Not investment, tax, or legal advice. Not a recommendation to buy or sell any security. Hire an adviser for personalized guidance.

The die is cast on SpaceX:

• If you have some shares from employment, you’ll get liquid at some point. You generally can’t hedge as an employee (options should be announced shortly), but investors have other tools to derisk, like exchange funds, tax-aware long/short, gifting, selling outright, staged selling, etc.

• Investors trying to get an allocation… bleh. Maybe just read Antti’s paper to make sure that’s the best strategy (TL;DR: recent winners tend to underperform). I have no idea what will happen.

• Investors getting exposure via an index fund, you might be forced to reckon with the idea that any particular index fund is an ironically active bet. The quicker an index adds SpaceX, the quicker investors get exposure, whether it makes fundamental sense or not. I’m very curious what the systematic active folks (Dimensional, AQR, Canvas, etc.) do with SpaceX, if anything, since they’re not benchmark bound.

Things that have nothing to do with SpaceX:

• Dimensional (2020): Borrowing Fees and Expected Stock Returns

• Andrew Ang (2026): Uncle Sam’s Cut: A Century of the Federal Tax Drag on US Equity Returns

• Knight/Knight (2016): Accounting for Notional Principal Contracts

• ISLA: Securities Lending Risks & their Mitigants

Who needs an estate planner when you have…

Alright, some SpaceX…

TGIF

With a few mega IPOs coming fast, I figure everyone could benefit from state-specific wealth management analysis.

The United States is a quirky collection of tax regimes (well beyond CA and NY).

I’ve essentially boiled down state-level income and capital gains into 5 buckets (examples of each):

Read more

On Sunday, I wrote about how the stocks of companies being acquired might start to “trade like cash” if the deal were nearly certain to close.

“Trading like cash” means the price has pinned to the acquisition price (or close to it), any risk premium is gone, and a capital gain is hurtling toward you.

At this point, some suggest donating the stock to claim the charitable deduction and avoid the capital gains tax.

There’s just one problem…

Read more

At Basis Northwest 2026, Savina Rizova, Dimensional’s co-CIO, told a story about something strange her team had noticed in an equity portfolio they’d onboarded.

A stock in the portfolio was about to be acquired in a very public, all-cash transaction, but the previous manager had continued buying the name.

A manager might continue adding to a stock position if they were trying to minimize deviation from a benchmark, usually measured by something like tracking error.

But there are pre- and post-tax consequences to holding a stock being acquired, particularly if there’s a high probability the deal will close.

It’s generally sub-optimal for several reasons:

Read more

• Savina Rizova (Dimensional): Why You Should Go Beyond Tax Loss Harvesting in SMAs

• Gavin Romm (AllianceBernstein): Tax-Loss Harvesting with Bonds vs. Stocks: Different Rules, Same Goal

• Liberman, Sosner, Freitas (AQR): The Tax Benefits of Pre-Tax Alpha

• Basis Northwest / The Journal of Wealth Management curated articles

• on How I Invest…

A quick thank you…

Check out basisconf.com (we already updated it!) for more info on attending, sponsoring, and hosting.

What is Tape of Tapes Day?

A family member was drafted during the Vietnam War, and just before he was meant to ship out, Nixon halted the draft. As a consequence, Nixon was heralded, though not necessarily a hero, in my house growing up.

When the Nixon Presidential Library opened in 1990, I (wearing my Little League uniform) went with my family. And I’ve been back once a decade since.

I, like many people, find Nixon darkly fascinating and odd. I’ve read all of Woodward and Bernstein’s work on him, and saw Woodward live a handful of years ago.

My favorite piece on Nixon is probably A Night at Richard Nixon’s, a podcast about a strange dinner party (he was an awkward host) he had in 1989, well after leaving the White House.

June 4th, 1973 is a weird day in Nixon history. On that day, Nixon sat in the Executive Office Building and listened to one of his famous tapes (he had bugged several locations, including the Oval Office)… amazingly, a tape was rolling at the time, creating a tape of tapes.

I only know this story because Hillary Clinton told it in 1993 and I stumbled across her recollection while researching a children's book about how the taping system was installed. (don't judge… we all had way too much time during COVID… the book is done, btw. I printed 20 copies and gave them to friends, who undoubtedly read them to some baffled toddlers).

