Finding the Next Buffett June 15, 2001February 19, 2017 George Smith: ‘I was reading the latest Forbes and I came across an article by Jim Michaels in which he stated that leadership is more important than the product (over-simplifying). How can a person check on management to see if they are great or not? A stock will reflect it, but by then it is too late to invest.’ ☞ All but impossible. You can sometimes spot the real stinkers, and weed them out – a prison record can be a useful tip-off, for example. And you may be able to find the 50-year-old Jack Welches and Warren Buffetts and Hank Greenbergs, and possibly ride their next 15 or 20 or 25 years. (I first wrote about Buffett around 1983. Can someone please tell me why I didn’t by 10 shares of his stock? Or just take me out and shoot me?) But it’s tough to make these calls. Very often ‘the most admired companies’ on Fortune‘s annual list wind up being rotten performers the following year. One more argument for index funds? Tina Tolins, MD: ‘No, I don’t know “the old expression about bulls, bears and pigs.” Could you enlighten me?’ ☞ The bulls make money and the bears make money, but the pigs get slaughtered. Actually, of course, the bears generally get slaughtered, too, both because the market has an upward bias over time and because, even if you’re 100% right, you can get totally wiped out in the meantime. I have a friend who lost, in two days, everything he had worked his whole life for. He shorted way-out-of-the-money Amazon calls, which was a license to print money. Amazon was wildly overpriced already, and there was no risk at all to collecting these call premiums unless the stock jumped, like, 100 points in a week. He was completely right about Amazon – but too early. The stock jumped 150 points that week (or whatever). Come to think of it, this sad experience may also be covered under the ‘pigs get slaughtered’ rubric. Meanwhile, for every old saw that says one thing, there’s another famous old saw that cuts the other way – in this case, I guess it would be, ‘cut your losses and let your profits run.’ In other words, don’t sell just because something has gone way up. But if I had to choose one saw over another – especially in a retirement account where you don’t pay a tax penalty for selling – I’d chose the former. Because usually, if a stock goes up a lot, it becomes less of a tempting value. And I like tempting values. Then again, to the extent Jim Michaels of Forbes is right – and Jim, dean of financial journalists, is about the wisest guy around – you might look at it a different way. Let your profits run, at least in some situations, because the management that’s smart enough to be a winner this year may well just keep being smart, and winning, year after year. I.e., to some extent, stock prices themselves can identify good managements. By the time I wrote about Buffett, his stock had climbed from $16 to $300. But still had (at today’s prices) $67,900 to go. Unfortunately (well, witness Amazon at 250, now 15) it’s not this simple. One more argument for index funds? REMINDER: SECOND QUARTER ESTIMATED TAXES DUE TODAY.
Maybe We Should Give Orphans Marlboros . . . and Send Them to a Tax Haven June 14, 2001January 26, 2017 TAX HAVENS Spencer Martin: ‘I have to object to the idea that the OECD is a trustworthy organization – they epitomize the international bureaucracy of unelected mandarins who want to control things just for the glory of control. The OECD initiative is only about tax havens on the surface. Its main impetus is to implement France’s ideas about eliminating ‘harmful tax competition’ among nations and the need to ‘harmonize’ tax rates across members (at the highest common denominator, of course). Something rather like forcing Florida to charge New York tax rates.’ ☞ I doubt we are in danger of having France impose its tax laws on us any time soon – but getting that missile shield in place, and a full outer-space military capability, would be a prudent safeguard just in case. EL MARLBORO MUCHAHO Joe Cherner: ‘In the United States, placing cigarette ads at every checkout counter is LEGAL. But Wal-Mart doesn’t do it. ‘The health of our U.S. customers is important to us,’ according to a Wal-Mart spokesperson. (Tobacco addiction kills more than 400,000 Americans each year.) But in less developed countries, where customers are less informed, Wal-Mart pushes Marlboro billboards at every checkout counter (for a picture, click here). Wal-Mart also allows Philip Morris to use its parking lots in less developed countries to host Marlboro Adventure Team attractions where young people put on safety harnesses and try out fun and daring outdoor climbing activities. Wal-Mart’s response? As best I can piece together their point of view after months of talking with these folks, it is: ‘The health of our customers in less developed countries is not our top priority.’ But isn’t the health of ALL children important?’ ☞ To learn more, click here. BETTER OFF IN AN ORPHANAGE? Now here’s a controversial topic – gay adoption. What do you make of the logic in this editorial from the Chicago Tribune?
