Don’t stop reading; you’ve heard this all before, but now it seems both combatants and, more importantly, their audience, are prepared for battle.

Prime Minister Stephen Harper, charging the official opposition Liberal Party with obstructing his agenda, has said he’ll decide in coming weeks whether to force federal parliamentary elections. Opposition leader Stephane Dion accused Harper of wanting to block a probe by parliamentary committees into the Conservatives’ spending during the 2005-06 campaign that led to the current minority government.

Whatever motivation the party leaders publicly acknowledge, the current appetite to hit the trail is likely a function of the Canadian public’s openness to a new federal election. A recent poll by Ipsos-Reid for Canwest News Service and Global National revealed that 40 percent of Canadians are in favor of an election, up from 27 percent in March. Only 38 percent oppose one, down from 66 percent.

Harper in recent weeks has aggressively derided the current situation as “dysfunctional,” raising the prospect that he would engineer the minority government’s defeat now rather than wait until October 2009 for an election date fixed during his reign. He’s also called four byelections to fill open parliamentary seats. The results of those contests–three on Sept. 8, one on Sept. 22–should provide Harper as well as Dion an indication of how they’ll fare with the broader electorate. The Liberals have lost two major strongholds in recent byelections, but also held onto a couple.

Dion has said he hasn’t decided whether to bring down the government once Parliament returns for a fall session.

The Ipsos-Reid poll also suggests the Conservatives would only be able to secure another minority government were an election held today. Harper’s party has the support of 36 percent of Canadians, while Dion’s Liberals are at 30 percent. The NDP is at 14 percent support and the Green Party 10 percent. There are 308 seats in the House of Commons, including four vacancies. The Conservatives currently hold 127 seats, the Liberals 95, the Bloc Quebecois 48, the New Democratic Party (NDP) 30 and independents have four.  

Harper hasn’t said how he’ll set up an election for this fall, but there are a number of possibilities, according to the Toronto Globe and Mail:  

• Dissolve Parliament

Prime Minister Stephen Harper goes to the Governor-General and asks her to dissolve Parliament. This move is politically risky given that Mr. Harper brought in legislation to fix elections every four years, with the next one scheduled for Oct. 19, 2009.

• Opposition action

• Confidence motion

• Money bill

• Involve the Senate

We’ll be taking a deeper look at the interplay of politics, elections and trusts in the September issue of Canadian Edge. The short story is that CE focuses on strong businesses capable of sustaining ample distributions for yield-hungry investors, no matter the genuflections of short-sighted elected officials.

Here’s some more color on the North Pole.

The United States Geological Survey report on the disposition of High Arctic oil and natural gas illustrates the long-term story, but the great melt, whatever its causes, has opened up those waters to a lot more traffic already–Andrew Revkin of The International Herald Tribune reports that more than 200 cruise ships sailed around Greenland in 2007, up from 27 in 2004.

It’s easy to dramatize the timing of the US Coast Guard’s now-public effort to fund new icebreakers, though, coming as it does on the heels of the first anniversary of Russia’s flag-planting at the North Pole and amid The Big Bear’s demonstration of neighborhood dominance. Here’s where Revkin’s story gets interesting:

…[T]his spring, the leaders of the Pentagon’s Pacific Command, Northern Command and Transportation Command strongly recommended in a letter that the Joint Chiefs of Staff endorse a fresh push by the Coast Guard to increase the United States’ ability to gain access to and control its Arctic waters.

The growing Pentagon support for the Coast Guard, which is within the Department of Homeland Security, followed several highly publicized maneuvers by Russia aimed at cementing its position as the Arctic’s powerhouse, including sending a pair of small submarines to the seabed at the North Pole just over a year ago.

And more, from the Financial Times:

Canada and the US say a past land dispute over 12,000 sq km of seabed elsewhere in the Beaufort Sea is being put aside in the name of defending against Russia’s Arctic claims, which clash with those of the US, Canada, Denmark and Norway.

Putting together Georgia and the Arctic, here’s Nick Leo of The Telegraph of London:

As Russian forces consolidate their grip on her messy southern frontier in the aftermath of the war with Georgia, her diplomats, oilmen and military have been pressing their advantage in the north, a border region which is on a far vaster scale but equally confused and disputed.

