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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: TideGlider who wrote (9303)	11/12/1997 7:19:00 PM
From: TideGlider	Read Replies (1) \| Respond to of 25960

FROM INDIVIDUAL INVESTOR Answer: Short Against The Box User "Turpin" (at cnol58@aol.com) wants to know what "selling short against the box" means. It is mainly used as a tax strategy to lock in capital gains, and delay paying taxes on them. Here is how it works. You must own a stock (or be "long" the stock as they say in the business) to short it against the box. For example, early in 1997 you buy 100 shares of Microsoft (Nasdaq: MSFT) at $80. Yesterday, MSFT closes at $132, so on paper you have a $52 gain in less than one year, or 65%. You are jubilant with this gain, so you want to realize it by selling the stock. But if you sell today, you must pay a hefty short term capital gains tax, currently at 39.6%. So I want to lock in this great 65% return, but I do not want to pay taxes until it is a long term gain where the tax rate is 28% (the tax laws are changing in 1998, I am using the old numbers to illustrate the point). In order to lock in gains and not pay taxes, an investor can short the same amount of stock he owns. This is shorting against the box. In this example it was 100 shares of MSFT. If you short 100 shares of MSFT at $132, for every dollar it goes up, you lose $100. But you also own 100 shares of MSFT, so for every dollar MSFT goes up you make a $100. Going short against the box means your position in MSFT is in perfect equilibrium. No matter whree the stock goes, you have locked in a 65% gain at $132, except the taxman can't touch you, since in reality you have not sold your original 100 shares of MSFT. You have not realized your 65% gain by selling MSFT, you have just locked it in by shorting the exact same amount of MSFT shares that you own. Now if this is true, a person purchasing bonds at 47 and shorting against them would actually realize a loss for the bond value for tax purposes and see no gain on his short position until he purchases the stock back. I have absolutely no business background! Where would the benefit be in the rise of the stock. There are many variable, however there is most likely a date...to relieve pressure and resume rise of the stock. I realize that I am applying very jaudiced, manipulative and cold motivation to those in control of the stock price. They are in apparent control of this stock. They almost lost control the Friday after earnings, but the market encouraged them to continue. There must be an action date...I believe it is a two week period beginning after the expiration of this months contracts. This period encapsules the DLJ conference and carries through the early December Japan conference. There I predict a bit of a showdown and settlement over some Laser maker issues. Any comment? Bruce