Bottom Line
The bulls remain firmly in charge of this market, and underlying forces including seasonality are also supportive for further upside in the near-term. We have seen stocks decline to close out the year in December on rare circumstances, but even when such instances occurred, the magnitude of the decline has typically been relatively small. The bears will have their day, but for now this is a market that belongs to the bulls and is likely to remain so at least for the next several weeks. For despite some signs of underlying weakness in U.S. small caps (NYSEARCA:IWM) and high yield bonds (NYSEARCA:HYG), this appears to be a market that is setting up to enjoy clear sailing through the end of the year and into the next.
http://seekingalpha.com/article/2704625-stocks-clear-sailing-into-2015?ifp=0
Comments
Probably more of an attention grabbing headline event rather than a market bear...
"Investors run for the hills prior to end of year distributions".
Wait two days and headlines will bullishly read...
"Investors pour back into the Market"
A read on the topic:
Investor Beware of Year-End Capital Gain Distributions!
Whelp, for the Santa Claus rally, should one occur, you want to be into your 'all in' position this coming Black Friday.
and so it goes,
peace,
rono
Yes, but you have more shares now.
Yep, that is a big ouch.
Example: Using money in his taxable account, Bob purchases $10,000 of XYZ fund on Dec 1st. The fund makes a surprise long-term capital gain distribution of $4,000 on Dec 3rd. Ouch? Yes, Bob has to report an additional $4,000 in capital gains his tax return, but he can sell the fund before year-end. Assuming he sells right after the distribution, he has a $4,000 loss that he can use to offset the gain. (Following me? Bob's cost basis went from $10,000 to $14,000 - if reinvested - when the distribution happened; he sells the fund for $10,000 and locks in a $4,000 loss.) Lemonade out of lemons.
This is certainly not the ideal situation, but this strategy could help the boo boo.
This will not help if the fund kicks out a short-term capital gain as these are reported differently - they are considered ordinary income and capital losses do not directly offset them.
Is there an opportunity here to get a long-term gain from the fund and lock in a short-term loss? No - the IRS saw this coming. See Pub. 564 "Capital gain distribution before short-term loss" for details and an example.
I'm going to write an article about this on CapGainsValet.com.
If you don't seek "paid" expert tax advice maybe you should, you won't have to read all those publications....PS: I also don't fix my car, or my sink, or drill my teeth, but that's just me
Thank you for your efforts.
Take care,
Catch