Subject: IC940823: SPY, BEAR, LOW, tax, ... etc.

From: "Gray Zhu, 800-289-2498, 212-279-6700" <[email-masked]>
Date: Tue, 23 Aug 94 22:38:01 CDT

==================    IC940823: Investment Club  ======================

0. News: Market Rally .................................. Gray Zhu
1. About switch among mutual funds ..................... Fuhua Ling
2. Jokes: BEAR, LOW .................................... Gray Zhu
3. Who is SPY? ......................................... Gray Zhu
4. Tax for investments ................................. Gray Zhu
_______________________________________________________________________
   (be sure to read the Disclaimer in the end if you have not read)
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0. News: Market Rally 

The market made a rally today due to the Japanese Government's
intervene of the Dollar-Yen exchange. The Japanese bought 7 billion
dollars which is about one month's trade deficit of the U.S. to boost
the week dollar, and so, to boost the Japanese export. When the dollar
is weak, cars made in Japan (paid cost in Yen) is going to sell higher
price in the U.S. Thus less competitive.

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1. About switch among mutual funds

>From: [email-masked]
>Subject: Re: IC940821: The Market is Making a Quiet Comeback

Dear Gray: 

Some brokers do fund switching as a way to get a higher return. They
use, e.g., the time lag between U.S. and Japan. If you hear that there
is a big drop of the Japanese stock market in the morning, buy it the
very same day.  And sell it in the opposite situation. Some of them
really do well. The point is, this is also a way to make money. Like
other ways, this way is also not guaranteed, but it is not nonnsense.

                                                        Fuhua Ling

Question: How does the time lag between U.S. and Japan help you make
quick money (you seem mean it) in mutual funds?  -Gray

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2. Jokes: BEAR, LOW

Why the Stock is called "BEAR"?  - Business Week.

Vermont Teddy Bear couldnt have picked a less auspicious stock symbol
than BEAR. After going public at $10 last Nov., the mail-order
marketer of pricey ursine cuddlies saw its stock zoom to $16 3/4. But
it has been, er, a bear market ever since. Shares hit $5 1/4 last week
after the company posted a $78,000 second-quarter loss. What has gone
wrong? Not a thing, says the company, which claims the loss was caused
by higher expenses as it moves into new markets and expands product
lines. But with profit just 2 cents a share in the first half, even
Barington Capital Group, the investment firm that brought Vermont
Teddy Bear public, says it may pull back from its projection of 25
cents a share for the year.

LOW is not low: 

There is another stock symbol LOW, but it is not really low,, has been
doing well -Gray.

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3. Who is SPY?

SPY is a spy of the market, it is a stock-index "stock".

We know S&P 500 is a market index, which is a weighted average of
stock prices of 500 biggest companies, SPY is a special "stock", its
price does not change according to the law of "supply and demand", but
changes according to S&P 500. To be exact, it is price is the S&P 500
devided by 10, and around up to a 1/32 points.

SPY has unlimited liquidity - there is never a problem you cannot buy
or sell the stock, no matter how many shares. The spread between the
ask and bid price is very small, unlike the some small stock issues.

Many people buy SPY as a investment, and it is not a bad investment.
You are getting the market average return all the time, which is
average 12% over the past 30 year. And there is no tax (I heard of).

It behaves like a close-end mutual funds, i.e. transaction as a stock,
but perform like a mutual fund - slow moving. SPY has the volatility
of 1.0, the volitility of other mutual funds and stocks is normalized
according to this. 

Some mutual funds use S&P 500 options or SPY as a hedge. I mean
holding long position in the funds, and short (buy puts) SPY. You can
use S&P 500 hedge your own portforlio as well.

========================================================================
4. Tax?

>From: [email-masked]

>I have a question about tax.  As a student with F-1 visa, I do not pay
>tax on the interset from my saving account.  Is the money made from
>mutual fund also tax-free?  In addition, someone in my lab to me that
>people need to pay property tax on stock (that is investment on stock
>is treated as property), is that true?
>Qian Zhou,

Gray: 

a) Investment is not savings. Investment gain is added to gross income
   for tax purpose (normally, there are situations dont concern most of us), 
   including mutual funds and stocks, etc.

b) You pay tax when you sell and there is a gain. But for mutual funds, 
   you have to pay the tax the same year you received the dividend (income),
   no matter you reinvest or not.

   You can also deduct $3000 year for capital loss, if you lose more, can
   deduct the rest in latter years, but $3000 each year maximum. The
   deduction is from the gross income, not tax.

c) I dont know stock paying property tax. There may be a law in your state.

d) I am not a tax expert. Read the tax return form may be of help,
   consult a lawyer when necessary.

==========================================================================
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==========================================================================
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