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Capital-Gains Taxes Not the Enemy


In 2008, the enemy is sitting on paper gains too long.


Hello from New York, where I thought I'd celebrate my day off from TV by taking my family to the circus. What we're doing instead: Carting our infectious children from doctor to doctor to address their Strep throats. Seeing 2 children marveling at their first circus and spending the night clutching a feverish 3-year old are equally memorable experiences, but for entirely different reasons. Put it this way: If I could get long watching the expression on my daughter's face when she sees her first trapeze act against a short of sleeping for 2 hours and waiting to break into a fever myself, I'd put the trade on in size.

Here are other scattered thoughts and possibly feverish notions:

  • As per my insanely oft-repeated strategy of the year, I booked gains in my 2x Short S&P 500 ETF (SDS) and yesterday's Best Buy (BBY) short. Commission and capital-gains taxes are loathsome, but not the enemy. The enemy in 2008 is sitting on gains too long. Nothing lures you into feeling like a genius more effectively than quick paper gains. I'd rather dump the positions, pay the tax and make myself look smart in other ways.

    Specifically, I sit the kids on my lap and wager on the outcome of Popeye cartoons ("I bet Popeye ends up beating the tar out of Bluto"). Not only do I impress the kids and win our bets, I also teach the boy that nothing solves a dispute more effectively then loading up on "muscle in a can" and smacking his enemy around like crazy.

  • I'm not just trimming the negative bets around here. I also sold some of the McDonald's (MCD) I bought in the October swoon and the US Dollar (UUP) I picked up back in August when the Olympics and a dollar breakout coincided in a way I just couldn't ignore. I kept larger chunks of both of those than I did the SDS or Best Buy (which I cut shorter than my hair, which always has at least a hint of stubble).

  • Because I'm a sensitive, masculine, male who isn't afraid to be in touch with his macho sensitivity, I put on a little Bon Jovi 80's prom music while I took winners off my books. JonBon could buy and sell me, he's got cool hair, and I actually envy his (admittedly less than stellar) movie career. Regardless, in the context of stocks, he's as wrong as he is moving in this song. The US Dollar already busted out, Jon. The only way it could break my heart is if I didn't take profits.

  • To be a timeless hair rocker, you need to be the soundtrack for more than one feeling. I spent months and months shorting General Motors (GM) in size (when I ran an amount of money that could be referred to as "in size" with a straight face). Shorting GM was the first stock idea I ever shared on CNBC. I never made a penny, but I fought the good fight. Happens to us all, from time to time. You can whine about it or stand tall in the glory of being defeated for the right reasons. I choose the latter.

  • Are the casinos in trouble? Well, let's say this: Las Vegas Sands (LVS) is down by a 1/3 today despite reassurances from Macao big wig Edmund Ho that he would absolutely not allow Macao casinos to fail.

    Indeed, Mr. Ho added, "if necessary, the government will take (the casinos) over". For students of film or Cuban history, Mr. Ho sounded quite a bit like Fulgencio Batista assuring the Mob not to worry about those Castro-leg guerrillas. Judging by the trading in LVS today, I'm not the only one who saw the Godfather II.

  • Speaking of failing by going retro, Google (GOOG) continues to trade weak despite having a cool search engine, a space program, a fleet of jets and a ton of Segway- riding engineers. When reached for comment in 1999, Google noted that "there was no way a downturn could impact the company... We're immune from the business cycle the way Yahoo (YHOO) and Excite (DEAD) are!".

  • Starbucks (SBUX) is trading pretty well today despite profits falling 97%. For what it's worth, I think store closures and barista sackings are the right things for Howard Schultz to be doing. Alas, doing the right thing doesn't make the stock a buy. It simply saves Starbucks from becoming Linens n' Things.

  • Just as I finished this post, I'm hearing a guy on the show right after mine (though not tonight) taking a shot at Blackstone's (BX) Steve Schwarzman for declaring himself optimistic. He's probably being honest (I'd be optimistic too had I cashed out at the tip-top of the private equity market). If I'd ridden Blackstone down the entire 80% it's fallen since the IPO last summer, on the other hand, I'd want the CEO who led my stock that much lower to be mulling hanging himself with piano wire.
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Positions in UUP, MCD

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