Daily Market Update – December 31, 2014 (Close)
So far the first two days of this week have been disappointing if you’ve been looking for that fabled Santa Claus Rally, as I have.
You may have had a better chance of spotting the real Santa Claus on Christmas Eve than experiencing that rally, although there’s still Friday, strictly speaking, as that is the fifth day after Christmas.
This morning’s futures looked as if today will be just like the previous two days of this week and that trading would be in a narrow range.
The good news is that the range wasn’t anywhere near as narrow, but the bad news was that it was in the wrong direction, especially in the last hour.
This morning it looked as if that trading may get off to a positive start, even as energy prices were again moderately lower and getting further away from that $54 level.
I didn’t expect that there would be be much personal action today, but I didn’t expect much yesterday, either, and at least two trades came out of the boredom and even more today.
Fortunately, those opportunities came before the market decided to not cooperate with those in a party mood.
While there was some economic news today, such as the Jobless Claims, nothing was really of the stature to typically move markets. Friday reveals an ISM number and sometimes that has an impact on things, but the beginning of a new tax year can bring its own dynamic, regardless of economic report activity.
Today, instead, was a day to think about last minute tax strategies, as looking through closets that are screaming for items to be donated and maybe losing positions longing to be sold.
The basic rule for the former may be related to how your waist size has changed over the year. Meanwhile, the basic rule for the latter is based on your tax rate.
That rate, together with the time frame of your holding determines what kind of tax benefit you can get from taking a loss on the position.
That value can be expressed on a per share basis.
The question becomes can you reasonably expect the stock to appreciate by that much in the next 30 days, at which point you can buy shares back without triggering the “Wash Sales Rule.”
If the answer is that you don’t expect the stock to gain that much in that time frame, then there may be a tax advantage from selling, if in a taxable account.
A spreadsheet to do the calculations is located at http://j.mp/1BhNGMI and offers a quick and simple analysis of whether or not it may make sense to take a loss.
That’s always a touchy subject and I hate taking losses other than for tax reasons, but I especially hate the idea of taking a loss in what should be a sound company, but may be subject to basic economic laws or business cycles
That definitely is the case in the energy sector, but I also think that is the case in all commodities, including metals. In the latter case that cycle has been much more prolonged than I ever would have imagined, but at some point an ascent will occur, as it always has in the past. Just as I hate taking losses, I especially hate to watch that ascent occur after I’ve taken the losses.
For today I wasn’t too worried about such things, but surprisingly did get an answer to my hopes for any errant opportunities to sell some calls on uncovered positions. I was prepared to hold my breath for those opportunities, even at the risk of turning blue, but it didn’t have to be that way.
I’d rather be a nice shade of pink, anyway, but maybe even more appropriately, a really nice shade of green to start the new year. A few of those unexpected sales at least may end up paying for tonight’s libations, just as the last hour’s sell off put me in a less festive mood, but at least the bubbles may cure that.
Happy New Year and wishes for health, happiness and prosperity to all.