He’s . . . Snortling? June 13, 2001February 19, 2017 The Los Angeles Times did a story last week that questioned the President’s level of engagement. “He’s engaged,’ fumed a Republican senator who participated in the recent budget meeting in the White House Cabinet Room, ‘but it’s all surface engagement – all kinds of wisecracks, snortling and nicknames.” What has stuff like this to do with your money? Nothing directly. But national and world confidence are important factors in economic well-being. When markets feel secure, they thrive. When they feel shaky, they sometimes stumble. Many believe that the President can get his mind around substantive issues when he applies himself – and some, including a ‘conservative midwestern Republican’ quoted in the story, wish he would. Meanwhile, the New York Times reported Friday that seven former IRS commissioners, three of them Republicans, have written a letter to Treasury Secretary O’Neill, urging him to ‘withdraw his opposition to a proposed crackdown on … tax havens.” These tax havens are terrific for wealthy people who wish to evade taxes. A manufacturer I used to know told me some years ago that he keeps millions of dollars in a secret account overseas, so it can earn interest and appreciate tax-free. He has three homes in America and none that I know of abroad – he’s 100% American. “Well, but it’s illegal,” I sputtered, naively. “Doesn’t everybody do it?” he replied? My guess is that very few do it – but enough for the Treasury (and the treasuries of other nations) to be losing billions of dollars (and euros and pounds) that the rest of us have to make up. The Clinton administration was working with the 30-member Organization for Economic Cooperation and Development to fix this. Reports the Times: [The OECD] has already persuaded nine countries that it calls tax havens to cooperate with criminal tax investigations and to ease some of their bank-secrecy laws. But many of the countries it regards as offenders, including Panama and Turks and Caicos, have stiffened their opposition since Mr. O’Neill issued a statement on May 10 saying the Bush administration would not support an overly broad effort to impose sanctions on tax havens. The letter to O’Neill from the seven former IRS commissioners said that “we have never been closer to cracking down on tax abuse through the use of tax havens and that is especially important to the United States.” Not so fast, seems to be the new administration’s policy on this. Which is good news for the manufacturer I used to know. We “cannot turn a blind eye to toward cheating in any form,” O’Neill has dutifully averred. And that’s fine. But if the bank-secrecy laws of these countries are maintained, then even the sharpest eye may see no evil. It is, as I’ve snortled, a grand time to be wealthy in America.
Is Your Mutual Fund Manager Gorgeous? Uh, oh. June 12, 2001January 26, 2017 Sam Kahn: ‘I know this won’t fly as a submission to the Value Investors Club you wrote about last week, but my favorite recommendation is to buy mutual funds managed by [differently-beautiful] women. Women still have to work harder than men to be successful and [differently-beautiful] women have to work even harder than that. I usually don’t find what I need in a prospectus, but with a little research (sometimes it’s a judgment call), this has worked for me.’ ☞ Differently-beautiful was not exactly the adjective Sam used, but everyone is beautiful in some way – especially if they’re earning you better than average returns on your money. UPDATES: Bob Stally: “Forbes.com has some good and active message boards, including one for Calton.” Ralph: “Re: lowermybills.com, you should check out abtolls.com and ecglongdistance.com. Either one has lower rates.” Last March 14 I told you about some stock picks of a very smart friend. As of Friday they were up, collectively, about 67%. One of them, Jones Apparel (JNY), up 73%, and has also been favored by Warren Buffett. I noticed Friday that some Buffett-controlled entities have recently sold some of their JNY. Since I had it in a retirement account, sheltered from tax, I sold mine as well. This isn’t to say JNY won’t continue to thrive, or even that I’ve interpreted the insider-trading data properly. But you know the old saying about bulls, bears, and pigs. Meanwhile, the Great Atlantic & Pacific Preferred J stock (GAJ) suggested here in January at $12 (now $22), paid its regular 58-cent-a-share quarterly dividend again in May, as it did in February . . . leading me, of course, to wish (at least for now, until something terrible happens) that I had bought much more. But there’s an old saying for that one, too – “would’a-could’a-should’a.” Roughly translated: “Get over it!” The free books went to a teacher in Fort Wayne, Indiana. For more on the vandal scandal – click here.
