Cap Gains

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Aug 15, 2007 11:22 pm

Been running into alot of old-schoolers with very low basis, individual securities.  I am somewhat of the opinion that positions like these should be slowly taking advantage of the preferential treatment of capital gains TODAY (with the exception of really old folks looking for heirs to receive stepped-up basis) as the future of this tax structure is uncertain. 


Of course this is only true for folks who I am prospecting who I think aren't diversified sufficiently...


Any thoughts on this?

Aug 16, 2007 12:01 am

Do they have any losses in the accounts as well?  If you find some losses, you can take some gains.  Otherwise, I think it depends on the situation.  I'm sure some people would be willing to sell to diversify, and if they haven't learned that in this market, they never will.


When I was at ML, we had the Eaton Vance Exchange Fund for this.  If it's a big enough position, that would be a really good thing to look into.


If long term capital gains taxes increase to ordinary income levels in the next presidential cycle, it will be very interesting to see how people react.  Any thoughts on that?

Aug 16, 2007 7:53 am
drewski803:

Been running into alot of old-schoolers with very low basis, individual securities.  I am somewhat of the opinion that positions like these should be slowly taking advantage of the preferential treatment of capital gains TODAY (with the exception of really old folks looking for heirs to receive stepped-up basis) as the future of this tax structure is uncertain. 


Of course this is only true for folks who I am prospecting who I think aren't diversified sufficiently...


Any thoughts on this?



What do you mean by "old-schoolers?"  Are you saying they're old people or that they have old fashioned beliefs?


For a great many people there is an emotional attachment to a company--often it's where they worked, or where their father worked and you're pissing into the wind when you suggest that they should sell it.


Didn't you say you have something like 95 weeks of experience in this business?  With all that background what makes you think they're wrong?  Oh wait, I know.  If they don't sell their holdings they're not giving you money to convert into fees--my bad.


In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."


Thankfully it did not make it to me.  While my mother was its custodian Bridgestone Tires bought them out.


A "financial advisor" needs to LISTEN to the client--especially when that "advisor" has experience that can be measured in hours rather than decades.


A "financial advisor" needs to understand that it is NOT their money.  Investors are not stupid--most are far brighter than you.  They know the benefits of diversification but that holding has been very good to them, so good that it trumps what they see to be the benefits of diversifying.


Every day fat people are told by their doctor that being fat is not good for their health--they smile and agree.  Then go out for a piece of cheesecake and a chocolate latte at Starbucks.  Then on the way home they stop off to talk to their mother, a 300 pound 80 year old woman.  Advisors are not the end all.

Aug 16, 2007 8:04 am
snaggletooth:

When I was at ML, we had the Eaton Vance Exchange Fund for this.  If it's a big enough position, that would be a really good thing to look into.


If long term capital gains taxes increase to ordinary income levels in the next presidential cycle, it will be very interesting to see how people react.  Any thoughts on that?



Exchange funds may be worth exploring.  If memory serves me right there is a trade off in that liquidity is restricted for a number of years and that you become subject to possible taxable events over which you have no control.


Changing the tax code regarding LTG taxation will not be easy as long as there are at least 41 Republican members of the Senate--so I don't think trying to suggest that a gain should be taken now instead of waiting doesn't have a lot of credibility.

Aug 16, 2007 8:07 am

I see the twist into a double negative--I was watching the morning business report and not paying attention.

Aug 16, 2007 10:14 am
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."



Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.

Aug 16, 2007 10:24 am
Maxstud:
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."




Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.


Is it possible that there were two such holdings--GE and Firestone?


As for the rest of that idiotic statement--I have no need to sell the stock, but I do own 96 LEAP puts with a 40 strike, bought with a cash gift from her.


She has promised to kill herself and my Dad in 2010.  My brother and I agreed to let them wait till the day after Christmas.

Aug 16, 2007 10:25 am
DAtoo:
Maxstud:
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."




Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.


Is it possible that there were two such holdings--GE and Firestone?


