Tax Code Strikes Again --- Proven Cause of Early Onset Investor Dementia

Bizarre Investment Conversations 2013...

2012 was an unusual year in the Tax Free CEF market --- prices rose inexorably through November 30th, culminating a 3.5 year surge of roughly 75%. This while generating a stable tax free income in the 6% neighborhood.

Not surprisingly, this spectacular rise from financial crisis lows created an almost endless supply of profit taking opportunities where few routinely appear. Compounding short term capital gains, which in many instances can exceed dividend income, may bring about exceptional growth in income account market values.

But in the real world of investing, some investors just don't seem to get it.

How could any investor not be thrilled with large amounts of capital gains on top of significant tax free income? Concerned that an income tax liability is created by such wanton disregard for the tax code, some investors actually prefer to have no short term profits at all! Talk about shooting oneself in the foot.

At year end, many portfolios could well have shown eye-opening gains in market value, after all expenses, and even after a roughly 5% sell off in tax free CEFs during December --- a decline that has extended into 2013. Verification of these trend-like analyses can be found by studying the individual CEFs at cefconnect.com.

Where would the market value of a a tax exempt CEF portfolio be today, without the realization of profits? And without the additional tax exempt income that the reinvested gains produced?

Clearly, there would be much less of a gain in portfolio "Working Capital" (you may need to Google this terminology --- I can't include a book worth of explanation in such a small space), which grows much faster with realized gains than it possibly can without them.

In "The Brainwashing of the American Investor", a similar tail-wags-dog story ends with this tongue-in-cheek suggestion to investors: "Send me your profits, I'll be happy to pay the taxes."

The message is simple --- any amount at all after taxes is better than an after tax goose egg.

You just can't make this stuff up....

Please Tweet this to your universe and send it to all of your connections --- cast your vote for replacing this ridiculous tax code.

Tax Code Strikes Again --- Proven Cause of Early Onset Investor Dementia
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