Cleo Paskal, an Assistant Fellow at Chatham House and an expert on how climate change will affect borders, said: “The Russians have a big head start. Their nuclear submarines have been all over the Arctic for decades, they have 16 icebreaking ships to the Americans’ four, they have a lot of experience and a lot of the right gear.

“And they have a lot to gain. Apart from fossil fuels, there are important fisheries that will increasingly move north with global warming. Strategic control of the Arctic is within their reach.”

“It is the markets’ job to reallocate money from the ignorant to the intelligent, from the lazy to the hard working and studious; from the naive to the educated, and from the speculator to the investor.”

The entire piece is well worth a read.

Fall is the perfect time to enjoy Washington, DC’s outdoor treasures and catch a glimpse of nature’s splendor. And this year you can enjoy the immediate aftermath of the Presidential election in the seat if the federal government.

Join me and my colleagues Neil George and Elliott Gue for the DC Money Show, Nov. 6-8, 2008, at The Wardman Park Marriott.

Go to www.moneyshow.com or call 800-970-4355 and refer to priority code 011362 to register as our guest.

We also have a special invitation for our readers. KCI Communications, Inc., is organizing an exciting 11-day investment cruise Dec. 1-12 through the Caribbean and Panama Canal. Participants will have the opportunity to meet and chat with my colleagues Gregg Early, Neil George and Elliott Gue.

This will be a unique opportunity to step away from your daily routines, relax in one of the most beautiful parts of the world and share analysts’ knowledge and passion for the markets. During the sail, you’ll not only explore the cerulean splendor of the Caribbean, but you’ll also delve deep into current markets in search of the most profitable opportunities for your portfolios. You’ll also have the rare chance to sail through one of the world’s engineering marvels, the Panama Canal.

It’s always a special treat to meet and talk with subscribers in person, and we couldn’t have picked a better setting than aboard the six-star Crystal Serenity. This is sure to be an especially memorable experience. We hope you’ll join us.

For more information, please click here or call 877-238-1270.

We’ve come to the end of a largely positive second quarter earnings reporting season for CE Portfolio holdings. Below is the last group to report, which includes the one hiccup, Arctic Glacier Income Fund (TSX: AG.UN, OTC: AGUNF).

Arctic was felled by the unforeseen impact of litigation expenses combined with an abnormally cold start to its strong season and the North American economic downturn. On the positive front, oil and gas trusts are using the cash benefits of high crude oil and natural gas commodity prices to pay down debt, fund capital programs and boost distributions. 

Results for real estate and infrastructure-related trusts were in line with expectations. While Canada is starting to show signs of stress based on the economic slowdown in the US, it remains fundamentally sound and in good position to weather the storm better than it has similar scenarios in the past.

Algonquin Power Income Fund’s (TSX: APF.UN, OTC: AGQNF) reported distributable cash of CAD.15.9 million (CAD0.21 per unit), down from CAD18.9 million (CAD0.25 per unit) a year ago. The decrease is primarily attributable to one-time cash items realized during the second quarter of 2007.

On the operations front, revenue from Algonquin’s power generation segment grew to CAD54.2 million from CAD47.8 million on higher energy production and energy rates in the renewable energy and thermal energy divisions. The thermal energy unit processed 38,738 tons of municipal solid waste, up 60 percent from 24,144 tons a year ago, a rate of growth beyond management expectations.

The fund expects throughput at its EFW facility to maintain a 100,000-ton annual pace. Revenue was basically flat in the utility services segment, which includes water and wastewater transportation and delivery. Slowing construction activity in the US hemmed in results during the second quarter, a factor that will continue through the balance of 2008.

Algonquin distributed CAD17.5 million to unitholders (CAD0.23 per unit), for a payout ratio of 110 percent. Algonquin Power Income Fund is a buy up to USD9.    

Artis REIT (TSX: AX.UN, OTC: ARESF) reported a 68 percent year-over-year increase in second quarter funds from operations (FFO), growth driven by acquisitions. As of June 30, 2008, Artis owned 86 income-producing commercial properties, up from 51 at the end of the second quarter of 2007. Distributable income (DI) on a per-unit basis was up 13.5 percent, and the payout ratio came down to 64 percent from 70 percent a year ago.

Management anticipates maintaining its aggressive approach to acquiring new properties, and also forecasts significant revenue, FFO and DI growth as below-market leases on existing properties are renewed at higher rates. Artis REIT, which has a lot of exposure to high-growth Alberta, rates a buy up to USD18.

