Russell,
It has been a while since I have said anything. I want to elaborate on the comment I made for which you have replied to.
I believe that the tax loss selling will be so nasty this year that it will bring just what the doctor ordered. Why do I think so?
A good number of pigs made a lot of money in the 4th Q of 99. They reinvested (re-traded) that moolah back in to the market in the 1st Q. Paying taxes was deferred to April 2000. One of the most significant causes of April's mini crash was due to the liquidation for paying taxes. Back in January-Feb nobody even saw this coming. While I thought it will cause some selling in to April 15th deadline, I have no idea that it would cause such a steep decline.
If April caused selling for paying-up back taxes, I think December will trigger selling for NOT paying taxes. Here is why:
If you made a lot money trading tech-stocks early this year, and sitting on some losing techs (there are plenty of them) wouldn't make sense. Naturally, you would sell them - whether you are a fund guy or an individual.
Now that many funds have given hefty distributions (upto 35%) for the year along with a decline in NAV (Again, up to 35%), now it is time for Joe6Pack to assess the tax situation. I have been advising some of my friends to sell funds in the losing column (at least) just enough to offset the tax liability created by their distributions. WHat I have not realized until recently is this - the exact same strategy is being recommended by many financial planners and is receiving a lot of press in the mainstream media lately.
washingtonpost.com
So, I think that December will see a lot of fund redemptions, which in-turn will cause some more selling. Even if Greeny lowers rates, I am not sure if this will change the dynamic in the near future.
Besides, for truly long term investors with deep pockets, there is no real incentive to buy stocks till new year as the tax on long term gains will be 18% if you bought them after Dec 2000. So, there will be a buyer strike. (I am speculating).
Net-net, December should be pretty bad for stocks. Dubya or Robot - it won't any difference! All, IMO, of course! |
