Author: A.T.

I am, sadly, long back from vacation — that Great Narthern Tar I began telling you about a couple of weeks ago — the one where we piled into our Hertz with a supply of audio tapes (the first two, Angela’s Ashes and How the Irish Saved Civilization were outstanding, but left me tahkin fooney) and headed narth from Manhattan with a supply of restaurant-quality manual orange juicers I had bought in bulk, wholesale, to leave as house gifts at each stop along the way.

I told you about our first host, who asked us to guess what his dad gave him for his birthday (a shopping center), and a couple of others that got us up through Connecticut to Rhode Island. I’m not going to eat up the rest of your summer vacation telling you about mine, but a few more highlights:

• Saturday – drive from Tiverton, Rhode Island, to Truro, on Cape Cod. Truro is the most beautiful place in the world, with the added bonus, when things get a little too peaceful, of having its own quaint amusement park just a few miles up the road — Provincetown. Not to say Provincetown is literally owned or run by Disney (it’s a little too honky-tonk for that) or by the folks who run Coney Island (too many art galleries). It’s just this wonderful old fishing village, filled with little shops and restaurants and ice cream cone places — but almost none of it newly constructed franchises, none of it corporate. I love Starbucks, I love corporate. But not everywhere. Not always. In P-town, the only franchise is the old Dairy Queen on the way back from the beach, and that, of course, is no franchise — it’s an institution.

• So we’re strolling up Commercial Street after dinner with our friends Jim and Gayle — Jim, the rare coin potentate turned novelist I have written about before — they, thrilled with their new juicer, Charles and I enjoying the diversity of the passing parade, when I see, amid the tattooed and nose-ringed, my old investment banker college pal Ace. “Ace!” I shout over a couple of heads. (It was dark, but I’d know that cigar anywhere.) He turns and smiles and shows us the art gallery he and his wife have an interest in, or are major patrons of — whatever the connection, they get their own parking space, which in P-town in the summer is the last gasp.

• It is particularly good to see Ace, because he will know what to do about my knee. Other people, when they have an injury, call an orthopedic surgeon. I call Ace. He has torn more ligaments, undergone more orthoscopic procedures — the man shuttles between the golf course, the tennis court, the ski slope and the magnetic resonance machine. A few years ago, skiing in one of those places you have to helicopter into, he was the last man in a string of nine. An avalanche killed the seven ahead of him. And yet he still skis.

• “Your knee,” he said, pointing to his own two to show off his latest round of surgery. “You need to see Dr. Minkoff. He’s the best. If you have trouble getting an appointment, tell Diane you’re a friend of mine.” And that’s just what I did. (Anyone else out there ruptured his/her anterior cruciate ligament? Was the surgery worth it? All comments/suggestions welcome.)

• Monday – We drive from Truro to Boston in search of people to give juicers, and stop in North Quincy to visit a family I had last seen in Moscow. Now they live in North Quincy. I worry that their talent and energy are needed in Russia, but it makes me so proud of America — and happy for them — to see how they’re living. Dmitri came over first to get a job and earn the money to bring Tanya and their daughter Sasha, who after just one year here, aged 11, speaks perfect American and excels in school. They’re thriving. Tanya insists we eat some wonderful Russian things she has prepared. Dmitri pulls out the camera. They promise to use the juicer just as I instruct: leave the oranges in the refrigerator overnight — the Sunkist thin-skinned juicing kind — and then drink the juice straight from the stainless steel cup into which it flows. Gotta run.

• Later Monday – dinner in Cambridge at John Harvard’s Brew Pub, not because we like brew so much, but because we like the owner, who invited us to see it. He’s got 11 of them so far and hopes to have several hundred one of these days. His wife has to cancel at the last minute. She runs one of the world’s leading management consulting firms, but it wasn’t some crucial client meeting that ran long, it was emergency dental surgery. “Ouch!” as the campers gathered round the campfire the next night would say at every opportunity. (Tuesday we went to South Watafud, Maine — population 7 in the wintuh, 200 in the summuh. We were visiting Camp Wigwam, where my dad was Best Camper 1933, and I was a pretty good camper too, and where the tall pine trees stand patiently, majestically, quietly, overlooking Bear Lake. Richard Rodgers wrote one of the camp songs. Einstein visited for a little vacation. The trees have seen it all.)

