For those of you that do not understand why Oct. is a bad month most of the time please read the below.
October 5, 1998 tax loss selling
Bear Stearns InvestorView
245 Park Ave., New York, N.Y. 10167
SEPTEMBER 21 ~ That the Asian contagion is finally taking its toll on heretofore-resistant consumer multinational stocks strikes us as the ''last shoe'' dropping in this long discounting process.
October may pose a particularly tough hurdle for the beaten-down areas of the market, however, since tax-loss selling by mutual funds stands to be vicious in 1998. (To determine net capital gains, the general rule for mutual funds is to use the 12 months ending October 31.) Given the individual investor's expectations of 15% returns from stocks per year, and Lipper Analytical Services' report that the average general equity fund is down 4.9% year-to-date, managers would hate to combine disappointing performance with a taxable event. Hence, to avoid distributing capital gains to shareholders, portfolio managers would be inclined to sell anything they hold at a significant loss to offset any gains taken. Therefore, what has already been down will probably come under renewed pressure. Once past this point, it may be a good idea to bargain-hunt in the depressed basic material, commodity technology, capital goods, and energy sectors, where the ultimate value buyers-corporate insiders-have begun shopping.
-ELIZABETH J. MACKAY
Greg |
