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Strategies & Market Trends : Investing during a Bear Market -- Ignore unavailable to you. Want to Upgrade?

To: Richard Estes who wrote (194)	11/14/1997 11:28:00 AM
From: Joan Osland Graffius	Read Replies (1) \| Respond to of 226

Richard, We all have different definitions of a good stock. Why would you sell MSFT when your cost bases is under $1, Intel when your cost cases is under $2, Oracle when your costs bases is under $1, John Deere when your cost bases is under $2, BA when your cost bases is under $1, GE when your costs bases is under $2, and so it goes. It is my opinion in these cases your best strategy is to hedge this type of portfolio during times of uncertainty. If I need to use these assets to pay the bills I prefer to sell them off as cash is needed. Now if one of these companies lost their reason for ownership, that is another discussion. I certainly am not into sending uncle sam 20% of all these profits.:-) Joan

To: Richard Estes who wrote (194)	11/14/1997 12:15:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 226

I don't understand your message, if it is in any way a reply to mine. I am talking about a protective short position. I am SHORT those "very good companies" so as to lock in their present value. Take IBM, your example. If you own 100 shares already and sell short against the box, IBM can go to zero and you have lost nothing. The worst that can happen is that you have to pay 20% capital gains on the value of the stock at the time you shorted it. But if IBM goes way down and then looks like a promising investment, you have the choice of covering your short and keeping your original shares. Let's say IBM was at 100. You own shares worth $10,000. You sell 100 shares short. If it goes up and you are uncomfortable you just give the broker your shares and collect your $10,000 (minus commissions and any dividends in the interim) You pay the government 20% capital gains tax. If IBM goes down to 20, you can either cover your short and take a fully taxable profit of $8,000 or deliver your shares and report the original capital gains. You could hold the shares and short again if the market rose. Probably the smartest thing I could do would be just to take my profits, pay the taxes, and put it all into BEARX. But meantime I am not losing much. Perhaps I do just have an irrational reluctance to pay taxes. It sounds as if you think I am in favor of holding onto losing stocks and using margin to go long at this time. In fact, by shorting the winners I hold onto the profits, or have a choice as to when and how to realize the profits. I haven't had anything long on margin since about 1984.

To: Richard Estes who wrote (194)	11/14/1997 12:42:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 226

Oh I see what you were responding to now. I really think that Addi should sell everything he has, put the money in the bank, pay any taxes, and wait for lower prices. But since it didn't sound as if he was going to do that, I as suggesting that he not be run out of the market for life by the bear market that (I think) we are going to see. You are certainly right that one should sell losers and not hold on in some superstitious hope that all will be well. I just meant that if the company looked sound at the time, after a decline, you shouldn't sell it, and even buy more. Now judgiong what's sound or not is another question. John Templeton seems to hit 2 out of three. I seem to hit more like 7 out of 12--or not even that. To judge from what Addi said, he knows the tech business or some aspect thereof but is misjudging the market risk.