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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: larry who wrote (9425)	5/31/1998 11:59:00 PM
From: Pancho Villa	Read Replies (1) \| Respond to of 18691

>. Especially considering that the short interests in the big Board and Nasdaq at such high historical levels, I have to say that it's far from bears giving up. And that will push the bull market further. Certainly the strong growth in US economy helps a lot to the bulls.< You are right many people think a substantial chunk of this bull market has just been fueled by short covering. Pancho

To: larry who wrote (9425)	6/1/1998 5:37:00 AM
From: Skeeter Bug	Respond to of 18691

>>Certainly the strong growth in US economy helps a lot to the bulls.<< don't look now but there is little, if any, growth at the present time...

To: larry who wrote (9425)	6/2/1998 2:17:00 PM
From: Marconi	Read Replies (2) \| Respond to of 18691

Hello Larry: << Especially considering that the short interests in the big Board and Nasdaq at such high historical levels>> Caution! History is not what it used to be. General short interest figures should be 'sticky' possibly until after the next major bear market and a major new bull market occur. Now I suspect since the early 80's, short interest grew and remained high at least since the 1986 tax law allowed gains to be boxed, but not recognized for tax purposes. I am not sure about the pre-1986 tax laws. In the 80's I used to think that the short interest was telling me about market direction--but at the time I did not realize the possible tax law effects and the ambiguity posed by summary figures. I have not seen figures for the likely magnitude of that component of the short interest. Presuming those generally holding such positions have their creature needs covered, then they could carry those positions forward even to the date of death, allowing for a durable and persistent tax-avoidance measure for the wealthy. I remember 'flower bonds' and how tax law changes(late 70's) took them out of the picture. Their popularity would suggest the wealthy would more than likely take advantage of the better features of (short- at- the) boxed gain positions. I understand boxing gains and carrying them forward indefinitely (if one wishes) was removed in the 1997 tax law changes surrounding capital gains treatments. I understand boxed gains are now taxed at the end of the year, although an ambiguity might be to have accounts at different brokerages, with a bought position in one and a sold position in another--except that the net available funds with two brokerages in such a position are not as freely available and usable as was the case in the pre-1997 tax law situation. Changes in short interest figures after the 1997 tax law changes took effect probably fit your views--I suppose subtracting the short interest figures up to the date of the change in tax law might be a way to focus more on recent effects. But I know of some highly respectable investors who just recently learned you cannot box gains and carry them forward indefinitely now. The extent the public is educated on this factor could materially cloud the picture obtained by subtracting pre-1997 tax law figures to obtain the effects since the change. It is an exercise I have not tried. Has anyone tried this, and if so, what do you see? I think the ability to carry gains forward at trivial risk, coupled with the availability of the money value of those gains is such an advantage tax-wise that that historical component of the short interest is going to be an enduring feature embedded in the summary statistics publicly available such as on the NASDAQ site. Might be a decent study for academics to conduct a proper survey and publish their findings. It might be safest to use only changes in short interest from recent months as an indicator, until there is a credible way to separate important tax effects embedded in the historical short interest figures from that portion of the short interest figures that represent raw trading without favorable tax implications. Best regards, m