Here is the interview with Hilary…

In 1974 on the Impeachment Committee, Hillary Rodham’s main assignment was establishing the legal procedures to be followed in the course of the impeachment. Her work ultimately led to suggesting drafting procedures to be followed by the committee in conducting the formal presentation aspects of its work, what sort of rules of evidence would be involved, what sort of objections would be deemed appropriate or inappropriate, and the scope of cross-examination. It meant staying in the background, and being, above all, discreet.

“I was kind of locked in this soundproof room with the big headphone on, listening to tapes,” she told the Arkansas Gazette. “There was one we called the tape of tapes. It was Nixon taping himself listening to the tapes, making up his defenses to what he heard on the tapes. So you would hear Nixon talk and then you’d hear very faintly the sound of a taped prior conversation, and you’d hear him say, ‘What I meant when I said that was...’ I mean, it was surreal.”

Hillary Clinton: The Inside Story, by Judith Warner: on Government Reform (1993)

Here is a recording from June 4th, if you’re curious.

Why bother acknowledging Tape of Tapes Day?

First, it’s a ridiculous way to spend a precious day on Planet Earth. (We have so few)

Second, and without sounding corny, Tape of Tapes Day is about integrity and what happens when it flies out the window. It is a ridiculous reminder that we can bury ourselves in rumination, and to avoid shenanigans that might get us into that position in the first place.

Happy (belated) Tape of Tapes Day.

If you’re here for the memes…

TGIF

You may occasionally look at an ETF’s holdings and see something like “SPY 09/18/2026 10.01 C” or “SPX US 06/18/26 C7430”.

These are call options on SPY and SPX.

Why do ETFs use one versus the other? (many reasons, but I’ll focus on tax here)

And how do we keep them straight?

Below is an idiotproof mnemonic for remembering which is which… and a side-by-side comparison of the tax attributes.

Read more

To celebrate the nation’s 250th anniversary, I’m kicking off The 50 States Project, where, approximately weekly, I’ll talk about something state-specific.

If you have quirky state-specific stories, send them to me, and they might turn into a blog post. More about this little (actually big) project another time…

I live in Washington State. We have an unusual capital gains excise tax.

I wrote about WA State’s excise tax here.

One mitigating factor is that the excise tax is federally (SALT) deductible, right?

Nope!

How do federal and WA State taxes interact with each other?

And is there a case for WA State excise tax to reduce federal income tax in another way?

Read more

Thank you to our sponsors, speakers, and everyone who attended Basis Northwest from near and far.

We’ll be back soon…

I was at a private wealth conference a while back, and maybe 10% of the sessions mentioned tax.

At the happy hour afterward, one attendee asked me why anyone would care about how investments were taxed as long as they were making money. He thought tax management was a joke.

My conference, Basis Northwest, in Seattle, WA, wrapped up last week. We had 350 people in the building and about 80% were from out of state.

Over and over, folks approached me and said everyone at Basis Northwest “self-selected” into attending.

In other words, everyone there cared deeply about tax management. There was approximately zero chance I’d bump into anyone who thought tax management was a joke.

One advantage of this is that we didn’t have to unpack direct indexing, for instance. Everyone took it for granted, and we simply moved into newer or more nuanced material.

I ran a survey at the end of the conference and awkwardly waited in the auditorium until we had 101 responses about where we should go next… here are the top 10:

NYC, Chicago, Seattle, Boston, Denver, Miami, Nashville, LA, Austin, DC.

I also asked for general feedback, and one common theme was “too much long/short!” which I found delightful and probably correct.

I want content that spans the accumulation, management, decumulation, and estate phases and weaves them together thoughtfully.

I also want deeper technical and educational content.

No one… not one person… said they cared about making the content continuing-education-eligible.

CE content usually conflicts with the 25 min slots, which nearly everyone said they really liked.

So anyway, I have more content work to do, but I have a plan…

And here’s what people were saying during/after the conf.

Thank you again to everyone who attended.

Enjoy the balance of the weekend.

I’m taking a breather!

Thank you to our sponsors, speakers, and everyone attending the conference from near and far.

