Episode Details

Before we come to the main thrust of today’s piece, there is something I need to flag. We are just coming into North American tax loss selling season, and a number of you have asked if I will be putting together a portfolio of tax loss trades this year.

The answer is, “maybe”.

I’m not sure how well it will work this year for reasons you are about to find out, but it’s something I am still considering, and I will I try to have a list of options for next week’s missive. By my reckoning the dates when you’ll find the biggest bargains this year will be Friday December 19, Monday December 22 and Tuesday December 23, though the window stretches from next week all the way to New Year’s Eve.

What am I talking about?

At the end of the year in the US and Canada, investors (both retail and institutions) sell their worst performing stocks in order to realise losses to offset against gains elsewhere in order to reduce their tax bill.

This selling tends to climax in the last two or three days of trading before Christmas and it means badly performing stocks, particularly illiquid ones, get way oversold only to experience something of a rally in the first few weeks of the following year as the selling dissipates.

So the trade is simple: buy as the selling climaxes and then flip sometime in February (my Canadian broker says March and last year this proved very true).

Nothing is guaranteed in this cruel world (except the further debasement of your national currency), but it is a trade with a remarkably successful hit rate, and a clear timescale. It also becomes apparent pretty quickly if it isn’t working, enabling you to exit any losers early.

If you live in a Third World Country such as the UK, I urge you to own gold or silver. The pound is going to be further devalued. The bullion dealer I recommend is The Pure Gold Company. Pricing is competitive, quality of service is high. They deliver to the UK, the US, Canada and Europe or you can store your gold with them. More here.

By all means go back and audit me, but last year I believe 8 of the 9 ideas worked.

Some picks work better than others. Some years work better than others, but gains of 20-50%, even doubles sometimes, are not uncommon. The trade works particularly well in smallcap Canadian resource stocks, as, when they are bad, they are really bad, and can get hugely oversold. However, this year Canadian resource stocks, particularly gold and silver miners, have had a bonanza year, so there won’t be much tax selling there. In fact, markets more generally have been strong, so there is not the normal flood of dogs to be sold.

However, I have some ideas. Crypto Treasury Companies, for example, could be big winners because of the huge losses they have generated. So keep an eye out and I will try and have something for you this time next week. Be ready to move quickly, as well, so have some cash to play with.

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