When You’ll Get Your $300 — and What To Do With It June 8, 2001February 19, 2017 You could write at great length about all the rotten, dumb and irresponsible parts of the tax bill signed into law Thursday – this is tax simplification? — and thousands of people will, for years to come, as we struggle with its many time-bomb consequences. But one of the good parts of the bill is simple, fair, and welcome. It lowers the bottom bracket from 15% to 10%, for everyone, retroactive to all of this year. This will save all taxpayers 5% on their first $6,000 of taxable income if they’re single – $300 – or $600 on their first $12,000 if they file jointly. In part to ‘stimulate the economy,’ checks for those amounts are being mailed out right away – or as close to ‘right away’ as can be managed when you’re talking about 100 million checks. Here’s when to expect yours: If the final two digits of your Social Security are . . . 00-09, it will be mailed the week of July 23 10-19, it will be mailed the week of July 30 20-29, it will be mailed the week of August 6 30-39, it will be mailed the week of August 13 40-49, it will be mailed the week of August 20 50-59, it will be mailed the week of August 27 60-69, it will be mailed the week of September 3 70-79, it will be mailed the week of September 10 80-89, it will be mailed the week of September 17 90-99, it will be mailed the week of September 24 My own guess is that by the time the check finally comes, a lot of people will either have spent the money three times over, or will just be sort of drained from anticipating it. Nonetheless, to many it will be welcome. Here’s what I want you to do with yours: If you have credit card debt, take this $300 or $600 and pay down that debt! (Tear down that wall, Mr. Gorbachev! It is the personal-finance equivalent.) Otherwise, endorse it over to the Democratic National Committee and send it to me. Think of it as poetic justice. As the Big Day draws closer, I’ll tell you why and where to send it. (Those of you who are inspired by the leadership of Trent Lott, Jesse Helms, Dick Armey and Tom DeLay should, of course, consider endorsing yours over to the Republican National Committee instead.) Or if you just can’t wait to help – or want to address an envelope and stick it up on the refrigerator door in giddy anticipation – here’s the address: Andrew Tobias Treasurer Democratic National Committee 430 So. Capital St., SE Washington, DC 20003 Please toss in a business card or a Post-It or something with your OCCUPATION and EMPLOYER, as required by law. (Also, optionally, your e-mail address.) While you await your Treasury check, you can take some vicarious pleasure in knowing that since taking office, our Secretary of the Treasury – who, like you, will be getting the same $300 or $600 – has, in addition, already made what may approach a $62 million gain on his Alcoa stock, according to a report in Salon. (Alcoa has benefited wonderfully, even if California hasn’t, from the Administration’s energy policy.) Secretary O’Neill may not have had much experience on the world financial stage before being tapped for this hugely important job – he may not be an Alexander Hamilton or a Robert Rubin, or in line to be president of Harvard or Yale when he’s through – but the man knows a heck of a lot more about running a business than I ever will, and he knows aluminum. Contributions to the DNC are not tax deductible. Your contribution will be used in connection with federal elections and is subject to the limitations and prohibitions of the Federal Election Campaign Act. Federal law requires the DNC to use its best efforts to collect and report the name, mailing address, occupation and name of employer of individuals whose contributions exceed $200 in a calendar year.