As for the rest of that idiotic statement--I have no need to sell the stock, but I do own 96 LEAP puts with a 40 strike, bought with a cash gift from her.


She has promised to kill herself and my Dad in 2010.  My brother and I agreed to let them wait till the day after Christmas.



I would recommend August 16, 2007. High noon.

Aug 16, 2007 10:50 am
DAtoo:
Maxstud:
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."




Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.


Is it possible that there were two such holdings--GE and Firestone?


As for the rest of that idiotic statement--I have no need to sell the stock, but I do own 96 LEAP puts with a 40 strike, bought with a cash gift from her.


She has promised to kill herself and my Dad in 2010.  My brother and I agreed to let them wait till the day after Christmas.




So your family usually makes sell/hold recommendations on their deathbeds?  They like to get in one last portfolio review before they die?

Aug 16, 2007 11:08 am
Maxstud:
DAtoo:
Maxstud:
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."




Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.


Is it possible that there were two such holdings--GE and Firestone?


As for the rest of that idiotic statement--I have no need to sell the stock, but I do own 96 LEAP puts with a 40 strike, bought with a cash gift from her.


She has promised to kill herself and my Dad in 2010.  My brother and I agreed to let them wait till the day after Christmas.




So your family usually makes sell/hold recommendations on their deathbeds?  They like to get in one last portfolio review before they die?



Apparantly, they like to pay estate taxes on unproductive assets.

Aug 16, 2007 11:19 am

If someone had the time and/or desire, it would be interesting to go back a couple years and read Put's posts. It would be funny to see exactly how many different stories he has fabricated...


The best thing is that all of these stories ( I own strip malls, I was once an options seminar guru, I have GE, I have Firestone, blah...) are probably people he once knew, who no longer speak to him, and are somewhat believable because he can put a detailed spin on them...

Aug 16, 2007 11:30 am
Bobby Hull:
Maxstud:
DAtoo:
Maxstud:
DAtoo:

[

In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."




Last time you told this story the stock was GE, and you were wanting for mom to kick off so you could sell it.


Is it possible that there were two such holdings--GE and Firestone?


As for the rest of that idiotic statement--I have no need to sell the stock, but I do own 96 LEAP puts with a 40 strike, bought with a cash gift from her.


She has promised to kill herself and my Dad in 2010.  My brother and I agreed to let them wait till the day after Christmas.




So your family usually makes sell/hold recommendations on their deathbeds?  They like to get in one last portfolio review before they die?



Apparantly, they like to pay estate taxes on unproductive assets.



That brings up something.  About fifteen years ago, when they were still in their sixties, my parents bought a two million second to die policy.


I was awe struck with how cheap it was considering how old they were at the time.  But the family has paid on it for years so maybe NYL knew what they were doing.


Since they've promised to kill themselves in 2010 I guess the proceeds of that will end up being more for my brother and me to split.

Aug 16, 2007 11:32 am
blarmston:

If someone had the time and/or desire, it would be interesting to go back a couple years and read Put's posts. It would be funny to see exactly how many different stories he has fabricated...


The best thing is that all of these stories ( I own strip malls, I was once an options seminar guru, I have GE, I have Firestone, blah...) are probably people he once knew, who no longer speak to him, and are somewhat believable because he can put a detailed spin on them...



For the record, I do not own strip malls--never have, and doubt if I ever will.


It's three jewelry stores located in regiional malls--down the hall from Macys type places, near the food court.  You know--a mall.


We don't own the mall--not even a little bit of it.  We rent the space.

Aug 16, 2007 5:23 pm

How pissed was the family when Bridgestone (a Japanese company) bought out Firestone?  Four generations ago meant WW2 era folks.  I'll bet that was a fun discussion.

Aug 16, 2007 5:35 pm
Spaceman Spiff:

How pissed was the family when Bridgestone (a Japanese company) bought out Firestone?  Four generations ago meant WW2 era folks.  I'll bet that was a fun discussion.