• Finally Monday we arrived at the Ritz Carlton on Arlington Street, a stone’s throw from friends who would have been happy to put us up for nothing (well, maybe a juicer), but Charles had begun to panic, understandably, at the idea of staying night after night with a bunch of strangers (to him) and so, to make peace, I had booked us a suite (well, a junior suite) at the Ritz. This is not behavior that comes naturally to me. We arrive at the counter, guaranteed reservation in hand, and are told that, to the hotel’s great regret, some guests who were supposed to check out did not, and the Ritz was hoping we would allow them to put us up for free, with complimentary room service, either across the river at the Hyatt — they would take us over and back in the Ritz limo — or else upstairs in a “parlour room” with no shower. And herein lies the difference in a nutshell between Charles and me. I am thinking, Yes! A free room at the Ritz! Free room service! Charles is . . . well, really angry. (And you don’t want to be around the Irish when they’re angry. Ireland. Land of Ire. I think I’ve mentioned this before.) He was of course dignified in his handling of the situation, but it was the storm clouds in his eyes, I think, that got us the free room service. To me it was, of course, the highlight of the trip. For the lack of a shower, we saved $500. I invested it in Apple at $13 and now it’s $1,000! Well, no, it isn’t. I stupidly sold much too soon. But hand me $500 and a hot wet towel anytime.

There was a little more to our vacation — we saw two moose, we saw three loons, we had a magnificent panorama of the Rangely Lakes, where I had last paddled a canoe 38 years earlier. We gave juicers to my old high school soccer coach and his wife in North Belgrade, and to Bob and Carol in Rangely. We stopped in Freeport — the “factory outlet” theme park anchored by L.L. Bean (now there’s a zoo). We listened to The Runaway Jury on tape all the way to Southern New Hampshire, where we stayed with the estimable Jerry Rubin, the real creative genius behind a software program called Managing Your Money, even though I got all the credit for it. (Jerry and Marilyn are fine. Their two little boys are now both working at Rubin Associates, the family software business, both expecting kids of their own — time flies.) And we dropped the car at Logan Airport, where Hertz charged us $3.90 a gallon to fill our tank. The Delta shuttle, it being a Saturday by the this time, was half price — $90 less the $10 worth of frequent flier miles.

I’ve been writing this stuff for a lot of years now, and every so often I get to the part where I explain how, when interest rates go up, bond prices go down and vice versa. This is largely true of interest rates and stock prices, too. But with bonds, I’m never sure my reader or listener fully grasps that it’s absolute — just two sides of the same coin. Like: the more water there is in the glass, the less empty it is. (Not “the less empty it tends to be.”) Or like a see-saw: when one side goes down, the other side goes up. (Not: “unless there’s some flexibility in the wood.”) No matter how heavy the children on the see-saw, it never bends or it snaps.

There is not the slightest magic or wonder to this, except that it’s so hard to explain to some people. If you have a 30-year bond that yields 7% — $35 a bond every six months for 30 years — and if someone reports that the going rate on such bonds has fallen to 6.6%, it can only mean that the price of the bond has risen above $1,000, such that, when you do all the math, those twice-a-year $35 checks work out not to the 7% they would at the stated $1,000 price (par, for a bond), but to just 6.6%.

I’ve thought of another analogy for this: foreign exchange. Any two currencies will do, but let’s take the US and Canadian dollars. If the US dollar goes up against the Canadian dollar, is there any conceivable way the Canadian dollar does not simultaneously and in a precisely symmetrical way go down against the US dollar? Not sometimes, or “isn’t that remarkable,” but just two pieces of a single, interlocked thing.

