Tax Selling

In the past couple of weeks we have seen a steady stream of secondary offerings and insider selling. Much of this is likely due to the tax increases going into effect in January. Over $14 billion of secondaries have been announced this week alone. This additional supply of stock will make it  difficult for the market to make much headway.

I was hoping for a decline this week that would dampen sentiment. Instead the modest advance  has sent sentiment towards excess bullishness. The AAII bears, Investors Intelligence bears, Hulbert newsletter writers & the NAAIM are all approaching levels of excess optimism.

I believe that the risk in the near term is to the downside and have added to hedges as the market has climbed. The market has laughed at my plans for a decline and then a rally into year end. I still believe this can occur but the timetable has been pushed out a bit.

2 comments:

steven said...

Very nice sentiment call - 2 down days following this post. But CIM announced econ value of $2.95 at the end of the 3rd quarter. Thoughts?

ISSC is down over 10% from its peak 2 days ago and the deferred dividend dates associated with spec dividends has many investors confused. You don't like these types of anomalies?

Tsachy Mishal said...

I was hoping for a higher economic book value out of CIM. But there was a large margin of safety in the shares so I still view them as attractive.

Given how well the RMBS market had performed in the third quarter it is inconceivable to me that CIMs economic book value rose so modestly. I can only come up with two explanations. The accountants & lawyers are being extra cautious on the marks because of the restatements. Or Annaly is trying to steal the company for cheap.

I am not familiar with ISSC