Investing 102

[GregWeld]

Originally Posted by clill

You can't buy CPST much lower than it is. They have yet to make a profit but are building cool turbine generators. 1 moving part that floats on air bearings and swamped with orders. Now they just have to figure out how to make money.
http://www.capstoneturbine.com/

It's the only thing I have any stock in because I am not a high roller like Weld.

How's that working out for you??


Capstone Turbine Corp. (CPST) Drops 25.53% on October 01

[Vegas69]

Low blow....ha

[GregWeld]

Originally Posted by Vegas69

Low blow....ha

It takes a LOT to keep even on low blows with Charlie!


Really wasn't trying to rub his face in it as much as I was pointing out "statements" like this are always tough to defend. This is INVESTING 102... and it's a good learning point for many here.

I think there are MANY stocks in the S&P that are considered to be in true "bear territory" which is down 20%... so this is not the only stock that sucks... the whole market is stinky right now.

[GregWeld]

So when you think the "pros" do such a much better job than you ever could "investing".... think again. LOL

Read this article on the "hot" hedge funds... The first couple paragraphs will give you all the info you'll need. : > )



http://www.bloomberg.com/news/articl...al-2008-losses

[XLexusTech]

Anyone have any opinions or even a formula for taking gains or taking losses for tax purposes?

Here is my situation... I have one stock and one municipal both traded in a post tax "Play" account... I am going to share the tickers because it will help ..

I have MUI which is a tax free Muni that can take a loss on.. and trade up for MUS.. I am down 38% on it..
I have COKE that I am up 198% on right now.. which I think is a good time to sell off some of it..

Is there a way to calculate how much of each would offset? Assume Coke is not subject to short term gains?

In a nutshell, is there any offset losses and gains strategies to help come april 15th?

[CRCRFT78]

FINALLY I have caught up with this thread again after slacking off. After watching the market take some serious hits I realized I needed to get back on board with what I have going on and put some idle (LAZY) workers back to work.

I have about $3800 in my retirement account and have been considering purchasing ATT (T) with that or adding to my two red positions. CAT is -12.80% and KMI is -28.34%. The rest of the account is doing pretty good.

Do you think it would be wise to spend it all on ATT, add to the 2 in the red or divide it between the three of them? I've included a screenshot of my holdings for your critique.

[XLexusTech]

Jose I am not qualified to answer your question... But congrats on them gains !

[GregWeld]

Originally Posted by XLexusTech

Anyone have any opinions or even a formula for taking gains or taking losses for tax purposes?

Here is my situation... I have one stock and one municipal both traded in a post tax "Play" account... I am going to share the tickers because it will help ..

I have MUI which is a tax free Muni that can take a loss on.. and trade up for MUS.. I am down 38% on it..
I have COKE that I am up 198% on right now.. which I think is a good time to sell off some of it..

Is there a way to calculate how much of each would offset? Assume Coke is not subject to short term gains?

In a nutshell, is there any offset losses and gains strategies to help come april 15th?

This is easy -- because tax harvesting is not complicated. If you want to be tax NEUTRAL - then sometime before December 31st -- you sell the loser (however much you want to sell).... and then you sell enough of the winner to zero that loss out. Or vice versa. Sell however much of the gainer to equal the amount of the loss you want to take. So if you have a loss sale of $1,000 (capital loss) - then sell something with a gain - where your capital gain is $1,000. Net tax neutral transaction.

Losses are capped at $3000.00 per year -- so if you just sold the loser --- and had a $9,000 loss - you'd have to carry the loss over a three year period...

For losses - there is no distinction between short and long term. That distinction comes if you have GAINS. So you can sell a short term loser and offset that loss with a long term or short term gainer if you want a tax neutral harvest.

But remember that you can't write off more than a $3,000 loss per year. So you can't earn $100,000 and sell a bunch of losers where you lost $50,000 - and think you're going to offset your income by $50,000. You'd only be able to write off $3,000 this year. This is why people that want to take some gains - but not incur the taxes - usually offset the gains with selling some losers. Then use the cash to re-deploy into other investments.

Your brokerage account should show you your "paper" gains and losses per position. And from there it should be pretty easy to do the math to calculate what you need to sell to make this all work out.

