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Strategies & Market Trends : Waiting for the big Kahuna

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To: James F. Hopkins who wrote (22118)	7/23/1998 10:30:00 AM
From: Moominoid	Read Replies (1) of 94695

Stocks such as Cisco (PE 113), Dell Computer (PE 81), Worldcom (PE 300+) and Lucent (PE 181+) wag the S&P 500, not because they are truly the highest capitalized, but because they are truly absurdly priced. And the more absurdly priced they become, the more power they wield. They, in fact, become the market. This is actually reminiscent of George Soros' ideas in "The Alchemy of Finance". and as they go up in price the weighting goes up and it's causing the index funds to have to buy even more Why? If they hold th index its value goes up - they don't have to buy more. If people had to pay taxes on not just what they sold but what the gain in value was each year they would be a lot more prudent in how they invest, and the market would be a lot more logical. This sort of capital gains tax would make sure people don't make trades just for tax reasons. This is very noticeable in Australia where the CGT is equal to your marginal tax rate which for anyone earning more than $A50000 is 47%. You're very reluctant to sell when the market goes up and very keen to sell for a tax loss when it goes down. This increases volatility. People deemed to be sharetraders by the Australian Taxation Office are taxed in the way you suggest instead of in the regular way. It would make more sense to abolish income tax altogether and have a flat rate VAT with basic incomes paid to all citizens - but this would throw a lot of public servants out of work and close downa lot of tax dodges and so probably will never come to pass. David

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