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Some Thoughts On GNI

|Includes:Great Northern Iron Ore Properties (GNI)

Great Northern Iron Ore Properties (NYSE:GNI) continues to barrel along. It is now (10:30 AM, Nov. 18, 2012) trading at > $80. I find this incredible, although perhaps it is not surprising.

As I have maintained all along, no "certificate" or "share" of GNI is going to earn more than $45 over the next two-and-a-half years. My gut feeling is that that figure is on the high side, and that it is more likely to pull in maybe $35 if it's lucky.

Why, then, but shares of it at $80, when that would represent a net loss of $35 - $45 per share?

Tax write-off?

In a way, this makes some sense - after all, I have sold some losers which had the effect of reducing my overall tax burden (not that my tax burden is particularly heavy to begin with). Probably every investor has benefited from that activity at one time or another, either intentionally or unintentionally.

It makes some sense, then, that someone would buy a bunch of shares of a loser so that three years down the road they will be able to write off at least half of that amount from their capital gains. This is particularly true if one is in a high tax bracket, and the losses from GNI reduce one's tax burden (and there has been talk of raising the taxes on capital gains).

But I don't know. . . it still strikes me that intentionally losing a bunch of money isn't going to pay off nearly enough as a tax write-off to be worth it.

But you never know.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am not a tax specialist, and do not consider myself to be qualified to give tax advice. If you have any questions or interests in the strategy considered in this article, you should discuss the matter with a qualified tax attorney/specialist.

Stocks: GNI