Good Deals June 7, 2001February 19, 2017 FREE BOOKS LOOKING FOR A HOME I have here a set of the 20-volume 1931 Funk & Wagnalls encyclopedia (they are small volumes), along with Larned’s 1915 five-volume history of the world. If anyone would like them, just give me your address and I’ll be glad to send them. (Feel free to tell me why you want them, so in case more than one of you does, I can take that into account.) Joelle: “please, please, PLEASE help me! Here’s the scoop: I work at a PR agency and …wait!…keep reading…(thank you)…I represent LowerMyBills.com. “I am contacting you b/c you are the voice of personal finance and we need your help. You’re still there? Haven’t lost you? Ok…. We really are a decent, helpful, useful, Web site that can really save people money. It’s NOT a scam. Really! It’s based on the concept that the consumer wins when business fight to get customers by lowering their prices. “Please keep reading…. “So – we have all these services, like long distance, insurance and options for picking your utility company. Of course, it’s all free to the user. They only need to visit us once to see how great it really is. “Here’s what we want: You to write a glowing article in Parade Magazine on how we are saving America’s consumers millions of dollars. You can tell people how we work and how they can save money too. To date, we have saved people either a documented $50 million dollars, or $100 million (if you allow us to get fancy with our numbers). “Here’s what you’ll get: A nomination from us for the Pulitzer Prize; Our undying gratitude; Satisfaction that you probably helped us all keep our jobs by getting the word out that we exist, “Are you so excited by my suggestion that you don’t now what to do next??? We really, really, really need/want your help!!! Please???? Pretty please? Check us out – you’ll be sold! Our site is (of course) www.lowermybills.com.” ☞ Hmmm. Oh, why not.
Did You Click on This Value Site? June 6, 2001February 19, 2017 From last November 13: Want to visit a smart website for smart value investors? Click here. It will be closed to guests at some point, but in the meantime you may find some great ideas. And if your own ideas are sharp enough, you may become a member of the club. Half a year later, so far, so good. Here’s what the current Barron’s had to say about this site: Savvy value investors like Mario Gabelli and Warren Buffett have been known to host private get-togethers where they swap stock picks and generate new ideas. Now value investors can host such get-togethers on the Internet: the Value Investors Club, a Website where smart investors “audition” to share their best value-stock ideas . . . The site’s founders are former hedge-fund managers Joel Greenblatt and John Petry of Gotham Capital. Under founder Greenblatt [whom I count as a friend, and about whom I’ve written before], Gotham ran up annual average gains of 50% — over nearly 10 years, ending in 1994 . . . “This is the right kind of market for a renaissance of value investing,” says Greenblatt. “A lot of the ideas our members posted have worked. We have a lot of happy campers.” He points to Alliance Gaming, written up on the site by a member when it was trading at $2.50 a share; it now trades around $28. Another member made a compelling case for Westmoreland Coal, now at $18, when the stock was at $4.75 in September. Abercrombie & Fitch was written up last year around $12; the retailer has since rocketed to $40.’ Bill Davis: ‘You wrote . . . We suddenly have an energy crisis. Into the fray rush oilmen Bush and Cheney. The Bush budget calls for: a 49.9% cut in hydropower research a 53.7 % cut in solar energy research a 48.2% cut in wind energy research . . . Please share with your readers the specifics of these bullet points.” ☞ Sure. The data from which those percentages are derived comes from Page 14 of the Energy Department Budget Highlights, Department of Energy: Total Solar Energy: FY 2001:$92,681,000 FY 2002: $42,932,000 FY 2002 vs. FY 2001: -$49,749 (53.7% cut) Total Wind Energy: FY 2001: $39,553,000 FY 2002: $20,500,000 FY 2002 vs. FY 2001: -$19,053 (48.2% cut) Total Hydropower: FY 2001: $4,989,000 FY 2002: $2,500,000 FY 2002 vs. FY 2001: -$2,489,000 (49.9% cut) As I’ve said before, this is a grand time to be an oil man, or to own stock in Enron (as chief Bush strategist Karl Rove does) or in aluminum companies (which consume so much cheap electricity that they’ve been selling some of it, instead, into the power grid, making more money that way than by making aluminum) as Treasury Secretary O’Neill does. Put more broadly, it’s just a wonderful, wonderful time to be rich and powerful. Even more than usual. As billions are drained from California consumer pockets to Texas energy pockets, the President sees no reason to step in with short-term measures. But as Alan Blinder and others – who generally deplore price controls (as do I) – have pointed out: he’s wrong. This is one of those instances where the right kind of short-term market interventions are definitely called for and in the interest of the nation . . . though not in the interest of Enron.