A quick recap of Basis Northwest 2026: Day 1

Some readings…

Arnott x3…

1. Trifecta: A Fundamental Revolution in Indexing

Arnott Index Solutions For Tax Alpha Portfolios

1.73MB ∙ PDF file

Download

Download

3.

Arnott Index Solutions For Tax Alpha Portfolios

1.73MB ∙ PDF file

Download

Download

AllianceBernstein: The Next Generation of Fixed-Income Tax-Loss Harvesting

AQR: The Tax Benefits of Pre-Tax Alpha

Random notes…

• Tax-aware long/short a recurring theme

• Box spread borrowing mentioned in 5 different talks

• Bonds are back (tax and execution prowess)

• Variable prepaid forwards paired with other solutions

• Tax-aware real estate (and Qualified Opportunity Funds)

• 351 exchange to ETF prevalent and popular

• Private placement life insurance use cases

• Tax personalization a dominant theme

• Requests for more estate/income planning overlap

Ehren Stanhope: Canvas

Rob Arnott: Research Affiliates

Jeff Chang and Jon DiGiovanni: First Trust/Vest

Andrew Berman, Nick Bruce: Arqitel

Jason Marcus: Scharf Investments (351 panel with Meb Faber)

Daniel Bunn: Tax Foundation

3 possible risks to unsustainable tax policy: populism, protectionism, and partisanship.

Joseph Liberman: AQR

Erkko Etula: Brooklyn/Nuveen

Gavin Romm: AllianceBernstein

Basis Northwest 2026 is half over.

Just remember…

TGIF.

✅ Basis Northwest 2026 is here!

Tonight’s welcome reception is hosted by Canvas.

Tomorrow’s after-party is hosted by First Trust.

Friday’s going-away party is hosted by Symmetry.

🔱 Friday’s Mariners game is hosted by Burney Advisory Services and… me.

💸 The best way to stay up to date on future Basis events is this newsletter.

Let’s say you have a direct indexing portfolio that has grown well beyond its cost basis.

You could add cash to the portfolio. The manager would take the cash and invest it. Since the investments are fresh (i.e., close to their cost basis), normal market volatility will likely push some names below cost basis, creating tax-loss harvesting opportunities.

Another approach is to add margin and short positions, transforming the direct index into a long/short strategy.

Tax-aware long/short assets are well above $150 billion now. You can get up to speed on tax-aware long/short here.

Just like a cash infusion, positions acquired with margin and new short positions haven’t appreciated yet. They have full tax-loss harvesting potential.

There’s a similar dynamic at play when a manager generates alpha.

Read more

✅ Basis Northwest 2026 is sold out.

💸 The best way to stay up to date on future Basis events is this newsletter.

Educational content. Not investment, tax, or legal advice. Work with a tax adviser.

Last December, I started kicking around the idea of doing a deep comparison of a variable prepaid forward contract (VPF) and a collar combined with a margin loan (C/M).

My co-authors and I published our first version a few months later.

We just published an updated version following a peer-review cycle, and for a little while, our paper is on SSRN.

Quick digression… I’ll be at FPA NorCal (with my son!) this week. Say hello!

Both VPF and C/M are “hedging and monetization” strategies that help investors de-risk concentrated public stock positions.

More specifically, they’re meant to help investors limit downside, while retaining some upside, and giving them capital to put to work elsewhere.

Both solutions look very similar from the outside, but they’re structurally different in meaningful ways.

Read more

✅ Basis Northwest 2026 is sold out.

I started letting folks off the waitlist, but about one in three said they couldn’t come anymore. I have 4 spots left. The first people to message me will get them.

💸 The best way to stay up to date on future Basis events is this newsletter.

We hear a lot about tax optimization in stocks... but what about bonds?

Eric Golden will get us up to speed next week at Basis Northwest 2026.

Eric spent nearly two decades at Fidelity before striking out on his own to build Canopy.

I learn something every time I talk with Eric, and I think he’s got something special in store for attendees...

Is the risk well-compensated?

I’m getting a lot of questions lately about the risk and cost of tax-aware long/short strategies (130/30, 200/100, etc.), and I say the same thing every time: higher risk and cost could make sense if they’re appropriately compensated.

