today, page-74

Well blastoff perhaps I can change your mind, and your thumb vote. You said: "...a good trader will have many successful buy and sells in EXT and your figures quickly become wrong for these with the trader well ahead..." so what I'll do is, I won't assume a good trader, I'll do the figures for a PERFECT trader. That's right, someone who can sell at the exact top and buy at the exact bottom, flawlessly, every time. I'll also investigate what happens if as you say: "...In the event of a takeover there is capital gains rollover relief available..."

OK, our perfect trader "The Rooster" has bought some EXT last year for $1. He buys $10,000 worth or 10,000 shares. He sells them on 4 Feb for $1.68, and buys again on 10 Feb for $1.49, and so on, and so on. Each time he pays capital gains tax at 49.5% (including Medicare levy). His position looks like this:

Buy.....Price..Shares...Total.......Sell......Price....Total......Gain......CGT.....Rmdr
????..$1.00.10,000.$10,000..04/02...$1.68..$16,800...$6,800..$3,366..$13,434
10/02..$1.49..9,016..$13,434..22/02..$2.30..$20,737...$7,303..$3,615..$17,122
25/02..$2.07..8,271..$17,121..07/04..$5.30..$43,836..$26,715.$13,224..$30,612
16/04..$3.46..8,847..$30,611..21/06...$7.20...$63,698...$33,088..$16,378...$47,320
06/07..$5.57..8,495..$47,317..16/09..$11.17...$94,889...$47,572..$23,548...$71,341
04/10..$8.83..8,079..$71,338..14/10..$10.01...$80,871....$9,533...$4,719...$76,152
29/10..$8.41..9,054..$76,144..???..$20.00..$181,080..$104,936..$51,943..$129,137

So after all this trading, "The Rooster", our PERFECT trader, has made $129,137 after tax. However, our L/T holder, "The Pussy Cat", who also bought 10,000 shares at $1, sold her shares for $200,000 and paid $47,025 in capital gains tax, leaving her with $152,975 profit. "The Pussy Cat" made $23,838 MORE than "The Rooster", or 18%.

Now, if there is no capital gains tax on takeover, "The Rooster" would pocket $181,080. But "The Pussy Cat" would pocket $200,000, this is $18,920 MORE than "The Rooster". I would point out that the only way to get capital gains tax relief would require a scrip offer, which unfortunately for us all doesn't seem likely. Still, it could happen.

OK, I have done the sums for a PERFECT trader. No trader is that good; they are going to miss a few tops and bottoms. So a typical trader is likely to be worse off.

Now, I don't mind if you trade. Traders probably have a dozen or even a score of positions open at any one time; they watch and juggle an enormous number of stocks. They don't have time, nor do they care, about fundamentals.

But the sums show quite clearly that a long term holder in EXT comes out ahead.