I had an interesting development on Friday. One of the long forgotten stocks in my portfolio (Avis Budget Group) was the subject of a short squeeze and produced a nearly $500k capital gain. I wouldn’t rent a car from them, but I’m now proud to be an investor, and when the trade settles on Tuesday an ex-shareholder. (See chart at link.)
As some of you know, my policy over my 30+ years of early retirement has been to limit interest and dividend income to the maximum extent possible, while making portfolio withdrawals with capital gains and tax-paid returns of capital. I’m a LTB&H investor who rarely makes a trade and limits investing activity to a couple of hours of tax planning and portfolio rebalancing the last week of the year. Friday’s activity was my first stock transaction in eight years.
Of course, there is some cost to this Powerball level win. I’ve got a large capital gains and 3.8% Medicare surtax to pay and I’ll be in the top IRMAA bracket in 2028 paying an extra $600/month in penalties on my Medicare Part B and D premium. But that’s fair, there’s no reason that middle-class working people should be subsidizing my Medicare insurance.
The lesson here is that even if you have everything on autopilot, it still makes sense to log into your account once or twice a day to detect if you have any large swings in your account value one way or another. Back in 2024, I had a $900,000 ACTS transfer theft that I was able to stop before the money was spirited away to Russia or the Ukraine. And last Friday, a big swing in the positive direction that I was able to act on.
Congrats on your windfall. Mostly good news but a reminder of why many of us went to index funds 30 years ago. And I know you went to Berkshire Hathaway as your index fund proxy. I have thought of funding grandkids trusts with BRK, but am concerned about an event such as you are having with Avis or something similar. Or a bad manager takes over once Greg Abel moves on. But that’s a divergence from your good news. Pay the tax, the IRMAA for a year, and smile about your still-net-windfall after taxes. And how are you feeling?
Very nice! I had a similar experience* a few summers ago. I exited a physical therapy session and before getting into the car, I happened to glance at my stock quote page in the CNBC app. I happened to notice that some stock that I’ve owned for years (even decades) jumped by nearly 100% that day. So I did something uncharacteristic. First I had to figure out how to login to my broker on the phone (I do that so rarely and it changes periodically). Second, once logged in, I did something that I never did before, I clicked “SELL” and then ticked off the box that said “all shares” (first time ever using that tick box), and selected “market trade”, and clocked “GO” (or whatever they call it). It was my second largest value trade ever. That year was a big year for long-term capital gains.
One, I rarely trade stocks (I do however trade options regularly).
Two, I’ve never ticked the “all shares” box before.
Three, I almost never use market orders.
Anyway, it took a bunch of trades to sell all the shares, and the prices were between $7.49 and $7.54 (I actually just now logged into my broker website and checked the history!) Today those shares are trading at $2.50 or so. I’m very glad that I acted impulsively (very out of character for me) that day in the parking lot.
I hesitate to mention this, but I once heard Cramer say something along the lines of “when you hear anything about fraud or accounting issues, you sell first and ask questions later”. I would add “when there’s a short squeeze, you sell first and ask questions later”.
* I’m pretty sure I posted about it here back then (Summer '23).
Congratulations. Keep in mind there are ways to reduce your tax bill. Charitable donations can help. If you are paying 18.8% capital gains and charitable deduction reduces taxes by 24%, that’s a 27% bonus. If you are in estate tax country saving that 40% makes it even more attractive.
That was mentioned on my Google Ticker (that there was a short squeeze developing in the stock over the past month.) You just never know when It’s time to pull the trigger, once the short squeeze resolves, the stock drops pretty quickly.
I joked to someone last Friday that I’ll be disappointed if the stock blows up to $600/share next week.
I had a cost basis of less than $10/share. I acquired it decades ago as a penny stock when Avis was close to bankruptcy. They then did a 10 for 1 reverse split to keep the share price above $1 so they wouldn’t get delisted.
I think what’s happening here is that the short interest is in the hands of a large hedge fund(s) where the position is a very small percentage of assets. So even if they get to where the cover ratio is 10 to 1 or 20 to 1, they have the financial ability to ride it out.
{{ Avis Stock Up Another 18% Amid Short Squeeze; Two Investors Control Over 100% of Shares }}
This could be another DELL for somebody. {{ LOL }} A $10,000 investment in DELL at my purchase price in 1992 was worth $2.4 million at the market peak in 2000. (Of course, few people (including me) sold at the peak.)
Absolutely! As famed investor Jim Rogers once told one of the anchors on CNBC, “I grew up poor in Alabama. I aspire to a higher tax bracket”. (Though I’m sure he’s still doing what he can to reduce his liability.)
I’m doing well. I’m pretty close to walking unaided after the above knee amputation. But my residual limb has shrunk a bit now that I’ve been walking miles per day on it. They’re in the process of manufacturing a new socket for me, but it will be mid-May at the earliest before I get it. These high tech prosthetics seem to have the maintenance requirements of an aircraft.
In the meantime I’m limited to what I can do because my leg is rotating in the socket about 30 degrees with every step, and I then have to put weight on to screw it back towards the medial.
Sorry you have to deal with all that but keep up the good fight. Hopefully you get situated where you can get to some sort of good new normal. I wish you well.
