“Hey is that a deep gaping wound? Here let me rub some salt in it for you.” Fund liquidations rose so managers had to sell positions across the board to generate more cash. But if you are down 40% for the year, you have to be able realize some losses and offset positions that had a near 0 cost basis, right?
what positions do you know of that a mutual fund is holding at a 0 cost basis? They can offset the gains and losses (if they sell both the winners and losers)…but I dont see this as a reason funds are going to dump their few winners and be forced to stay out of them for 30 days in my opinion
I don’t know specifically. I just know cap gains are coming in some funds. I assumed it would be easy to offset gains but I am hearing otherwise. The low cost basis thing was one of the arguments made. Say you bought GE in 1962 and the adj cost is $0.18 per share?
I guess I dont know many MFs that bought something in 1962 or whenever and have held it that long…turnover always seems to high to have consistent holdings like that. I may be off on that a bit, but it seems like a stretch to think it is a widespread issue. I think what may happen is that all these losses will be offsetting cap gains for many years to come, meaning there will not be nearly as much tax revenue from these vehicles (or from the investors who end up paying them).