Conference nyoss1::market_investing

    35 shares of IBM at a loss of ($115 - $50) = $65/share = $2275.
    This amount is low enough that you can simply reduce your taxable
    income by $2275 in the year you sell.  
    
    If you don't think IBM will increase in value I'd sell now, take the
    loss and the $600+ tax savings in 1993, and look for a better
    investment.

      Forget  that  you paid ~$115.  You have alread lost the difference
      between $115 and the current price.  Their  is  no  "strategy  for
      (gracefully) taking a loss" that will change that.
      
      Look at IBM *TODAY*.  Is it a good investment at today's price? If
      not then sell it "ASAP in hopes of finding a new  investment  that
      will grow".
      
      If you DO consider it a good investment at today's price, then the
      matter is a bit more complex.  You have a "paper" loss and it  MAY
      be  to  your  advantage  to  capture  that  loss this year for tax
      purposes.  So if you want to stay in IBM you might decied to sell,
      wait 31days (?) to avoid having a "wash sale" and then re-buy IBM.
      Naturally, if IBM goes back to $115, at some future  point  you'll
      have  a  taxable  gain  equal  to  your loss this year.  Points to
      consider:
          
          Do  you  have  taxable gains this year against which this loss
          can be applied?
          
          Do  you believe that the time value of the money plus or minus
          the difference in tax rates between  today  and  "some  future
          point" make it advantageous to trade off a loss today agains a
          gain in the future?  (If tax rates increas you could  have  to
          pay  more  tax on you're future gain that you save on the loss
          this year.)

    According to my friend at IBM, if the actual break up of the company
    takes place into few independent companies, stockholders will benefit.
    Assuming that the bad news is already out, I wouldn't rush into selling
    now (especially since the stock has already taken major beating). 
    
    Anyway, I have heard that some analysts expect it to go down as low as
    $40 a share when they think it is a great buy. 
    
    This reminds me of an ex DECie who sold in December at $33 - was hoping 
    to buy back after the wash period and now doesn't think its a
    good buy after the recent run up. He may never recoup his massive
    losses but he may have sold it a bit too early. Oh, I am talking about 
    the DEC stocks he had for $100+.

    
    re: .0
    
    >What's your strategy for (gracefully) taking a loss on a stock?
    
    I never take a loss gracefully. I take it, but not gracefully. ;-)
    Kidding aside, I use a stop loss of 10%.  If any investment I hold
    dips that much, (as sleazeball Gordon Gecko would say) I "dump it".
    
    - Phil
    

    The only reason to sell at a loss is if you believe you can do better
    elsewhere with the worth of the stock at TODAY's price.  NEVER look at
    what you paid, ALWAYS look forward.
    
    You can reduce the loss by taking advantage of the tax deduction of
    losses (up to 3K per year and rollover the rest to next year).  So,
    when you do your analysis, factor in the "gain due to reduced taaxes"
    as part of how well that money would do elsewhere.  Clearly, due to tax
    considerations, the best time to do that analysis and arrive at a "sell
    for a loss" conclusion is at the end of the year; make the transaction
    on Dec 31, if you can.  
    
    I NEVER gracefully sell for a loss!!!  The only mitigating factor is
    that I can stick 1/3 of it on Uncle Sam.
    
    As always, FWIW
    
    Dave

    I'm sure a lot of people use a rule like -10% or -20% to decide
    whether to dump an investment.  I wonder whether anyone's done any
    analysis to see whether "dumping" is a good strategy.  That is: do
    investments that lose 10% generally (in statistical terms) stay losers,
    or do they tend to bounce back later?  And of the losers, how many
    are heading for near-100% losses in value?  Of course, I don't expect
    that people will be able to present the hundreds of pages of figures
    it would take to support their strategies, but it would be nice to hear
    what examples they might use to explain this bit of conventional
    wisdom.

    There's an old axiom of investing that states "dump your non-performers
    and ride the winners". The strategy is you can lose 10 or 20% on some
    stocks but can double or triple on others and you'll be a net gainer
    over the long term. NEVER FALL IN LOVE WITH ANY ONE STOCK!!! If it's
    not doing well dump it. I'd rather get interest than ride a stock down.
    Successful strategies show you need goals to succeed. Never buy a stock
    unless you know when to sell and when to buy. Anyone who's held a stock
    long enough to lose half its value didn't have any pre-set limits and
    should never have bought the stock. I may be stating the obvious but
    money and emotions have a way of clouding good sense.
    			Dan D

	Based on my personal experience, I can argue both ways. But, finally,
	it is the nature of the underlying instrument that will determine
	whether you should dump it ir not. One needs more information about
	the company's products, competition, growth, and the overall market
	situation. 