An Exasperation of Morons A Confederacy of Dunces? June 5, 2001January 26, 2017 Addressing recent columns . . . BOREALIS Joel Grimes: ‘You think Borealis is wacky? They look pretty normal compared to another company that’s going to revolutionize the power industry as well as our understanding of physics, chemistry, medicine, the nature of the universe and much, much more. In the process, Blacklight Power, may put Borealis, Shell, Exxon, Global Marine, PG&E and every other energy company out of business. Their theory (as yet, un proven and un peer-reviewed) is that they can create power for free and as a byproduct they’ll make hundreds of unique compounds that do everything from cure cancer to launch rockets on the cheap. Not a public company, but rumor has it Morgan Stanley wants to do the IPO. And they got Pacificorp to invest in them. I’m pretty sure they’re completely insane. But if I could just get a tiny piece of that company, I’d feel much better about saying so.’ ☞ I e-mailed the contact at Boeing listed on the Borealis press release, to see whether he was really at Boeing, and if he might have something to say. He responded, in full: ‘I am at Boeing.’ Well, that’s something, anyway. A PHRASE OF TERNS Chris Kueffner: ‘See: An Exaltation of Larks, by James Lipton.’ David LeFever: ‘A conspiracy of sharks.’ PAPAL APOLOGIES John Lemon: ‘You failed to mention another piece of anecdotal evidence of the Pope apologizing a few years too late. On a much smaller scale, but no less telling, was the Vatican’s 1995 apology to none other than Galileo, who was labeled a heretic and sentenced to life in prison for having the temerity to suggest that the sun did not revolve around the earth.’ Thomas Rashid: ‘I agree with your take in today’s column. But let’s remember that at least Pope John Paul is the only religious leader that I know of who has made some apologies and significantly reached out to other faiths … better late than never, no?’ ☞ You bet. MORONS SHOULDN’T BE ALLOWED TO VOTE Dale Stancil [Re: May 21]: ‘You might want to mention that these aren’t valid, countable votes. Describing them as ‘undervotes’ or ‘overrvotes’ doesn’t change this. Should we even be debating the franchise of people who can’t follow the instructions to punch a hole in a piece of paper?’ Warren Spieker: ‘You seriously undermine your own credibility when you subscribe to and publish opinion articles that pretend to understand voter ‘intent’ and use it to justify a Gore win. In what past elections have they gone back to count the ‘overvotes’ and used voter intent to pick the winner (which is what the article advocates for Gore’s win)?’ ☞ While in no way meant to be a full a answer, here’s a bit of a longer opinion that suggests there may be more to this than you thought [emphasis added]: . . . (T)he Legislature has mandated that no vote shall be ignored “if there is a clear indication of the intent of the voter” on the ballot, unless it is “impossible to determine the elector’s choice . . . ” Section 101.5614(5)-(6) Fla. Stat. (2000). Section 102.166(7), Florida Statutes (2000), also provides that the focus of any manual examination of a ballot shall be to determine the voter’s intent. The clear message from this legislative policy is that every citizen’s vote be counted whenever possible, whether in an election for a local commissioner or an election for president of the United States. You and Dale seem to believe that a valid vote is only one that a machine can read, whatever limitations that machine may have. Or that someone who fills in the GORE circle for the optical scanner but then invalidates his ballot by handwriting LIEBERMAN (or YOU GO, GORE! or whatever) is just too stupid to have his vote counted. But the Florida legislature seems to disagree. There is a longstanding philosophical debate over whether people without property should be allowed to vote, women should be allowed to vote, African-Americans should be allowed to vote, felons who have paid their debt to society should be allowed to vote, people without education should be allowed to vote. But since 1789, the tide has been running more or less inexorably in one direction: one citizen, one vote. Only on the issue of felons do the states vary. Most say that, once you have fully served your time, your eligibility to vote is restored. Others, like Texas and Florida, say no. Thus, writes attorney Andrew Shapiro, ‘an eighteen-year-old first-time offender who trades a guilty plea for a nonprison sentence may unwittingly sacrifice forever his right to vote.’ In my view, this is unfair.
