Time To Get Out Of Market: Layoffs Spread Far And Wide, Capital Gains Taxes Will Skyrocket, JC Penny Report A 26.1% Drop In Same-store Sales, Greek 5bn Bond Expires Next Friday And No Solution Yet, And Bankers About To Be Arrested In LIBOR CASE
Earlier today, Twitchy related some heartbreaking stories of small business owners laying off workers to avoid the economic impact of the Obamacare tax that isn’t a tax. Comedian Jon Lovitz, a small business owner himself, was no barrel of laughs either as his timeline filled with stories of impending downsizing. So, what about those big corporations? Boeing’s defense division announced yesterday it would cut 30 percent of management staff, and the company was not alone, we’re learning.
Come Jan. 1, you can kiss those 0 percent long-term gains tax rates goodbye. Instead, there will be a minimum 10 percent federal tax on long-term gains, with the cap raised from its current 15 percent to 20 percent.
Then there’s the Medicare contribution tax to consider. High-earning taxpayers will see an extra 3.8 percent levied against net investment income, including long-term capital gains –– bringing the highest possible tax rate on gains to 23.8 percent.
Here’s how Christian recommends finishing out the year to your advantage:
Make big sales before Dec. 31. This makes sense if you’ve owned assets for longer than a year –– say, stocks, or a vacation home –– and stand to make a big gain by selling. “Ditto for the sale of a main home if the taxpayer expects the gain to substantially exceed the $250,000 home-sale exclusion amount ($500,000 for joint filers),” Christian says.
Sell promising stocks, then buy them back. This is a tricky maneuver but can play to your advantage if you time it right. “If a taxpayer owns appreciated stock outright –– not through a tax-deferred retirement account –– that the individual has owned for more than a year and wants to lock in the 0 percent to 15 percent tax rate on the gain, but thinks the stock still has plenty of room to grow, he or she should consider selling the stock and then repurchasing it,” Christian suggests.
Factor in your personal financial timeline. Keep in mind that selling and buying back stocks to take advantage of lower tax rates today could wind up costing more down the line. “If capital gain rates go up and a taxpayer sells the repurchased stock down the road at a profit, the total tax on the 2012 sale and the future sale could be lower than if the individual had not sold in 2012 and had only made a single sale in the future,” Christian says.
“It might not make sense to pay the tax now –– assuming the taxpayer is not eligible for the 0% tax rate –– if he or she does not expect to sell the stock in the next several years or plan to hold onto the stock to pass on to heirs.”
Let’s not make this more complicated than it truly is.
From The Reformed Broker:
Let’s not make this more complicated than it truly is – it is a Fiscal Cliff at the current moment.
It is not a Fiscal Slope or anything gradual. I actually wish they’d call it a Fiscal Brick Wall because that’s what it will actually act as upon investable assets.
If there is no compromise, the U.S. economy absolutely will slam into a wall. The smart money, however, would not be placed on that scenario. It is unlikely that anyone on either side wants a repeat of last year and the more obstinate wing of the GOP that started the whole episode has just been neutered.
But let’s get back to the Cliff’s impact, should we go over it…
Now there is a new meme going around that some of the more prominent bloggers have repeated, wherein we hear about how “the changes don’t all take effect at once” and “this whole thing is just like Y2K” and “actually, it will probably have very little effect on the economy at all.”
The bloggers who are repeating this are technically correct. But they tend to be either journalists or economists, and not market people necessarily.
And so I think that here’s what they miss:
1. What the fiscal cliff’s actual impact on the economy will ultimately be is not the point, it is the…
Eurozone leaders reach across to the rescue of Greece, after the failure of international lenders to bridge their differences on how to reduce the growing Greek debt, which pushes the country close to bankruptcy given the debt repayment obligations amounting to 5 billion euros ending next week.
The company hopes to finalize the new program, which prolongs the rescue of Greece by 2016, Eurogroup meeting in Brussels on Monday, November 12.
The potential deal would release the installment of the loan of € 31.5 billion in Athens “desperately” waiting to be disbursed.
Greek Aid Payment Call Won’t Be Made Next Week, EU Official (Bloomberg)
At the moment, we’re looking at the third straight day of soggy, ugly markets.
Europe is red across the board.
Italy is down 0.5%.
Germany is off 0.4%.
Spain is down 0.6%
This comes after a night in which the Nikkei fell 0.9%.
This week has seen a swirl of hard to read headlines. People are supposedly worried about the fiscal cliff, and Greek/Spain fears have flared up. And of course there’s been the election, which of course has caused people to reassess and so forth.
Just out from Bloomberg:
- RBS, UBS TRADERS SAID TO FACE ARREST WITHIN MONTH IN LIBOR CASE
Note the word “traders” – not CEOs, not COOs, not General Counsels, not Managers, not Supervisors… Traders. Because remember: it was a scheming 28-year old Frenchman that was the mastermind behind Goldman’s CDO fraud for years. Nobody else. Just him. That said, we are looking forward to the latest minimum prison reality TV show: “How Many Cigarettes* For A Bollinger?”
Escape velocity is 4 to 5 percent, but the growth trend now is about 1.5 percent, Rosenberg says. The economy expanded 2 percent in the third quarter.
If the government dives over the fiscal cliff, the economy will enter a recession next year, he says. “The only real question is how deep.”
Rosenberg favors biting the bullet now to get the deficit under control rather than waiting until later when the red ink is even bigger.
“The longer we kick the can down the road, the more we follow on the road toward Europe,” he says.
More hard selling for the Euro, which just keeps pushing lower.