In fact, this is so simple and obvious I suspect it was very clear to you until reading this comment. Now, you’re not so sure.

“As I read Steve’s experience with property insurance,” writes Tom from Novell, “I was reminded of an experience I had with auto insurance a few years ago. Luckily it involved only my premium, not a refusal of my company to pay. It illustrates, however, the industry’s indifference to customers.

“My wife and I had three teenagers, a very modest new car, and an old clunker. Both cars were insured under the same policy. When the clunker no longer ran, we decided not to repair or replace it. This was based in part on the cost of insurance. I called our insurance company at once and told them to take the car off our policy.

“The customer service representative was helpful. She gathered information, ran figures through her computer, and told me what the increase in my premium would be. I patiently explained that I was dropping, not adding, a car. She understood, but our children had been rated against the older car and were now rated against the newer. Hence, our premium was higher.

“I had a discussion with her, and then with her supervisor, neither of whom understood why I thought it unreasonable to be charged more to insure one car than two. I suggested we go back to insuring both, but they refused.

“I could only conclude that insurance premiums, like airline fares, are designed to be incomprehensible to those who pay them.”

Fascinating — as anything counter-intuitive is fascinating. I don’t think the company was being “indifferent to its customers,” as you put it, just intriguingly rational. I guess they figured that in families with two cars, the kids get to drive the clunker. And so now, with just one car, they would be taking out the Jaguar from time to time (OK, I know it wasn’t a Jag, but to make the point) . . . and dented Jaguars cost a lot more to fix than dented clunkers. The liability portion of your policy remained unchanged (I’m guessing), because your kids were no more or less likely to run over a little old lady in the Jaguar than in the jalopy. But the collision — coverage you probably didn’t even carry on the old clunker, if you were smart — increased in price because now any fender they dented would be the Jaguar’s.

Of course, it’s always a good idea to shop around for insurance — even today, as you read this. But not, in this case, in my view, because the insurer was uncaring. Their one mistake was in not managing to explain it more clearly.

“Similar story,” writes Dr. D, “only with an A.M. Best A+ rated company and disability insurance. This company no longer sends premium notices as they want me, and no doubt others, to drop their policies. Their response is, ‘the policy does not ****require**** us to bill you, it is your responsibility to pay.’ Switching companies is not possible for me as most companies consider me ‘overinsured.’ Insurance companies are clearly, and legitimately, in the business of making money for their stockholders; but if they need to pay some benefits to do that, so be it.”

Now that one’s a little closer to skanky, if you ask me. If their normal practice is to send bills, they should probably just take their lumps on this policy and treat you nicely, and send bills, even if their actuaries tell them you are not a good risk. (If I read you right, their problem is that they’ve committed to pay you so much if you’re disabled, they fear they’re giving you an incentive to fib a bit, or exaggerate, if you ever have an accident or hurt your back or start injecting yourself with some of the pain killers in your doctor’s bag.)

It’s kind of like an all-you-can-eat restaurant that sees Haystacks Calhoun coming up the steps. (Is anyone else old enough to remember that name? Is he still alive? Not still wrestling, I presume. What does he weigh now?) Heck, the sign says “all you can eat,” and so they should be as gracious to old Haystacks as to anyone else, even if the owner in the back expects to lose money on him.

Variable annuities, which sell like hotcakes, but which I’ve suggested many times before are not such a great buy, have become a somewhat even less great buy — as one might have guessed they would, as a capital-gains tax cut had been hanging in the air for some time. They are an inadvertent means of converting what would otherwise be lightly taxed long-term gains (if you just held some growth stocks or an index fund) into more heavily taxed ordinary income as you withdraw the money. Now, with the lower capital gains rate, that’s even more of a drawback.

Why pay a built-in sales commission, along with a management fee and a life insurance fee, only to lock yourself into a variable annuity manager who may or may not do a great job but who will, in any event, wind up providing you with fully taxable money at the other end, 10 or 20 years from now when you want to spend it?

