Business Week has jumped on the doom & gloom bandwagon with an article about "[-]Black[/-] Bloody Tuesday", the quarterly redemption deadline for many hedge funds:
Look Out for Bloody Tuesday - BusinessWeek
While a redemptions run on the market seems to be a bit of a reach, I have no trouble believing that stock-market performance will generally suck over the next 3-24 months. Reinvest those dividends!
Another exploit for prolonged sideways/down conditions is tax-loss selling. On one hand, we're only down 4% YTD. OTOH, about half of that is a batch of cap losses (in a taxable account) of a dividend ETF (DVY) that's had the snot pounded out of it in the last year. It's a long-term holding and there's no compelling reason to mess with that. Hypothetically we could sell the loser shares, sit on the perch for 31 days, book the loss, and then buy back in. Not only would we save a few thousand bucks on cap gains taxes, we'd be able to raise the dividend yield of our shares by a few basis points.
My motivation is offsetting the impending long-term cap-gains tax on Berkshire Hathaway shares that we sold earlier this year. But today's cap gains tax rates are arguably at an all-time low and I'm pretty much just polishing cannonballs to save a bit of spending money. We've already reduced some of the tax bill by accelerating charitable donations and hedging part of our state tax bill with some investment credits. (Thanks, Clif!) Of course a large recovery over the next three months would [-]piss me off[/-] punish me for being a dirty market timer.
I'm facing the same ambivalence over a few shares of Tate & Lyle PLC (ADR TATYY), the maker of artificial sweetener Splenda. We've enjoyed several years of 4-5% yields on this stock but it's been hammered by declining margins, changing EU sugar regulations, a host of copycats, and litigation. It'd also be easy to book this loss and buy more shares of an international dividend ETF like PID, although admittedly the resulting yield would be less than TATYY.
I should assess the benefits of the cap-gains loss against the impact of the change in the tax rate of any qualified dividends that I get around the dates of the tax-loss selling/buying. The dividends may be taxed at the higher non-qualified dividend tax rate, but I'm not sure if that indeed is an issue.
Anyone else contemplating this move? Any "gotchas" I'm missing?
Look Out for Bloody Tuesday - BusinessWeek
While a redemptions run on the market seems to be a bit of a reach, I have no trouble believing that stock-market performance will generally suck over the next 3-24 months. Reinvest those dividends!
Another exploit for prolonged sideways/down conditions is tax-loss selling. On one hand, we're only down 4% YTD. OTOH, about half of that is a batch of cap losses (in a taxable account) of a dividend ETF (DVY) that's had the snot pounded out of it in the last year. It's a long-term holding and there's no compelling reason to mess with that. Hypothetically we could sell the loser shares, sit on the perch for 31 days, book the loss, and then buy back in. Not only would we save a few thousand bucks on cap gains taxes, we'd be able to raise the dividend yield of our shares by a few basis points.
My motivation is offsetting the impending long-term cap-gains tax on Berkshire Hathaway shares that we sold earlier this year. But today's cap gains tax rates are arguably at an all-time low and I'm pretty much just polishing cannonballs to save a bit of spending money. We've already reduced some of the tax bill by accelerating charitable donations and hedging part of our state tax bill with some investment credits. (Thanks, Clif!) Of course a large recovery over the next three months would [-]piss me off[/-] punish me for being a dirty market timer.
I'm facing the same ambivalence over a few shares of Tate & Lyle PLC (ADR TATYY), the maker of artificial sweetener Splenda. We've enjoyed several years of 4-5% yields on this stock but it's been hammered by declining margins, changing EU sugar regulations, a host of copycats, and litigation. It'd also be easy to book this loss and buy more shares of an international dividend ETF like PID, although admittedly the resulting yield would be less than TATYY.
I should assess the benefits of the cap-gains loss against the impact of the change in the tax rate of any qualified dividends that I get around the dates of the tax-loss selling/buying. The dividends may be taxed at the higher non-qualified dividend tax rate, but I'm not sure if that indeed is an issue.
Anyone else contemplating this move? Any "gotchas" I'm missing?