[GregWeld]

Originally Posted by CRCRFT78

FINALLY I have caught up with this thread again after slacking off. After watching the market take some serious hits I realized I needed to get back on board with what I have going on and put some idle (LAZY) workers back to work.

I have about $3800 in my retirement account and have been considering purchasing ATT (T) with that or adding to my two red positions. CAT is -12.80% and KMI is -28.34%. The rest of the account is doing pretty good.

Do you think it would be wise to spend it all on ATT, add to the 2 in the red or divide it between the three of them? I've included a screenshot of my holdings for your critique.

Always hardest to put money into the bleeders... but that's what you do if you still think the company is solid - that the dividend is solid - and if you believe the share price is down for some reason other than the company is going to hell. Remember that if you simply bought the same amount of shares that you have - it's only going to cut your loss a little. That would be called "doubling down".

In your case - let's take KMI:

You have 31 shares @ $41.35 per share cost basis. So if you bought 31 more shares at todays price of $29.63 --- your new cost basis would be 62 shares @ $35.49 per share. That is closer to where it's trading - but not really close enough for "me"... If it was me I'd want to get my share price down to maybe $32 ish. That way it has less to recover before I'm made whole - or I take a loss and turn it into a gain. So I might buy 100 shares of it. Your position would then be 131 shares @ $32.47

That is painful to do - takes this position to "out of whack" with the 5% rule -- but rules are made to be broken IF you think of this as a TEMPORARY position that is a bit of a gamble = in a effort to get you back to even.

KMI moved down with oil - yet it's their pipes that move oil... regardless of the price of oil - a person that owns the crude has to move it to sell it - that uses KMI's pipes... the consumption of oil is not the problem - the oversupply of it is. Regardless - if you have too much supply - you might have to store that - and that means you have to move it to a storage facility etc.

If oil comes back just a little... KMI will move with it. In the meantime you're collecting 6.6% dividend... which is just huge. And you have more upside potential here than you do down - unless oil goes to $35 or $20... which is something we just don't know. Oil seems to be floating right around the $40 level here for some time... and the oil rig count is on the decline - which helps with the oversupply... and blah blah blah.

So it would cost you $2900 of your $3800 available. I'd hold the remaining grand and build back some more cash. Cash is always nice - and the more volatile the market the more comfort you'll get from holding some cash. If you really want to do some math - you'd take the 6.6% dividend you're making on the new KMI purchase - and spread that over the $3800 (if you want to look at it that way) and you'd be making about 5% on that - which is a good return! Even though a grand is sitting idle.

Mind you -- this strategy doesn't always work!! Share prices can fall further - giving you an even larger loss (because you'd be holding even more shares!) - but when this strategy works -- it works really really well!

As soon as the share price approached or exceeded the new cost basis.... I'd sell the original 31 shares (you can do this - as you can identify which shares should be sold) leaving you with the 100 shares at your $29 purchase price... and then your gains can start from that new lower cost basis. I'd then use that money plus any new cash and the remaining cash you had and figure out what to do with that... when you're ready.

Ask more detail if you don't understand the strategy. If you're nervous about this strategy - then let's discuss a different move.

I'm focusing on KMI rather than CAT because the CAT isn't that much of a loss - and it can recover that distance pretty quickly on it's own... if we see China and Europe recover a bit... I wouldn't chase that here. The KMI has the big reward component if oil recovers just a bit - and the dividend on it is fantastic down here!

[CRCRFT78]

Thank you for the insight Greg. I didn't think to look at it from that perspective because the bleeders don't scare me into making any irrational decisions (buying high selling low). I'm in this for the long haul and given my time line I believe KMI & CAT will/should recover. One reason why I was considering buying ATT to add to my positions.

Just to make sure I'm understanding what your explaining to me. Buying shares at a lower cost per share will bring my average cost per share down which should help speed up my recovery IF the stock price rises and does not decline further because now the gap has become smaller between my losses and breaking even. Selling the long-term shares of KMI will eliminate the higher cost per share keeping the new shares at the lower cost basis allowing my gains to become more substantial IF the share price rises by not having to make up as much ground to recover.

I think I just repeated what you said but I need to make sure I'm understanding it.