For those of you already in such investments, don’t feel bad: you did the right thing by saving money in the first place. That’s the big issue, even though I do frankly think you could have done even a little better just buying a couple of index funds on your own.

From Paul Fischer: “You’ve recently explained how Stop Losses and Stop Limits work, and the pros and cons of each. I was wondering if you could explain trailing stop losses. I have heard the term, and I know what I think it might be but I would be grateful if you could clear it up for me.”

Actually, I didn’t know the answer to this one, so I asked one of Ceres’ trading managers, Mike Reynolds. His reply was that some firms — not Ceres — will allow their customers to place buy orders on stocks, with a contingent stop order that will activate once the buy order executes. In other words, you’d say, “Buy 100 Dell at 77, with a stop-loss at 74.” If the stock traded down to 77, you’d get your 100 shares — but if it then traded down to 74, a sell order would then be triggered.

From Gregory Germain: “A friend asked an insurance question I don’t know the answer to, and thought you might. His daughter is about to get her license at 16. He wants to give her an old (but safe) car to drive. The question is, are the parents liable for an accident by the kid, so that they need to get high limits insurance for her? Or can she get her own insurance with lower limits?”

Oh, sure — “a friend.” I’ve heard that one before. Let’s face it: this is your kid, Greg, and you’re scared to death. No? Well, anyway, here’s the answer.

It depends. And varies from state to state. For example, California makes parents liable for the “willful misconduct of a minor which results in injury or death to another person.” (A minor, in California, is any kid under 18, unless you’ve gone through formal procedures to “establish their emancipation” at an earlier age. Needless to say, I didn’t know any of this; I asked a knowledgeable lawyer.) But when it comes to auto accidents, a parent can also be held liable for any negligent act of the child — as can the person who signed the child’s driver’s license application.

The good news, in California, is that you could only be held liable for the statutory minimums out there — $15,000 per person up to a maximum of $30,000, and $5,000 of property damage — even if your daughter maimed the entire high school water ballet club. (The bad news is that most of the money people pay for injury auto insurance in California goes to fighting over things like this, and fraud, rather than to helping you or your daughter if you’ve been injured.)

Ah, but you’re not from California? Me, neither. Unfortunately, you’ll need to talk to a good insurance agent or, if need be, a knowledgeable attorney. Sorry. There’s no one-size-fits-all.

Steve lives in Connecticut, known as “The Premium State” in recognition of all the insurers headquartered there. OK, I’m kidding. (It’s — of all things — “The Nutmeg State.”) But where Idaho has potatoes and Texas has lone stars, Connecticut has Yale and insurance companies. Lest one think the world has changed too much since 1982 when I wrote The Invisible Bankers: Everything the Insurance Industry Never Wanted You to Know (out of print, don’t bother), Steve offers this cautionary tale:

Over the years I have had two major instances in which insurance should have immediately covered me but was either unreasonably delayed or refused.

In the first case, resolved long ago, we had just moved from one apartment to another. One of the first nights a fire broke out in the complex. We lost all our belongings and apparently we were covered by two policies: the policy for the new apartment and the 30-day overlap coverage from the old one. Needless to say the two companies fought and we didn’t see any money for years. This was my first taste of the insurance industry and helped make my decision not to take over my father’s insurance agency. The insurance industry had no sensible approach to customers.

In the case this year, we had dutifully paid liability premiums that were extremely high for most of 20 years. The details are involved, but the basic problem was that our insurance agent had arranged for financing with a different company than normal. We were sued two years after an event and found out that for a couple of months our policy had lapsed and the company had insisted our agent reapply rather than reinstate. If the company had merely reinstated immediately, we would have been covered. Instead their insistence that the agent reapply caused us to be uninsured.

The reason for the lapse was that we had paid the agent 1/3 of the policy up front and were told we would be billed as in the past for future premiums. We were never billed by the agent or finance company. We were never notified by the agent, finance company or insurance company for impending or actual cancellation. We first found out about the lapse when our agent called and said his office had just found out about the cancellation. Our first correspondence from the finance company was one week later and said we were owed a refund and didn’t even mention the cancellation. The agent reapplied to the same company after they refused a reinstatement. During the period of reapplying this incident happened, which we were to be sued over the next year.

