It's gotten to be that time of year again. Doing taxes can be a tedious job, especially if there's a couple hundred transactions to enter. But, also, doing the line-by-line work is an opportunity to do some review. So I never hire anyone else. My carry-forward, long-term capital losses are now $54k due to most of my positions in Lehman's debt finally getting settled last year. On them alone, I lost $19k from being stupidly and inexcusably over-weight (5.7% of AUM). My bet was that Lehman was “too big to fail” and that the gov’t would bail them out. But we all know how that movie ended.Even including the position-sizing mistakes I made with Lehmans, my net-profitability after taxes and losses chugs along, year after year, at an average rate of about 7.7%. Some years I tag 20% gross. Some years less. But overall, I make decent money for a bond-investor. So, as much as I would like to cut down on my losses, trying to do so would also cut down on my profitability. ("If there's no downside, there's no upside.") But there's 'good losses' (which are just a necessary cost of doing business) and then there's 'stupid losses' (which are the kind that should never have been allowed to happen and which will put you out of business if you don't fix the mistakes that gave rise to them.) A yearly review should suggest which are which. Better planning and management should cut down on the latter. (That's the hope, anyway.) Speaking of bank failures and defaults, there’s going to be more in the future, and the biggest will be the Fed/Treasury cartel. They won’t formally declare bankruptcy. They’ll do a stealth-default by repaying their debts with depreciated currency. Oh, wait. Isn’t that what they’re already doing? http://www.youtube.com/watch?v=j2AvU2cfXRk
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