Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (242351)	5/24/2003 5:10:38 PM
From: Joan Osland Graffius	Read Replies (3) \| Respond to of 436258

KT, I listened to Mark Mobius a couple of months ago say he was not investing in Chile. He did not give a reason. The neighborhood is tough, but they should have great export trade with China. Jimmy Rogers noted this morning that he thinks Mexico could shut off agriculture trade with the US.

To: Knighty Tin who wrote (242351)	5/24/2003 6:24:31 PM
From: MythMan	Respond to of 436258

>>It won't take you long to read, but you probably can't read all the good stuff in the store without getting some nasty looks from the clerk.<< LOL go to Barnes and Noble -g-

To: Knighty Tin who wrote (242351)	5/24/2003 6:33:05 PM
From: GraceZ	Respond to of 436258

3. Article about the progress women are making in their careers. Written by a man. We'll know when we've made progress when people stop writing articles like this.

To: Knighty Tin who wrote (242351)	5/24/2003 8:16:28 PM
From: ild	Read Replies (2) \| Respond to of 436258

Taxing Bears Short-sellers to pay more to borrow shares under new tax regime SHORT SELLERS ALREADY PAY a stiff price for their contrary views. But now they may have to pay even more. The tax-cut plan hammered out by Congressional conferees last week is causing a stir among short-sellers at mutual funds and hedge funds, since it turns out the tax package may make it more expensive for short-sellers to borrow stock and bet against companies they believe to be bad investments. Short sellers borrow shares they don't own and sell them in the market on a bet the stock will go down in price. Shorts buy back the borrowed shares at a profit if and when the stock drops. But the dividend-tax relief has thrown a wrench into that process. According to Lehman Brothers tax expert Robert Willens, shortsellers may have to cough up about $1.30 a share for every $1.00 in dividends paid out on shares they borrow. Say, for example, XYZ Co.'s stock dividend equals $1.00 a share. A short seller looking for a borrow would approach holders of the stock -- perhaps a mutual fund, or a big wirehouse on Wall Street that lends out stock. For the lenders to be "made whole," that is, to still wind up with $1.00 on an after-tax basis, they need a payment in lieu of dividends. That money would be paid by the short seller who's borrowed the shares. Under new tax law approved by Congress and being readied for President Bush's signature, the rate on dividends in the current tax package totals 15% -- the same rate as long-term capital gains. But not for dividends on borrowed shares; the rate is 35%. How does Willens arrive at the math? For the stock lender, who is foregoing $1.00 of dividends, the seller/borrower would have to pay $1.30 so the lender (using a 35% tax rate) would emerge with the same after-tax amount (85 cents) as if he or she kept the stock plus the dividend. "This is going to materially increase the cost of executing a short sale and, on the margin, could probably eliminate the short seller's expected profit from the trade," Willens say. The dividend exclusion "has an important collateral consequence for hedge funds and other short sellers." There are three parties in a short sale; the lender, the short seller/borrower, and the ultimate purchaser. The IRS ruled back in 1960, in Revenue Ruling 60-177, that the payment credited to the lender's account is not a "dividend" but an equivalent hypothetical amount. The dividend implies ownership of stock, but in a short sale, the purchaser (and not the lender, or the borrower/short seller) is considered the owner of the stock. With dividends taxed as ordinary income, as they are currently, there were no tax consequences to the distinction. If it becomes more expensive to short, will the whistleblowing by shorts dry up? "There will there be a smaller supply of securities available, which will mean the market is less efficient," says one hedge-fund partner. "If there's a premium, arbitrage strategies will become more expensive, and the markets less efficient." ... online.wsj.com