The insurance company (Western World) refused any help or support to fight a suit that involved a 4-year-old child left alone in a back hall in an athletic club by a parent. Later the parent sued us for his child being injured. Our first feeling was that the insurance company should fight the suit on the basis that leaving a child of 4 unsupervised in a dangerous environment was irresponsible. In fact, in Connecticut it is considered child abuse to leave a child unsupervised in much safer environments. However, we were left to fend for ourselves and the suit was finally settled.

The agent has done the right thing and helped share the cost. I have heard that this treatment of customers by the insurance company is widespread and would like to initiate action to recover our loss and legal fees plus damages on our and others’ behalfs from the insurance company and finance company. The suit out of pocket was approximately $7,500, but that was minor compared to the time and anguish, especially to my wife. We could have lost our house and all our possessions. What especially is irritating is that over the years we have paid this company over $100,000 in total with no claims ever. You would think a rational company would want to retain a loyal customer. Because of their actions, we now have a much better policy with AIG for 1/3 the cost with nowhere near the amount of exclusions.

We have never sued anybody, but it looks like we will get nowhere without legal action. Are there any lawyers out there that specialize in insurance problems like this — improperly terminated, no notices, and not reinstating immediately?

There are clearly some lessons here (and yes, I referred Steve to a famous trial lawyer who loves to sue insurance companies). One is: keep track of your insurance policies and make sure they’re paid up. Another is: shop around. Look how much Steve is saving now that he’s found another carrier. A third is: when shopping, consider claims-paying reputation. It seems that Steve’s agent may not only have bobbled some of the paperwork to the finance company, it neither got him a good price nor a carrier with much of a feel for keeping customers happy. A fourth is: shop for a good agent as well. Why didn’t Steve’s agent find him the 2/3 cheaper policy in the first place? And while “helping to share the cost” is commendable, it may be that the agent should really have paid the full cost, since it appears, from Steve’s account, as though it was the agent that screwed up. The insurer was nasty and short-sighted but may not have violated any contractual obligations.

The final thing I’d mention is the phrase “bad faith.” When your insurer is mistreating you, it may help to send a certified letter explaining why you feel it is acting in bad faith, and that you are on the verge of hiring a lawyer. If that doesn’t produce a reasonable settlement promptly, you may indeed want to retain a lawyer. (But try your own letter first and save the 33% or 40% the lawyer would charge.) The phrase “bad faith” means you see the potential not just for the $2,000 or $12,000 you think the insurer owes you, but for $5 million in punitive damages as well. Insurers understand that. You’ve paid your premiums; they should deal with you in good faith. Generally, in my experience, they do. But boy are there a lot of exceptions, as Steve’s experiences remind us.

Yes, I’ve noticed there’s a new tax bill. Some of you may be wondering why I haven’t been outlining for you all its ins and outs. What could be more topical or important to people like us? (Others of you have been following this space long enough to know there could be a nuclear war, and my column would probably be about ostrich meat or the latest genie joke.) Sure, if there were 2 million of you and you each paid me $180 a year, I’d gladly staff up to provide this kind of coverage (and change the name of this column to The Wall Street Journal).

But the fact is, I do have a few preliminary thoughts on the likely new law, even if they’re not yet the clever-ways-to-manipulate-it-to-your advantage variety. And I also have a genie joke.

