Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next
Author: jacket97 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 451  
Subject: Re: A Big Short refugee's quandary Date: 5/14/2011 11:13 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
BSrefugee,

First, welcome to Alpha. If you intend to stick around, I think you will find the community debate both lively and informative.

To your questions, I echo the sentiments of those who have already chimed in. I would like to add a couple points.

Taxes and investing
I don't like to think about taxes when making investing decisions. It is only a minor consideration. I think of it this way. What is the difference between your marginal short-term and long-term cap gains rate (e.g. 36% - 15% = 21%)? I consider the difference to be the tax hit. When considering the damage the market may do in the interim while you wait for your 12 month holding period, the tax hit might seem more palatable. I also consider the ability to use losses in offsetting gains to be an acceleration of a tax benefit (as opposed to the $3k/yr income limit). That is me, your mileage may vary, especially if you aren't a US taxpayer.

Hedging and Alpha
As a portfolio service, the longs hedge the shorts. However, they are considered independent ideas - the intent is to make money on both longs and shorts. In the ~6 months of the service so far, the closest we have come to a pair trade is long SA and short NG and possibly long CSCO, short JNPR. However, the trades were not pitched that way and the allocations did not match up perfectly.

What you should do is think about the exposure you have and the level of risk implied by that. If you are comfortable matching the Alpha portfolio then go for it. If you are concerned that you might miss so upside then find ways to add long exposure (e.g. ETFs). If you are concerned about a pullback, hang back on some of the long trades.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement