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Prestone,

Assuming a trader is in the 39% tax bracket, because of taxes they only carry over 61% of their profits (after commissions) each year for their own CAGR. The trader then must attain a return that is 1.64 ($100/$61)X the return of the Long Term Buy and Never Sell.

I don't have the time to test that assumption in a spreadsheet, but I don't think you're right. The reason I think that is because I did construct a spreadsheet awhile back that assumed 15% annnual pre-tax growth. One investor sells every two years. The other holds for 30 years before selling. Though both investors were enjoying the benefits of long-term capital gains, the investor waiting for 30 years to sell had an after-tax value that was 70% higher than the other one.

If I'm right that your assumption is wrong, it's because you are only taking the taxes into account. I don't think you're taking into account the compounding of all those lost funds paid to the taxes.

If you want to construct a spreadsheet to test your mathematical assumption and show me that I'm wrong, I'll be open-minded. And if you want me to e-mail my spreadsheet described above to you as a point of departure, I'm happy to do so.

As for my experience using gorilla-like strategies before the book was written, I will agree that I've bought the right stocks for the wrong reasons and the wrong stocks for the wrong reasons in the past. I've been very fortunate that I survived those episodes in good financial health. :)

--Mike Buckley

P. S. Please, that offer is only good to Prestone. I'm swamped with stuff and don't have time to handle all the e-mail I fear I'll get.

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