	I still hold IBM even though it has lost nearly 50% for me. In 
	retrospect, this was a mistake. In fact, I'm happy that I was 
	considering to buy more at about $70 to average down, but did not. 

	OTOH, I hold stocks of Ross Systems that makes Financial
	Accounting software for Digital and HP machines. They are a nicely
	growing company, with good products and good earnings growth. Last
	year, the stock fell heavily on less than expected growth in earnings
	(their earnings still grew by 117%!). I lost more than 60% of 
	my holdings on paper. I bought some more at that time only to
	see it fall to 25% of its value. Since then it has rebounded very
	nicely, and in fact, now I'm up nearly 13% on it!! So, in this case
	averaging down seems to have paid off, at least on paper. 

	[BTW, when I received Ross' annual report, I was surprised to see
	that there are only about 300 shareholders for this company. Should
	that worry me?]

	

    
    re: .6
    
    >That is: do investments that lose 10% generally (in statistical terms)
    >stay losers, or do they tend to bounce back later?  And of the losers,
    >how many are heading for near-100% losses in value? 
    
    For me, I do it with the full expectation that my abort sale _will_
    likely recover to new highs (and many do - man, is that frustrating!).
    
    Why? Because a short string of "near-100% losses" is only needed to 
    knock me out as an investor (I often margin trade), and no stock can
    become such a loser without first becoming a 10% loser.  Why 10%? 
    Fairly arbitrary, but it keeps my 2.5:1 (sometimes 2:1) ratio for %
    price gains to losses intact.  I've found that once I aim for more
    than 25% on a stock, it takes a much longer time in the trade (longer
    than I like to be in one).
    
    Bottom line is that a 90% loser has to pass thru 10%, 15%, etc. before
    it can do it to you (crashes excluded). The solution is to never let it
    get that far, but to do so one must give up some real good performers.
    :^(
    
    Fwiw, I mentioned in another topic that I had a bad year last year.  If
    I had clung to some of the issues that really tanked (all of which had
    stellar earnings and relative strengths at purchase time), it would
    have approached a disaster.  Rather have bad than disaster, as I'm
    still able to approach the plate for another swing rather than rot in
    the bleachers.  
    
    Just my take on it.
    
    - Phil
    

    
   RE .8
	OTOH, I hold stocks of Ross Systems that makes Financial
	Accounting software for Digital and HP machines. They are a nicely
	growing company, with good products and good earnings growth. Last
	year, the stock fell heavily on less than expected growth in earnings
	(their earnings still grew by 117%!). I lost more than 60% of 
	my holdings on paper. I bought some more at that time only to
	see it fall to 25% of its value. Since then it has rebounded very
	nicely, and in fact, now I'm up nearly 13% on it!! So, in this case
	averaging down seems to have paid off, at least on paper. 

	[BTW, when I received Ross' annual report, I was surprised to see
	that there are only about 300 shareholders for this company. Should
	that worry me?]
>>> FYI, I own Ross too and am holding onto it (so there's only 298 others
>>> out there that own it :-} ).  I'm hoping that with a
>>> DEC turn-around and their HP ports it ought to rebound nicely.
	

re "only 300 shareholders":

That's probably 300 shareholders of record.  If your stock is in the street
name, your broker is the shareholder of record.

    Re: Selling the losers...
    
    In a book a read several years ago, "The New Money Masters", by an
    author I forget, there was a discussion of this topic near the
    conclusion.  The book is about several money managers that have (had?)
    good investment track records.  The author stated that they use
    varying, sometimes contradictory, methods - but had one thing in
    common:
    
    They all sell losers.
    
    One of the recommendations that I specifically recall was:
    
    Sell any stock that decreases in value by more than 7 percent of the
    market in general.  (i.e. if the general market went down by 10%, don't
    sell your stock until it decreases around 17%).
    
    And remember one of my favorites:
    Nobody EVER made money from buying stock...
    
    Only by SELLING.
    
    Wayne