Atlantic Power Corp (TSX: ATP.UN, OTC: ATPWF) reported a 467 percent increase in cash available for distribution, driving its second quarter payout ratio down to just 60 percent. All facilities in which Atlantic has interests performed to expectations, and management forecast a 5 percent increase in distributions from those projects through 2008.

Last month Atlantic announced a “normal course issuer bid” to buy back up to 8 percent, or 4 million, of its outstanding income participating securities. As of Aug. 1, the company has repurchased and cancelled 157,280 at an average price of CAD8.44.

That should prove immediately accretive by reducing interest expense, as well as the number of shares on which equity dividends are paid. Atlantic Power Corp is a buy up to USD12.

Canadian Apartment Properties REIT (TSX: CAR.UN, OTC: CDPYF) enjoyed increases in average monthly rents across all sectors of its residential property portfolio, pushing its overall average up 3.7 percent to CAD935, and its occupancy rate improved to 98.2 percent from 96.9 percent.

FFO were CAD38.3 million (CAD0.58 per unit), up from CAD32.5 million (CAD0.54), and DI rose to CAD39.2 million (CAD0.60 per unit) from CAD32.9 million (CAD0.55 per unit). The payout ratio for the period ended June 30, 2008, was 93 percent, down from 99 percent in the second quarter of 2007.

Canadian Apartment Properties REIT’s acquisition strategy–focused on higher-growth markets–and its ability to maintain high occupancy rates set it up well for increased monthly rents. Canadian Apartment Properties REIT is a buy up to USD20.

Keyera Facilities Income Fund (TSX: KEY.UN, OTC: KEYUF) reported an 80 percent increase in distributable cash flow (DCF), despite slower drilling activity caused by wetter-than-normal weather, a longer-than-usual spring breakup and reduced capital budgets for producers set 12 months ago.

Keyera’s Gathering and Processing operation saw a significant increase in throughput, and the Marketing segment realized a 50 percent increase in income. DCF for the second quarter was CAD56 million, up from CAD31.2 million; Keyera paid CAD24.9 million to unitholders for a payout ratio of 44 percent.

Producers’ announced capital spending plans suggest drilling activity will increase through the balance of 2008, giving Keyera more room to grow distributions. Keyera Facilities Income Fund is a buy up to USD23.

Macquarie Power & Infrastructure Income Fund (TSX: MPT.UN, OTC: MCQPF) reported income from operations rose 29.2 percent during the second quarter, driven largely by the assets acquired in the Clean Power Income Fund deal. Distributable cash for the period was CAD11.million (CAD0.224 per unit), compared to CAD7.3 million (CAD0.237 per unit) a year ago.

Revenue was CAD33.5 million, up from CAD21.6 million in the second quarter of 2007 on the wind, hydro and biomass assets acquired in the Clean takeover and rate increases under Cardinal’s power purchase agreement. Leisureworld, a long-term care facility that diversifies and stabilizes the fund’s cash flow, saw a 37 percent increase in revenue; average occupancy for the quarter was 98.1 percent, flat with the second quarter of 2007, but private-room occupancy was up to 92.2 percent from 84.9 percent.

The second quarter payout ratio was 117 percent because of the seasonal nature of earnings. But it remained on target with management expectations for a roughly 100 percent payout for the full year. Stable Macquarie Power & Infrastructure Income Fund is a buy up to USD12.

Advantage Energy Income Fund (TSX: AVN.UN, NYSE: AAV) reported a 66 percent increase in FFO, helped by a 67 percent rise in revenues. FFO for the second quarter were CAD103.8 million (CAD0.74 per unit), up from CAD62.6 million (CAD0.54 per unit) a year ago. Higher commodity prices and the acquisition of Sound Energy Trust, which closed Sept. 5, 2007, drove results. Advantage increased total daily production to 32,015 barrels of oil equivalent per day (boe/d) from 27,115 during the second quarter of 2007, a boost attributable to the Sound assets.

Natural gas production climbed by 13 percent while crude oil and natural gas liquids production increased 28 percent. Advantage’s production is weighted 64 percent to natural gas, 29 percent to crude oil and 7 percent to natural gas liquids; its natural gas focus positions it well to capitalize on a favorable long-term pricing environment for the commodity.

