Author Topic: special situation vs liquidating long term portfolio?  (Read 1903 times)

SharperDingaan

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Re: special situation vs liquidating long term portfolio?
« Reply #10 on: June 17, 2018, 03:18:15 PM »
You own high quality securities so that you can do exactly this.
Avoid having to sell, and the ability to margin against the existing pile to buy something that ISN'T marginable.

Is that 20% return enough for the higher risk that you are going to take on?
Is it going to move the needle enough to even warrant leveraging to begin with ??
What if if takes longer than thought, or doesn't work out as anticipated?

If that 20% gain results in a meaningful change (mortgage paid off, down payment on a house), maybe its worth it.
But if you're already wealthy & it just results in a bigger pile, why even risk the shop at all? You're just bored.

Different strokes.

SD


Rod

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Re: special situation vs liquidating long term portfolio?
« Reply #11 on: June 17, 2018, 03:28:57 PM »
I would calculate how much tax I would pay on the sale of the existing stocks. Obviously that depends on the size of your unrealized gain as well as your tax bracket. If it is over 10% I probably wouldn't do it. You are trading a certain loss (taxes) for an uncertain gain.

scorpioncapital

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Re: special situation vs liquidating long term portfolio?
« Reply #12 on: June 17, 2018, 10:34:52 PM »
I'm reminded of Buffet's partnership letters that in years when the market could be flat to slightly down, arbitrage was what gave the partnership a positive year in an otherwise negative year. Obviously he can't do that anymore with a giant ship but you and I can. I already use a little leverage so I could deleverage. The middle ground seems to be to take a balanced approach. Neither maximum nor minimum. Will check back if it works out and post an analysis. It's a case of dissenters' rights, not arbitrage. The only way I think it fails is if the action to be taken is cancelled all together but I believe there is legal incentive not to cancel either.