When is a loss not worth taking? When it's Sirius XM Radio. (SIRI)
At least that’s what people want to believe.
No matter what I do or say, this stock remains the stock of the people. In fact, they should give you some stock when you buy a Sirius radio. Maybe a 10 share rebate.
Regardless what I tell people -- that it took too long for the FCC to vote, that the two companies lost almost a billion dollars while the regulators dallied -- they don’t want to sell.
And I couldn’t disagree more.
I am always adamant that tax considerations shouldn’t be a factor when you make investment decisions.
I think it's vital that you make economic decisions. The tax man influences you to do silly things, like all of the people who didn’t take the gains on the dotcoms because they didn’t want to pay taxes.
That’s just plain stupid. You have to do what is rational, and what is rational even if you love Sirius, is to take the loss now. If you do, you can offset other gains that you might have.
But more important, this quarter is a disaster for Sirius as is the next one because the deal came too late to salvage the Christmas retail selling season and the fall auto season. Missed ‘em both. Brutal.
Plus, there is a refinancing coming in February that, unless the stock goes to $4, will cause the common stock to be diluted even further. Now CEO Mel Karmazin has said there will be no reverse split. But without one, it is conceivable that SIRI stock will be below a dollar when the financing occurs. That’s how much dilution the refinancing will cause.
So the plan? Simple. If you really love Sirius the stock, how about this strategy. Sell it now and buy it back after the refinancing, successfully avoiding the wash sale rules that prohibit you from selling a stock and buying it back the next day just to get the tax loss.
I know there are plenty of people offering personal finance tax advice. I always leave that for my accountant. But this one, this trade, makes economic AND tax sense.
There is no sentimental reason to own a stock, not even Sirius. But at least there’s a way to save some money and then jump right back in at what should be a lower price.