Advantage cut its distribution from CAD0.15 per unit per month to CAD0.12, a level management should be able to sustain given the fundamental strength in natural gas. Buy Advantage Energy Income Fund up to USD14.

Ag Growth Income Fund (TSX: AFN.UN, OTC: AGGRF) posted a 60.3 percent jump in revenue and boosted its distribution by 21.4 percent. The provider of equipment and services to North American agriculture seems to have solved problems at certain facilities that limited its productive capacity, as production by truckload rose 47 percent and margins improved.

Sales for the period ended June 30, 2007, were up 60 percent from year-ago levels. Gross margin as a percentage of sales was 34.6 percent, down from 36.4 percent from a year ago as a result of problems at the recently acquired Twister operation; management has subsequently addressed those problems.

Ag Growth reported a significant order backlog, a function of the strong North American agricultural industry. The payout ratio is now down to 55 percent, backing up the big dividend increase. Well positioned to benefit from rising attention to global agriculture and food-production issues, Ag Growth Income Fund is a buy up to USD32.

Arctic Glacier Income Fund (TSX: AG.UN, OTC: AGUNF was hit last spring with the news that the US Dept of Justice was investigating the North American packaged ice industry for potential price and market collusion. At the time, Arctic wasn’t named as a target in the case, and management stated it was in full cooperation with the authorities on both sides of the border.

That remains the case today. Unfortunately, these numbers indicate the investigation is starting to take a toll on the trust, and at the same time, it’s confronting a huge jump in freight costs for packaged ice as well as unexpected customer conservation in North America (with revenue down 3 percent). Last week Arctic announced what it termed a temporary cut in its distribution by 18.2 percent because of these factors and further warned there’s no end in sight to the investigation.

It’s still true that packaged ice remains a generally stable business. And it’s still very hard to see how antitrust litigation could succeed in an industry selling something every home icemaker can provide. On the other hand, lengthy investigations can be devastating to small companies, particularly if their businesses are being strained by a worsening macro environment. And it’s also true that every Tom, Dick and Harry is coming out of the woodwork to try to get their piece of Arctic.

In any case, the situation here does appear to be worse than what management expected when the investigation broke last spring. In hindsight, it would have been great to avoid our current loss by selling then or at some other point along the way. Focusing on numbers rather than rumors saves you from being whipsawed out of good positions. But occasionally, the news and numbers do get worse, and when that happens, it’s time to bail. In light of the current situation and above all the dividend cut, I’m going to take the loss now and sell Arctic Glacier Income Fund.

Peyto Energy Trust’s (TSX: PEY.UN, OTC: PEYUF) foundation is built on its low-cost operating profile, solid balance sheet and long reserve life; expense cutting, debt reduction and a 21-year proved plus probable reserve horizon reported for the period ended June 30, 2008, show the trust is using the cash benefits of high commodity prices in the cause of sustainability.

FFO were up 7 percent in the second quarter on a 14 percent rise in revenue. Peyto reduced its operating costs from CAD2.70 per barrel of oil equivalent (boe) to CAD2.58. The trust distributed CAD46.6 million (CAD0.44 per unit) of its CAD74.1 million in FFO, for a payout ratio of 63 percent. Peyto Energy Trust is a buy to USD21.

Trinidad Drilling (TSX: TDG, OTC: TDGCF) came in with a 14.8 percent jump in cash flow per share from operations. Trinidad’s rig rates in the US and Canada continued to exceed industry averages by wide margins. The 31 percent utilization rate in Canada was well above the 20 percent industry benchmark for the period, a seasonally low period because of ice breakup conditions. Meanwhile, the US rig fleet rate stood at 87 percent of capacity.

Trinidad’s strong results remain because of three factors: a focus on deep drilling rigs increasingly needed to get at both new and older fields, the trust’s insistence on inking long-term contracts generally in advance of construction and continued expansion in the US, where market conditions remain better. That’s a formula that’s been stress-tested over the past two years of depression conditions in the Canadian drilling patch and shows every sign of continuing to work going forward.

The payout ratio of 48.4 percent of cash flow points to a distribution that’s sustainable, even for a company in a high-growth mode. That ensures good things for the shares, which have been all over the map this summer. Trinidad Drilling is a buy up to USD15.