What I’m reading/watching…

• The Wall Street Journal: Stock Gains Without All the Taxes? How the Hottest Trade on Wall Street Works

• McKeever/Rydqvist: Tax-Loss Harvesting Under Uncertainty

Basis Northwest co-host Shang Chou taking taxable investing with David Weisburd.

Shameless plug… we cover some interesting ground in long/short strategies…

Nice little (digital) perk for Basis Northwest 2026 attendees…

Very good explainer. Long live the balance sheet!

Memes…

An oldie but a goodie…

TGIF.

✅ Basis Northwest 2026 is sold out. I have started letting folks off of the waitlist.

🔴 Basis Northwest upcoming events…

Wednesday, May 27, 2026: 🍔 5:30 - 7:30 PM PT: Canvas kick-off reception (RSVP)

Friday, May 29, 2026: 🔱 7:10 PM PT: Mariners Game - 10 seats left (RSVP)

💸 The best way to stay up to date on future Basis events is this newsletter.

There’s an amazing free online resource for anyone who wants to learn how shorting stocks works.

Understanding the mechanics is undeniably cool.

However, the hottest thing in taxable wealth nowadays is tax-aware long/short (130/30, 200/100, etc.)…

Tax-aware long/short assets are well above $150 billion now. You can get up to speed on tax-aware long/short here.

…and hiring a manager requires at least passing knowledge of shorting.

So, let me recommend a surprisingly good resource…

Read more

✅ Basis Northwest 2026 is sold out. The waitlist has 50 people on it. We expect to release around 10 seats today and tomorrow.

🔴 Basis Northwest upcoming events…

Wednesday, May 27, 2026

• 🍔 5:30 - 7:30 PM PT: Canvas kick-off reception (RSVP)

Friday, May 29, 2026

• 🔱 7:10 PM PT: Mariners Game - 10 seats left (RSVP)

💸 The best way to stay up to date on future Basis events is this newsletter.

This article is educational content. Please work with a tax adviser.

I have lived in Seattle, WA, since 2013. At the time, the state had a high sales tax, but no capital gains or income tax.

Then the legislature introduced Chapter 82.87 RCW CAPITAL GAINS TAX in 2021, and the WA Supreme Court upheld it in 2023.

I keep track of legislative happenings in WA State using a little home-built dashboard.

There’s an interesting wrinkle that materially impacts Washingtonian investors who use tax-loss harvesting strategies.

Read more

Basis Northwest 2026 is sold out. The waitlist has 45 people on it. We expect to release another 5 or so seats this week.

The best way to stay up to date on future Basis events is this newsletter.

🔴 Basis Northwest upcoming events…

Wednesday, May 27, 2026

• 🍔 5:30 - 7:30 PM PT: Canvas kick-off reception (RSVP)

Friday, May 29, 2026

• 🔱 7:10 PM PT: Mariners Game - 10 seats left (RSVP)

tax mgt 🤝 risk mgt

This is my shorthand for “tax management is risk management.”

I’ve been saying this a lot lately.

In direct indexing, “risk” usually means underperformance relative to some benchmark (“poor tracking error,” as they say).

In tax-aware long/short strategies (130/30, 250/150, etc.), “risk” means the same thing, though there are many additional sources of said risk.

Tax-aware long/short assets are well above $150 billion now. You can get up to speed on tax-aware long/short here.

I’ve been exploring local risks, like short squeeze, lender policy changes, and manager underperformance (AQR’s recent research on this is excellent), for several months now.

Today, I’m zooming out and looking at a systemic risk and asking What if everyone unwinds their leverage at the same time?

Read more

Basis Northwest 2026 is sold out. The waitlist has 43 people on it. We expect to release another 5 or so seats next week. The best way to stay up to date on future Basis events is via this newsletter.

🔴 Upcoming events… Wednesday, May 27, 2026:

• 🛩️ 1:30 - 3:30 PM PT: Surprise event if you are arriving early (RSVP)

• 🍔 5:30 - 7:30 PM PT: Canvas kick-off reception (RSVP)

Taxable memes and what I’m reading...