Calton – and (Keep Reading) a Few Words about Index Funds Plus a Merger Rumor June 4, 2001February 19, 2017 A couple of weeks ago I updated you on Calton (CN), on which we had a five- or tenfold gain the first time around (much of it based on the recent market lunacy, but still) . . . and on which we seem to be making a much more modest, but respectable, gain since I suggested you consider it at $4.25 last July 24.Friday, the company announced a $5 dividend, payable July 5th. Apparently, for tax purposes, it will be considered a ‘return of capital’ – i.e., a partial liquidation of the company, not a distribution of profits – which means that if you did buy some at $4.25, only the extra 75 cents should be subject to tax. The stock closed Friday at $5.94, meaning that, at that moment, the market was valuing what would remain of the company at 94 cents. Actually, in fact, it may be worth a little more. (But even at $5.94, you’re up 39% in under a year.) So far as I know, once the $5 is distributed, three assets will remain: about $2 a share in cash, which I would value at about $2 (cash may not be exciting, but it’s wonderfully easy to value); an interest in some Internet start-ups, which could one day be worth something, but which could also wind up burning through the company’s $2 a share of cash; and the value of a “public shell,” which might be fifty cents or a dollar more. (Private companies sometimes “go public” by acquiring a company that’s already public. Calton, because it’s already listed on the American Stock Exchange, and because it has little by way of operations or employees to mess it up – no toxic waste hazards likely to be discovered – would seem to fill the bill nicely, if Calton’s management, which controls a majority of the stock, ever wanted to retire and capitalize on this “asset.”) So once the $5 is distributed, my guess is that the stock – which will instantly drop by $5 in value – should trade at closer to $2 than 94 cents. Not to say that it will, but that, in my view, it should. We’ll see. There is the real risk that it will burn through its cash and wither away, worthless. But there is also the possibility that management, which has a much bigger stake in this than you or I, will work in its own self-interest to make the assets grow. Incidentally, the dividend is “payable to shareholders of record as of June 20.” That means the stock should be trading at least a little above $5, as it is now, until June 20. But that on June 21 it will be instantly worth $5 less, and will open approximately $5 lower than it closed the night before. Anyone who owned the stock on June 20 (even if they then sold it) would get the $5 dividend July 5 (or whenever it actually hit their brokerage account). I’d be surprised if, once the cash is distributed, the stock did trade as low as 94 cents – not that I haven’t been wrong many times before. I’m going to try to buy some under $6 in the meantime, figuring that in a month or so, assuming no unforeseen snags, my actual cost will have been under $1, and that – who knows – there might still be a little value to be realized here. Like that last little dab of toothpaste most people waste. Not to mention all the wonderful ketchup that’s still sticking to the sides of the container when it’s thrown out. It pains me! Incidentally: most of you know that my advice is to avoid playing the stock market, and generally to put most or all the money you have earmarked for stocks into one or two no-load, low-expense, index funds. And to engage in a lifelong program of steady, periodic investing in these funds. So why the occasional discussions of specific stocks in this space? And why do I buy a stock like Calton? A few reasons. First, index funds are boring. Life is not a business, as my dad used to say . . . so if, presuming you can afford the risk – which if you still pay interest on your credit cards or have a car loan you can’t – why not? Live life on the edge. Has there ever been anything more exciting than watching Calton, day after day, trade at $4.25 or $4.50, hoping that one day – one glorious fireworks of a day – it could hit $5? Tell me you haven’t been goosebumps since last July 24, if you bought the stock. Tell me you didn’t hate weekends, because on weekends the excitement was suspended. Excitement