Basically, the new bill is pretty good, I think, given political reality. It’s high point is clearly hiking the cigarette tax to fund better health care for kids. A perfect trade-off, because you want to tax the things you want to discourage, like smoking, not the things you want to encourage, like hard work and investing. And you certainly want to invest in the health of our future — our kids. The best thing about the tobacco tax (all-too-modest as the 15-cent-a-pack is) is that it’s at least semi-voluntary (you can quit), and that if the burden falls most heavily on the poor, so do the benefits: on the margin, low-income people are most likely either to quit or not to start in the first place because of the price of smokes. No one who earns $80,000 a year is going to quit (and no kid who has signing privileges on his dad’s Visa card is going to find a pack priced out of reach) because 20 cigarettes cost $3, or whatever. But to those at the minimum wage, the impact actually could make a difference, on the margin. For those who do thus decide to avoid the tax hike by quitting, they get two huge benefits: the health benefit, of course, but also a big boost in their disposable income. Because not only will they avoid this extra 15 cents a pack, they will also avoid the rest of the cost of the pack as well — perhaps $1,000 a year for a fairly light addiction, which is a heck of a raise to a guy earning $6 or $8 an hour.

So that part is a clear winner.

I also am happy to see capital gains were not indexed to inflation — a completely sensible notion in concept, but, as the Clinton administration argued, a really dumb idea because of the complexity of execution (not just in all the extra calculations we’d have to do, but also in trying to avoid game-playing with the other side of it: indexing interest deductions taken to finance the investments that produced the gains).

Did we need a capital gains tax cut just now to get the economy out of the doldrums? Clearly not. Or to encourage people to shun relatively safe interest- and dividend-paying investments in favor of riskier investments, like stocks? Clearly not that either. Choosing this specific time to provide that added incentive may prove as perverse as it would have been to raise the capital gains tax in the months following the crash of 1929.

In short, there would have been better ways to do this, and it might have been held in reserve for a time it more needed doing. (I’ve long argued for a targeted ZERO capital gains tax rate on all purchases of NEWLY-ISSUED securities, to encourage the formation of new capital and the financing of new projects and growth, but no additional tax break on the mere TRADING of existing securities. It also makes no sense to me to make people wait a year or five to get the benefit of a tax break — there are already huge incentives to holding for the long term, such as the avoidance of tax altogether until you sell, so why artificially obstruct the natural flow of capital based on where people think it will earn the best return? Especially in the context of my NEWLY-ISSUED distinction, eliminating the holding period would work very well.)

Still, I’m as human as the next guy (no — I am!), and so I’m delighted that MY vast fortune will swell as a result of the cut to 20% and 18%. And that I can sell my house with no tax (even though I could have already, so long as I bought another of equal or greater value within two years). And that when I sell my little South Beach apartment building (14 tiny units, not great shape, yours for $499,999), I will get to keep an extra $25,000. Hey, I’m not crazy.

But I also do worry about the impact on charities. With tax rates fairly high, the benefit in giving appreciated securities — which is really pretty painless — was so neat it almost made you forget you still were, after all, getting poorer not richer by "beating taxes" this way. Now, especially to those living in low- or no-tax states, the benefit with an 18% or 20% rate will be less . . . and the lure of actual cash will be stronger. Beating taxes is a lure. Pure, after-tax cash is a lure. You’re pulled one way, you’re pulled the other — I predict that, by sliding the fulcrum of this tug of war away from the satisfactions of generosity to the primal appeal of self-interest (me! me! me!), the tax bill will inadvertently cut into charitable giving a bit.

You could argue, of course, just the opposite — that by letting rich people be a little richer, they’ll have even more money available to give away. But my own instinct is that it won’t necessarily work this way.

Then again, the difference isn’t likely to be dramatic or, perhaps (given all the other variables you can’t control), even measurable.

