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Non-Tech : Bill Wexler's Dog Pound -- Ignore unavailable to you. Want to Upgrade?

To: JDN who wrote (6248)	1/21/2000 6:25:00 AM
From: Bill Wexler	Read Replies (1) \| Respond to of 10293

I'd go a little lighter on equities (maybe cut back another 10%), and the remaining equities I wouldn't overweigh in tech as much as you have. Tax consequences are the last thing I think of when buying or selling stocks. It's simply incorrect to state that the market has to pullback 20% to "get even" after paying cap gains on a profitable investment. I also think that the "I don't want to pay taxes" line is simply another fantasy along the lines of "I'm a long-term investor". The evidence is crystal clear that investors are flipping stocks at ever-increasing rates. The astronomical volumes on the exchanges and the explosive growth of deep discount and online brokerages tell me that we are not exactly a nation of Warren Buffetts.

To: JDN who wrote (6248)	1/23/2000 2:49:00 AM
From: Graeme Smith	Read Replies (1) \| Respond to of 10293

>> At a minimum we will pay 20% capital gains taxes at the Federal level. So the market pulls back 20% we are only even... This is wrong. Whatever your Account Balances screen says, your current worth is exactly that minus about 20%. It doesn't matter whether you sell your shares now or in 10 years time. Unless you plan on rescinding your American citizenship, 20% or so of your gains belongs to the Government. You might feel richer with an account Balance of $1M and $200K of unrealised capital gains taxes than $800K and no taxes, but in reality your basically as wealthy. Admittedly if the market goes up another 100%, its better to be invested $1M than $.8M, but if it goes down 20%, your better off to realise the gain and pay the taxes. Also, I can't remember whether it was you, but who-ever posted that companies buying back shares weren't doing so using credit, made a mistake of overusing anecdotal evidence. Although in many cases, strong, well run companies are buying back shares through their cash flows (eg. MSFT) this does not equate the market in general. The total of the increase in US company debt is about equal to the amount spent buying back shares. This is a fact that can be easily calculated by adding the totals of all US listed companies debt and share repurchases. There is no subjectiveness in this fact.

To: JDN who wrote (6248)	1/23/2000 6:21:00 PM
From: Quad Sevens	Read Replies (2) \| Respond to of 10293

<<At a minimum we will pay 20% capital gains taxes at the Federal level. So the market pulls back 20%we are only even...>> Remember the tax is only on the profit, while the decline is on your entire market position. Forgetting this can lead to overestimation of the tax penalty. Example: Suppose you started 1999 with X in cash, which you then invested, and suppose you had a good 99, making 100% profit. So now, in Jan 00, you have 2X. You decide to sell, incurring taxes due in April 01 at the 20% rate. Assuming no other gains or losses, on April 15 01 you would have X + X - (.2)X = 1.8X. On the other hand, if you're afraid of selling and hold on until April 15 01, and the market has declined by 20% in that time, you will then have .8 times 2X or 1.6X. Not only is this less than the 1.8X above, but you still have yet to pay taxes on the .6X profit. Doing so at the 20% rate would leave you with 1.48X. If instead the tax bite is 40% for the early seller, he would only retain 1.6X. But that's still better than the 1.48X the later seller retains after taxes after a 20% decline, even if he only suffers a 20% tax rate.