End of Year Tax Selling

December 12, 2006

Hello,

Many long term investors have learned to get off to a fast start to Tax selling. Some long term investors even begin their tax selling right after Thanksgiving because every December the stock market gets hit by a rash of tax considerations. Taxes take a big bite out of an investor's return therefore Investors look to minimize their realized gains by recognizing their realized loses by year end.

Because of the dynamics of tax considerations stocks that outperformed during the year tend to get stronger because no one who is sitting on a big short-term gain is anxious to sell in December. Waiting until January to sell, this year's best performing stocks push capital gains tax liability into next year. Barring significant changes in events, the reduced level of selling gives the best performing stocks of the year some added strength -- until January.

The opposite happens to stocks that have gone down the drain this year. In order to reduce taxes, people who own these stocks want to sell them before the end of the year. Again, barring news, or material changes in the company the increased selling pressure tends to put pressure on the stock price until the end of the year.

James Foytlin

www.jamesfoytlin.com