I have some other musings on the tax bill, but we’re both getting carried away, distracted by tax loopholes, as usual, from our basic productive work. In your case: whatever it is you do for a living. In my case, writing for you the essence of this genie joke. (Forgive me if it hit your e-mailbox as it did mine.) The long form is a lot of fun and involves a lot of description of this 28-year-old golfer and his beautiful young wife. The short form is that they went to apologize to the owner of a golf-course-adjacent house whose window they just smashed with a terrible slice. "I’m not the owner," says the guy they encounter, "I’m a genie! In fact, until your golf ball smashed that window and then this vase, I had been trapped in here for 300 years!" Far from being angry, he offered them two wishes by way of gratitude, with the proviso that he then get one of his own. "I want to be a scratch golfer," said the man. "Poof, you’re a scratch golfer," said the genie. "I want ten million dollars," said the man. "Poof, you’ve got ten million dollars," said the genie. He then noted that he had been in that bottle for 300 years, without the company of a woman, let alone a woman as beautiful as the golfer’s wife, and so he made his wish, which involved spending the next hour with her. At the end of which, before they returned to the living room, he asked the wife: "How old is your husband?" "Twenty-eight." "And how long has he believed in this genie stuff?"

Enjoy your tax cut. Let’s hope it works largely as intended — as it may well — rather than spawn an industry of unproductive ways to convert ordinary income to capital gains, and overheat things that are already more than a little lukewarm warm.

Tomorrow: Sometimes Insurers Really Stink

From Bill Brinkley, Jr.: “You mentioned a while back that you can effectively ‘cancel out’ your position in a stock by shorting the exact number of shares you own. Somebody told me this a few years ago, and now you’ve got me thinking about it again as a way to lock in some gains on stocks I’d like to sell but don’t want to pay taxes on.”

This is called shorting against the box, from the days when your stock certificates were kept in a safety deposit box.

“My questions are these,” says Bill:

• “How long can you go on holding a stock both long and short? Forever? Doesn’t the IRS care?”

Forever is a long time, but it used to be the answer. Now, because the IRS does care, it looks as if this loophole may finally be closed as part of the new tax bill — and retroactively to short sales made after May of this year.

• “When you cover your short, any gains are treated as short-term capital gains, which here in my state creates additional tax to pay. So is the whole shorting plan really a good idea if you do someday have to close out your positions?”

Yes and no. I think the loophole will be closed, as it should be, so this may all be moot. And I should also point out the pothole in the loophole, lest you get any grand ideas: even under existing law, shorting against the box freezes your holding period. That is, if you held a stock 11 months and it hadn’t yet qualified as a long-term capital gain, shorting against the box would stop the clock unless and until you covered your short. So you can’t use this ploy to lock in a profit and see it risklessly mature as “long-term.”

The advantages are (or used to be) the ability to defer tax to a year when you’d be in a lower bracket, either because — in your case — you might someday be moving to a state with a lower income tax and/or because you expect the federal tax rate to come down. Shorting against the box allowed you to shift a gain into a year when it would be less heavily taxed.

Another possible advantage: Say you bought Coke at $10 and it’s $70 and you love it for the long term and certainly don’t want to trigger a huge tax by selling it . . . yet you think it’s likely to fall back a bit and you’re not happy about that. So you short some against the box, cover for a short-term gain at $60 or $55 or wherever, while you continue to hold your stock. I’m definitely not suggesting you do this, especially now with the new tax law, but that’s one way the strategy could have made sense.

Then again, there is the potential for this ploy to transform a lightly-taxed long-term capital gain into a more heavily taxed short-term gain. It’s not likely to happen with Coke, but continuing with this example, say the stock fell from $70 back to $10, where you bought it — or even to zero, when it turned out that Coke causes some dread disease and that Atlanta knew it all along. Well, you have a huge profit in your short — but, as you say, even if you held it for 30 years, it’s considered a short-term gain. And you’ve let the long-term gain in the shares you’re long wither away to nothing. So you’ve transformed a lightly taxed gain into a heavily taxed gain. Oops.

• “When the tax year ends and you’re holding a short position, the 1099 from your broker contains a Total Sales for the Year amount. This amount includes sales of the stock you borrowed to create the short position. And you have to put this total amount on your Schedule D. How do you explain to the IRS (year after year) that some of that money was from short sales and there’s no gain or loss yet to report? (Because the Total Sale Price column won’t add up to the 1099’s figure.)”

