Santa and 2nd order effects.
I sent a thread about the real world causation of the Santa clause rally. The tl;dr is that in years that have 10% gains by 11/1 the market rallies through year end caused by performance chasing and less selling to defer taxes. One level down..
I sent a thread about the real world causation of the Santa clause rally. The tl;dr is that in years that have 10% gains by 11/1 the market rallies through year end caused by performance chasing and less selling to defer taxes. One level down..
I want to talk about a level below the macro and shed light on my no touch tweets lately. In Q4 gains are not crystallized to avoid paying for taxes and active managers tend to chase the outperformers. However tax loss harvesting is a thing that does happen
That selling of underperforms is smaller than the macro buying of the Santa Claus effect and fuels the so called January effect where underperformers outperform.
The question is where are there losses. By and large everything is up. Does that mean there are no losses and no liquidity tax related selling. No! One has to look at expected basis of existing shareholders
That leads me to No Touch stocks. $PTON, $BYND, $ZG and the granddaddy of them all $MRNA. These stocks have tons of bag holders with losses. They represent significant sell pressure to crystallize losses. I wouldn't touch them until January
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