• NBER Lo/Khandani: What happened to the quants in August 2007? (analysis of long/short hedge funds)

• NBER Binsbergen/Diamond/Grotteria: Risk-Free Interest Rates

• AQR: The Tax Benefits of Pre-Tax Alpha

• Long/short: Schwab’s margin risk addendum is worth reading

• Burney Advisor Services: Don’t Let the Tail Wag the Dog

  

  Whitepaper Burney Dontlettailwagdog

  1.16MB ∙ PDF file

  Download

  Download

Sunday’s post explores the 2007 Quant Quake. Here’s a teaser from Lo/Khandani.

“Coordinated deleveraging” is worth a closer look.

Memes

Little bites of culture.

TGIF

Basis Northwest 2026 is sold out. The waitlist has 40 people on it. We expect to release another 5 or so seats this week and next. The best way to stay up to date on future Basis events is via Tax Alpha Insider.

🍔 Advisers arriving early to Basis Northwest: We may have a late lunch on Weds, May 27, 2026.

RSVP for the pre-conf lunch

The tax advantages of a qualified covered call

A covered call is a short call written on some underlying.

Covered calls have been around forever, but they’re especially popular now because “income” ETFs have exploded in popularity.

Under some conditions, if the call and the underlying hedge are substantially offsetting, the dreaded straddle rules kick in.

Speaking loosely, the straddle rules do two things:

1. Qualified dividends lose their qualified status

2. Harvested losses are deferred instead of recognized

But… there’s a statutory way to avoid straddle treatment if the covered call is Qualified.

How does that work?

Read more

Basis Northwest 2026 is sold out.

Join the waitlist

Advisers arriving early to Basis Northwest: We may have a late lunch on Weds, May 27, 2026.

RSVP for the pre-conf lunch

Read more

Basis Northwest 2026 is sold out.

Join the waitlist

Tax-aware long/short strategies have dominated the discussion in tax management for the last year or so. Assets are well above $150 billion now.

You can get up to speed on tax-aware long/short here.

The prudent question is… what could go wrong?

Schwab’s margin risk addendum has several interesting notes on risk.

One risk the addendum mentions is short squeeze, which SEC defines as…

The term “short squeeze” refers to the pressure on short sellers to cover their positions as a result of sharp price increases or difficulty in borrowing the security the sellers are short. The rush by short sellers to cover produces additional upward pressure on the price of the stock, which then can cause an even greater squeeze.

Key Points About Regulation SHO

This is timely because Avis (CAR) recently went through one (see Part 1).

Below is a quick update on the Avis saga.

That story has evolved interestingly in the past couple of weeks:

• The hedge fund that had accrued a substantial position sold a bunch.

• Avis's CEO accused the hedge fund of breaking the rules, and the hedge fund agreed to disgorge some of its profits.

• The share price came down from the squeeze peak, as have borrow fees.

When Avis was squeezing (rapid share price increase), 4 groups of advisers and investors wrote to me:

• Panicked: How could this happen?!

• Nonchalant: Boy, that was rough, oh well.

• Unaware: What’s happening?

• Opportunistic: Should we short more?

Many managers said Avis was easy to sidestep or had only a minor impact on portfolio performance, or that they partially covered some shorts that had gotten a little heavy. At least one suggested the squeeze could be an opportunity to add to the short.

What’s the “right” reaction to a short squeeze? And could history help?

Today, a look back at an important lesson from 2008: The VW short squeeze.

Read more

Join the waitlist

Tax-aware long/short strategies like 130/30, 250/150, etc., are white hot.

I estimate AUM north of $150 billion, up from $10-$20 billion just 2 years ago.

Getting up to speed on tax-aware long/short? Start here.

I get a few emails a week about how the strategy might be oversold, how many new entrants have come to market, and how advisers are seduced by the tax benefits, forgetting to consider whether the risks and costs are appropriately managed and well compensated.

So, Schwab’s recently released addendum to its margin disclosure statement for long/short strategies is especially timely.

The addendum doesn’t mention the reason for even considering tax-aware long/short, which, it’s worth repeating, should be pretax alpha.

It’s more of a cost, mechanics, and risk management document, and I found it very concise and helpful.

Here are a few takeaways…

Read more