No different from any other short sale. You just attach a little footnote to your return. (Or not, and if it ever comes up in an audit, you just explain, “Oh, that was a short sale.”)

But let me say once more: it looks as if this loophole may finally be closed — retroactively. So if you hold a stock you think you should sell, I’d just sell it. If you own one you think is a good long-term holding but has gotten way ahead of itself, you might consider writing calls against it or buying a put.

Tomorrow: The New Tax Bill

If you have time, do me a favor. Check out the BETA equity mutual funds selector on www.personalogic.com. (While there, you might also want to select a car or a camcorder or a laptop or a bike.) When you select Mutual Funds as the area you want to visit (and then click GO) you’ll be offered a chance to proceed with the guidance of "an expert." Right now, that offer is a little buried; you have to read to the end of the screen to see it. But that may be just as well, because the expert is . . . me.

Whether you proceed generically or with my hectoring, here’s the question: Does it make sense? Is it helpful? Does it work? How should we improve it? Did you get any screwy results?

This is a venture backed by Barry Diller, American Express, the Washington Post, Softbank, and Microsoft co-founder Paul Allen, so you can be sure they want to get it right. The goal is to be a completely objective aid to decision-making. The data is not intentionally skewed in any way to favor one mutual fund — or laptop or vacation spot — over another. It’s meant to work with your requirements and preferences and will show you at the end why certain funds (or laptops) ranked as they did — or failed to make the cut.

How will PersonaLogic make money from this? All suggestions are welcome. (But do you actually have to make money to get rich from starting an Internet company?) What I do know is that PersonaLogic co-founders Tom Sammon and Brad Scurlock have built a remarkable decision-making "engine," spending several years of their lives in the process. One of them was training computers to track Soviet nuclear subs not so long ago. Freeing him up for this is part of the "peace dividend."

As they tell the story:

It all started — long before our wealthy partners got involved — when Tom’s wife was expecting their first child. With the impending arrival of this very important cargo, Tom realized it was time to think more about things like safety and less about things like 0 to 60. Tom asked Brad, a car enthusiast, if he had any recommendations. This started Brad thinking: Why wasn’t there a program that helped people find their ideal cars? With their artificial intelligence and database experience, the two decided to create such a program.

They set about building a "decision machine" that would let them optimize the decision — find the model among the hundreds and hundreds of choices out there that would give them the most overall satisfaction for their money. And then they realized: The same decision engine that worked for cars would work for any other complex decision where there are hundreds of choices and lots of factors to consider.

Such as the selection of a mutual fund. Your feedback on the Mutual Fund section would be most helpful to me in spotting flaws, bugs and ideas for improvement. (See "E-mail Andy" below.)

(Actually, the company does have a way to make money. It contracts with other companies that want to use its decision engine on their sites to help walk customers through purchasing decisions. The PersonaLogic site is, for now at least, like a free showcase of its technology. Take a look.)

Thanks to my cyber-pal Dave Davis for what follows.

Several years ago Sally Bedell Smith wrote a book called In All His Glory: The Life of William S. Paley (the late legendary founder of CBS). My favorite anecdote from the book is this one:

“It is a measure of Paley’s idolatry that he embraced so many of [John Hay ‘Jock’] Whitney’s friends and elements of his lifestyle. He even convinced CBS to buy Whitney’s private plane. To Paley, Jock Whitney embodied the ultimate in American masculine style. Yet Whitney’s influence was less in matters of taste than in the way he operated. ‘Bill,’ summed up Walter Thayer, ‘liked the way Jock lived.’

“A gentle rivalry flecked their relationship as a result. Once while watching television with Whitney at Greentree, Paley wanted to change the channel. ‘Where’s your clicker?’ Paley asked, figuring Jock would have a remote-control switch at his fingertips. Jock calmly pressed a buzzer, and his butler walked up to the TV set to make the switch.”

Now that’s rich.

“Incidentally,” writes Dave, “if you haven’t read that book, I recommend it highly. The hardcover edition is about two inches thick, but it goes very fast.”