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Mickey Fulp is Expecting a Short-Term Tax Loss Sell-off but is Bullish Overall

on 11/27/2012

Investors are still reeling from months of bearish declines in their resource stock holdings. And now that the election is over, and the fiscal cliff looms, they are wondering what is going to happen in 2013. On top of that, it's the end of the year – a time when many investors do a tax-loss sell-off.

At the San Francisco Hard Assets Investment Conference (November 16 – 17), we met up with mercenary geologist Mickey Fulp who helped to answer that question for investors. Mr. Fulp made three appearances at the show – a Q&A on junior resource stocks, an Expert View discussion on ideas for year-end investment purposes, and he was a panel moderator for a panel with four gold companies.

We asked him about what the end of the year was going to be like for him and what he was expecting through December and into 2013.

He said: "Everybody, who plays around and speculates in junior resource sector, obviously has a few dogs in their portfolio with the fact that we've had a 20 month bear market." The election didn't help, he added later. "The election has obviously affected things – look at what has happened in the market with the sell-off since Obama was elected. Once again, in my opinion, the Republicans chose not to run a very viable candidate."

"I cover six companies. For the most part they've done very well. At least 4 of them have maintained their market caps during this down period of time. I continue to be a holder and supporter of those six particular companies," he reported. "Lots of other stuff is getting beaten up. I'm waiting for the bottom; we're not at the bottom yet, we're still in the middle of this tax-loss selling."

Driving the tax loss selling is a desire to avoid paying additional capital gains tax – a view that Mr. Fulp says is irrational: "We've got an irrational view of Americans that they'd rather sell stocks at depressed prices than pay another 4% to 8% in capital gains tax. It doesn't make a lot of sense."

So what is Mr. Fulp doing instead? He's also selling but only certain stocks: "It's time to move some of that deadwood out, burn capital gains that I've taken over the course of the year on some of my better holdings, and get down to zero capital gains at the end of the year… and move on from there…  I have basically taken the tack that I want to end this year with zero capital gains, both from a short- and long-term perspective," he told us. So he's not selling all of his depressed stocks, as others are. He's only selling the deadwood to help remove potential capital gains.

And then he offered some good news for investors who perhaps want to double down on some stocks when they're at their cheapest, or sell some of the better stocks: "I'm looking for a bottom before the year end and I expect a bounce at the beginning of the year. So I'll sell into that 2013 bounce on some of the stocks that I want to take profits on."

Mr. Fulp also offered his view on how many investors were approaching the changes in capital gains taxes: "Whatever happens in 2013 is, for tax consequences, a year away. I don't really understand the idea of people selling into this completely beaten-up market with good stocks to try to avoid an 8% additional capital gain in 2013. It makes no sense. Number one, that's assuming that the Bush tax cuts will actually be allowed to expire and that Obama's surcharge, of 3.8% on capital gains, is not going to be rolled    back. "

Next we turned our attention to the commodities Mr. Fulp is paying attention to right now. "I think the thing that's affecting gold and silver more than anything would be the Quantitative Easing and Operation Twist routines which continue. Gold made a run-up on the announcement of QE3 and it's been flat ever since but it's statistically pretty certain that gold will end higher than it started for the 12th consecutive year. It started the year about $1,550/ounce, if memory serves, and we're at well over $1,700 right now. In 2013, gold will end up higher than it will start in 2013. That's a pretty safe bet."

Although he didn't have any new stocks to talk about at the time, Mr. Fulp did mention that his subscribers had just received an exclusive "Mercenary Alert" on one of the companies he does cover. Investors who want to learn more about the companies that Mr. Fulp is paying attention to can subscribe at his website,

Resources investors could be disheartened because of the decline in the value of their stocks over the past several months, and Mr. Fulp's opinion that the bottom is still a month away may not make investors feel any better, but a bottom in indeed coming and that spells buying opportunities for the smart investor.



Mickey Fulp's website:



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