also should factor in currency risk as another reason to go.

Ultimately, Canadian royalty trusts offer an interesting high-yield way to get involved in energy. Elevated commodity prices, however, demand that investors proceed slowly in making new purchases in this sector.

In my next column, I'll discuss Canadian trusts that are about more than just energy.

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Investing in foreign markets involves unique risks including, but not limited to, currency fluctuation and political risk. In addition, international investing is typically more expensive for U.S. investors than buying nationally listed shares on a U.S. exchange.

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Charles P. Hanlon focuses on non-dollar investments. He is currently the president of Delta Global Advisors. At the time of publication, Hanlon had no positions in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Investing in foreign markets involves unique risks including, but not limited to, currency fluctuation and political risk. In addition, international investing is typically more expensive for U.S. investors than buying shares listed on a U.S. exchange. Hanlon appreciates your feedback; click here to send him an email.