like this is hard to match. And part of me secretly believes that if I’m relentlessly logical and patient enough, and look in odd enough nooks and crannies for value, I might actually beat the market. (Most of me remains appropriately unimpressed.) Second, I’ve been nervous about the general level of stocks over the last few years, and so have tried to find specific ones, some of them ridiculous or tiny, like Calton, that had not been swept up in the general exuberance. Today, that looks smart, but with hindsight, it may well look stupid, because “timing the market” is generally a losing game and not something I have much confidence that I or almost anyone else can do. A slow-but-steady, dollar-cost-averaging approach probably makes more sense. But – back to point #1 – I enjoy the game. Third, from a tax standpoint, it actually makes sense to have a little speculative fun with some of your money, so long as you can afford the risk. Most of it should be someplace sensible, like index funds for your stocks and Treasury Direct or a money market fund for your safer money. But index funds – while exposing you to blessedly little tax – don’t give you that extra little tax oomph you can get, at least up to a point, when you invest directly. Say you put $2,500 each into four somewhat risky but interesting stocks. I’m not talking about crazy stuff you have no clue why you’re buying – that’s always stupid – I’m talking about stocks like Calton or stocks in well-known companies that have encountered bumps, yet could recover (look how nicely Boeing has done, up from 38 to 65 in under a year), but that might also fall further and further into decline (poor Polaroid!). The simple tax trick here – or at least the first half of it – is to sell your losers in order to deduct up to $3,000 a year against your ordinary income (even if you don’t itemize deductions). If you are in the 33% tax bracket, between federal and local income tax, that cuts your tax bill by $1,000. (And then if you like – having waited 31 days to avoid Uncle Sam’s “wash sale” rule that would invalidate the tax loss – you could just buy the same stock back, figuring that if it seemed a good buy at 20, it might be an even better buy here at 6. There is no larger economic purpose served by search a maneuver – it will not grow the economy or help build a new factory or invent a new vaccine – but it will lower your taxes.) And then the other half of it is that with the stocks that do go up instead of down, you either hold on and let them grow, untaxed, until you eventually do sell at the low capital-gains tax rate . . . or else you use those winners (so long as you’ve held them at least a year and a day) to fund your charitable giving, and escape tax on the gain altogether. (For those fortunate enough to be in a position to give away thousands of dollars a year rather than a couple of hundred, the smart thing to do is to give appreciated securities rather than cash. And the smart way to do that is by setting up an account with Fidelity’s pioneering Charitable Gift Fund, or Schwab’s excellent knock-off of the same thing, or a local community foundation. I do mine partly through Fidelity and partly, to support my community, through the Stonewall Community Foundation.) By contrast, within an index fund, you might have one stock up 300% and another down 90%. But all those winners and losers largely average out, and you have no way to use the big loser to reduce your income tax or the big winner to fund your college reunion gift. This issue of “tax control” is one of the main appeals of FolioFN, which lets you, in effect, control your own small index fund. I feel like Matthew Broderick at the end of Ferris Bueller’s Day Off. You mean you’re still reading this endless column? Go home! New York Stock Exchange to merge with NASDAQ? You read it here first.
There’s No W in the hite House Keyboard! June 1, 2001February 19, 2017 Thanks to my pal Steve Sapka for this link. Who cares about W’s on typewriters? But if Salon has this right – you be the judge – then it’s just another example of highly effective character assassination. Like Gore ‘inventing’ the Internet or ‘discovering’ Love Canal or injecting himself into Love Story or shaking down Buddhists. None of it true or fair, but cumulatively devastating.