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Old 09-30-2008, 08:01 AM   #21
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I have a couple financials that have been hammered (guess who...), that I certainly won't mind harvesting for tax loss...problem is that there's nothing left of them to buy replacements with...

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Old 09-30-2008, 09:26 AM   #22
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My alternate view on tax-loss selling:

Remember, if you do a kind of 'trade' to a similar (but not identical) investment, that new investment now has the low cost basis. So yes, you can harvest the tax loss for this year, but the flip side is, you created a larger profit in that replacement investment.

Now that might be fine, especially if you had some other big gains that you sold this year (what are the odds of that?). But think about that increased tax down the road.

I expect taxes to go higher in the future. Do I *really* want to push gains into the future? Maybe, maybe not - I think it's worth thinking about. There is no free lunch with this, just delaying the bill a while. That delay may come at a price.

-ERD50
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Old 09-30-2008, 10:28 AM   #23
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Good old Warren Buffett. Wish I had invested with him a few years ago. Almost did but then I kept thinking about how old he was getting and was afraid he might retire or drop dead and then what?
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Berkshire Hathaway sure has done well for Nords and others that bought in early.
So... forget 1999-2002... where were you guys a month or two ago when "B" shares were trading in the $3800s?

The perpetual impression seems to be that the train has left the station and/or is heading for a derailment. Reading Miles' "The Warren Buffett CEO" may put your mind at ease about the succession issue, and a copy of Schroeder's "The Snowball" is less than $20 at Amazon.

The stuff he's publicly buying now will drop to Berkshire's bottom line like a ton of bricks over the next couple years. Every one of his CEOs is allocating his capital to scoop their competitors. I'm sure that he's taking advantage of the credit crisis to buy dollar bills for 30-40 cents, and we won't hear about it for weeks or months until the SEC requires disclosure. The housing market will recover. Insurance premiums will go up. Consumers will keep buying.

There are many worse places to put UncleMick's testosterone. Five years from now Buffett (and his successor) will look like a genius again. If you buy now, you could too...
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Old 09-30-2008, 10:36 AM   #24
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So... forget 1999-2002... where were you guys a month or two ago when "B" shares were trading in the $3800s?

The perpetual impression seems to be that the train has left the station and/or is heading for a derailment. Reading Miles' "The Warren Buffett CEO" may put your mind at ease about the succession issue, and a copy of Schroeder's "The Snowball" is less than $20 at Amazon.

The stuff he's publicly buying now will drop to Berkshire's bottom line like a ton of bricks over the next couple years.
Yep. The 1973-74 bear market might have been the best thing that ever happened to Berkshire shareholders.

I think this also speaks to why Berkshire tends to do very well in bear markets.

As for the mortality/succession thing, that is probably a little overstated. Plus, Berkshire is set up in a way that Buffett has essentially ZERO involvement in operations of its businesses. All he does, for the most part, is make investment decisions with its capital. That's obviously a very important thing, but his departure won't impact the day-to-day operations of Berkshire's businesses one bit.

[disclaimer: long eight shares of BRKB, the first of them circa 1999 for less than 1400 when investors felt Buffett was "out of touch" for not loading up on tech stocks]
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Old 09-30-2008, 10:55 AM   #25
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Since most people here use funds or ETFs, I can't imagine why they wouldn't want to realize capital losses by making a same day switch from one vehicle in the same asset class to another; if they have losses to realize, and if their tax position would benefit from the losses.

It's a long term interest free loan from the govt that may never have to be repaid.

Ha
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Old 09-30-2008, 10:59 AM   #26
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Since most people here use funds or ETFs, I can't imagine why they wouldn't want to realize capital losses by making a same day switch from one vehicle in the same asset class to another; if they have losses to realize, and if their tax position would benefit from the losses.

It's a long term interest free loan from the govt that may never have to be repaid.

Ha
What if your marginal tax rate is 15% this year, but 25% when you sell the fund you traded into?

-ERD50
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Old 09-30-2008, 11:02 AM   #27
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I would if I could, but almost all of my investments are in 401Ks and IRAs. There's really no tax-loss harvesting to be done -- at least not enough to make it worthwhile.
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Old 09-30-2008, 11:04 AM   #28
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Originally Posted by ERD50 View Post
What if your marginal tax rate is 15% this year, but 25% when you sell the fund you traded into?

-ERD50
Then you fail the tests I mention.

But mine will be 28%, and I hope less in years to come. Also, don't forget, many securities will never be sold in a taxable manner.

Ha
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Old 09-30-2008, 11:58 AM   #29
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Originally Posted by ERD50 View Post
My alternate view on tax-loss selling:

Remember, if you do a kind of 'trade' to a similar (but not identical) investment, that new investment now has the low cost basis. So yes, you can harvest the tax loss for this year, but the flip side is, you created a larger profit in that replacement investment.

Now that might be fine, especially if you had some other big gains that you sold this year (what are the odds of that?). But think about that increased tax down the road.

I expect taxes to go higher in the future. Do I *really* want to push gains into the future? Maybe, maybe not - I think it's worth thinking about. There is no free lunch with this, just delaying the bill a while. That delay may come at a price.

-ERD50
Not disagreeing at all w/ your points. However, depending on if/when taxes go higher in the future, there may be time value of the losses harvested today. Also the free lunch could be if you die before selling and your heirs get a stepup in basis assuming no major change in tax laws.
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Old 09-30-2008, 02:46 PM   #30
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I expect taxes to go higher in the future. Do I *really* want to push gains into the future? Maybe, maybe not - I think it's worth thinking about. There is no free lunch with this, just delaying the bill a while. That delay may come at a price.

-ERD50
Yes, but remember, that increase in the gain (due to the reduction in
basis) remains fixed in time - it does not grow with the asset. So if
you harvested $10K in losses this year, that only adds $10K to your
gain down the road (duh). So let's say longterm-capital gains taxes
actually double to 30% by the time you take the gain. Even so, if
you take the gain let's say 20 years from now, the rule-of-72 says
you only needed to average a 3.6% nominal return on that money
(the money you didn't pay Uncle this year) to break even. (And I'd
say the future 30% LTCG rate an 3.6% annualized return are both
pretty pessimistic assumptions). Anyhow, that's how I think about
it; make sense to anyone else ?
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