Last week I missed a day, ostensibly to eggnog.

Richard Theriault: “Eggnog is the best of reasons. None other is required. William Rainey Harper, first president of the University of Chicago, drank a quart of it every day with his lunch (and though it was a Baptist school, it did contain rum or brandy; I have the recipe). It did not cause him to miss his lectures but he was inured, unlike you, who are exposed only to seasonal excess.”

From Richard’s alumni magazine:

Eggnog was considered a “strengthening” drink at the turn of the 20th century. According to Young Man in a Hurry, Milton Mayer’s biography of William Rainey Harper, eggnog fueled the “busiest man in America.”

As dean of Yale Divinity School, Harper's typical day went this way: “His schedule took him to his first class at 7:30 in the morning. He taught until 11:00, and went to his office to work on his mail, discuss perhaps a dozen matters with each of his five assistants, and drink a quart of eggnog at his desk. Catching the 1:00 o’clock train to New York or Boston, he would deliver a lecture in the afternoon and another in the evening. The midnight train took him back to New Haven and his study.”

When he became president of the University of Chicago in 1890, Harper’s to-do list lengthened—but his lunch of eggnog remained in force.

INGREDIENTS

1 egg
ž tbsp sugar
A few grains salt
1˝ tbsps sherry or 1 tbsp brandy or rum
2/3 cup cold milk
A few gratings nutmeg

DIRECTIONS

Beat egg slightly. Add sugar, salt, and, slowly, liquor; then add, gradually, milk.

The nutmeg may be used with or instead of the liquor as flavoring.

Serves one.

INCY

Suggested June 11 at $3.40, sold July 28 near $6 (though guru still liked it), suggested again at $5.62 in a basket of three stocks October 29, and now just sold half Christmas Eve at $9.26 (guru likes it for the long term; thinks it might give back some gains in a bad market). The other two items in the basket are up only slightly, but guru still likes them, too. Remember: these are bets to be made only with money you can truly afford to lose. Because – as long-time readers know all too well – we may.

VSP

It’s a little late in the year to be reminding you of this, but if you bought a stock at various prices – as I’ve bought INCY, for example – then you own a variety of “tax lots.”

When you go to sell, each gets its own tax treatment as to gain or loss and holding period.

If you sell all your shares, you just recognize the appropriate gain or loss on each separate tax lot. But if you sell just some of your shares, it becomes a matter of some interest just which shares they were.

In the real world, of course, it makes no difference – it’s like asking which water you drank from a glass, the water that came out of the tap first or the water that came out a second or two later as the glass was filling up. It’s all the same. Water. INCY shares are INCY shares. But for tax purposes it does matter, and if you don’t specify, the IRS will assume the shares you bought first are the ones you’re selling. That’s why it can make sense to specify.

So far, all my INCY is short-term. But come April 25, the first shares I bought, at $2.09, will go long-term. So last Thursday, I didn’t want to sell my $2.09 INCY shares and be liable for tax on a big gain (especially as, in just a few months, that gain will qualify for lighter, long-term gain tax treatment) – I wanted to sell the shares I bought at $6.90 just a few weeks ago and be liable for tax on a small gain.

Different brokers have different systems of “specifying” the tax lot you are selling. In the days of rotary phones, you would call your broker and just say, “Hey, please sell 200 shares ‘versus purchase October 12, 1975’ and your printed confirmation slip would arrive in the mail noting ‘VSP 10/12/75’ in case the IRS ever wanted to see it. Many full-service brokers still work that way. Others, like Fidelity, automate the process (so it’s easier and much cheaper). Ameritrade lets you make the trade on-line and then either call a human to specify the lots you sold or email your instructions through their on-line messaging page.

It’s not too late to realize some tax losses for 2009 to lower your income tax. Then again, because so many folks have been selling for this purpose – driving some low-priced, thinly traded losers down even further – it might be smarter to wait. We may see quite a bounce next week once the tax-selling pressure is removed (and some tax-sellers, having taken their losses in November or December and waited the requisite 31 days to avoid the “wash-sale” rule enter buy orders to reestablish their positions). This well known pattern – a New Year bounce in stocks killed the previous year – is the well-known “January effect.” But because it is well known, a lot of people try to take advantage of it, beating the January crowd by buying beaten-down shares in late December. Which could leave you at the station waiting for the January effect, not realizing that it came early and has already passed you by. That it has already passed you – “Bye!” That it has already passed you – don’t buy. See what a challenging game this is? Sometimes, for some stocks, the January effect works in January, sometimes in December, sometimes not a all.

VSOP

And we’re back to eggnog.