Actually it was--my father still refers to them as "Those goddamn japs" and always pisses and moans when my brother picks them up in his Lexus.


On the other hand money is green.

Aug 16, 2007 6:18 pm
DAtoo:
Spaceman Spiff:

How pissed was the family when Bridgestone (a Japanese company) bought out Firestone?  Four generations ago meant WW2 era folks.  I'll bet that was a fun discussion.



Actually it was--my father still refers to them as "Those goddamn japs" and always pisses and moans when my brother picks them up in his Lexus.


On the other hand money is green.



Ahhhh well....he'll be dead soon.

Aug 16, 2007 6:19 pm
Bobby Hull:
DAtoo:
Spaceman Spiff:

How pissed was the family when Bridgestone (a Japanese company) bought out Firestone?  Four generations ago meant WW2 era folks.  I'll bet that was a fun discussion.



Actually it was--my father still refers to them as "Those goddamn japs" and always pisses and moans when my brother picks them up in his Lexus.


On the other hand money is green.



Ahhhh well....he'll be dead soon.



Probably not.  He's 88, his brother is 90 and he has twin sisters who are 85.  His mother lived to 104 and his father hit 97.

Aug 16, 2007 6:45 pm
drewski803:

Been running into alot of old-schoolers with very low basis, individual securities.  I am somewhat of the opinion that positions like these should be slowly taking advantage of the preferential treatment of capital gains TODAY (with the exception of really old folks looking for heirs to receive stepped-up basis) as the future of this tax structure is uncertain. 


Of course this is only true for folks who I am prospecting who I think aren't diversified sufficiently...


Any thoughts on this?



I recently had a client that’s utilities holdings were WAY out of whack in his portfolio. He had a huge position in Dominion he had been building for decades with all dividends reinvested. Luckily he kept all of his statements as they only go back 6 years at D (hard to believe I know). I put in a tender at 91.50 and a gtc order in the market at the same. BOTH were VS. Purchase orders that were for the most part LIFO except for a couple we picked for the higher basis. We liquidated 2/3 of his position in the most tax efficient way I could think of. The tender didn’t float but we got the trade due to this recent/crazy volatility.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


The VS. Purchase can be used to great effect but I’m sure you knew that.

Aug 16, 2007 9:00 pm

[quote=DAtoo

What do you mean by "old-schoolers?"  Are you saying they're old people or that they have old fashioned beliefs?


For a great many people there is an emotional attachment to a company--often it's where they worked, or where their father worked and you're pissing into the wind when you suggest that they should sell it.


Didn't you say you have something like 95 weeks of experience in this business?  With all that background what makes you think they're wrong?  Oh wait, I know.  If they don't sell their holdings they're not giving you money to convert into fees--my bad.


In my own family there was several thousand shares of Firestone--acquired four generations before me and passed from generation to generation with a deathbed admonition, "Don't ever sell the Firestone it's been good to the family."


Thankfully it did not make it to me.  While my mother was its custodian Bridgestone Tires bought them out.


A "financial advisor" needs to LISTEN to the client--especially when that "advisor" has experience that can be measured in hours rather than decades.


A "financial advisor" needs to understand that it is NOT their money.  Investors are not stupid--most are far brighter than you.  They know the benefits of diversification but that holding has been very good to them, so good that it trumps what they see to be the benefits of diversifying.


Every day fat people are told by their doctor that being fat is not good for their health--they smile and agree.  Then go out for a piece of cheesecake and a chocolate latte at Starbucks.  Then on the way home they stop off to talk to their mother, a 300 pound 80 year old woman.  Advisors are not the end all.


[/quote]


Most of my prospects are not smarter than me.  I never said anything about forcing them to sell or not understanding sentimental attachment.  You are an idiot who needs to check out the recommended 'LISTENING' skills.  I just asked if anyone else agreed with the logic of taking capital gains while we understand how they will be taxed (no time like the present.)

Aug 16, 2007 9:01 pm

Hmm...  you get the idea.