The New-School December Bear Strategy
Source: Morgan Myrmo
Summary
At the end of the year, tax-loss harvesting is a major issue affecting investment securities that are down in a majority of the year's trading days.
To measure the risk of such securities, a new algorithm called the current underwater position, or CUP, is presented.
Using the CUP, investors can rank the risk of securities as both stand-alone and intra-industry risks. Netflix is used as a strong short-er bear case.
"Following the light of the sun, we left the Old World." - Christopher Columbus
As many investors understand, cashing in underwater positions near year-end in the stock market is the key function in taking advantage of the IRS rule that only net capital gains are taxed.
With markets trending up at the end of the year, poor-performing stocks naturally represent a minority of total market capitalization. In this type of market there is a high demand to offset capital gains matched with a low supply of available positions to sell.
This must make the investor wonder, is there a measure to highlight the top securities at risk of decimation, such that I can sell them before tax-loss harvesting season afflicts further damage?
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