Today, as the market continues to bounce around like an incontinent poodle, I’ve started the long process of clearing out some holdings to take some tax losses before the end of the year.
The first is my holding in HDFC Bank, the big Indian home mortgage and national consumer bank. They have generally been a proxy for the Indian economy, and if I replace this in the near future it’s possible that I would choose instead to get Indian exposure through one of the available ETFs to avoid having to worry about individual country risk in this market. Though frankly, not many folks are climbing all over themselves to get Indian exposure these days, and it’s quite possible that the emerging markets boom that carried India to new heights over the last five years or so has to let yet some more air out of the bubble.
The company is not awful, certainly, and I considered holding on to it, but the stock is not rock bottom cheap and I don’t have a lot of conviction about their future prospects, so I’ll take my tax loss now.
The second is the Vietnam Opportunity Fund, an interesting wager on the future of a small and fast-growing country. Vietnam and the rest of Southeast Asia are little sticks awash in the river that is the world economy right now, and there isn’t much they can do to make their situation better or worse in the short run. Again, probably a good place to be in the long run, but the long run in this case is quite possibly a decade and the fund carries some relatively high costs and is not likely to get particularly popular anytime soon, so I’ll clear this position off the books as well.
So my portfolio is taking some lumps here, and I will probably do at least a little bit more of this in the coming couple months for stocks where I think a rebound or a brighter future may be at least six-12 months away. There is obviously some evaluation going on in choosing which tax losses to take, and which paper losses to sit on, but these decisions are primarily motivated by tax and personal portfolio planning reasons.
If I had unlimited funds, like our friend Warren Buffett, I’d put this money right back to work in some MLPs or utilities, but for now ...