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Archives for April 2012

Income Investors: Be Not Afraid

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The Problem Without congressional action the Bush tax cuts will expire in 2013. Expiration would lead to higher income taxes for all brackets, and lead to dividends being taxed at marginal income tax rates for middle-and upper-income filers. The potential for higher income tax rates on dividends is scaring many income investors. These investors are wondering if it is time to sell dividend stocks and buy non-dividend payers. The short answer is no. Compromise on the Way The President is pushing to keep income tax rates the same for all but the top tax bracket, and pushing to keep … [Read more...]

The Riches Your Family Deserves

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If you know how compound interest works, you’re in good company. Einstein referred to it as the eighth wonder of the world. Compound anything at 10% for 60 years and you have 300 times more than what you started with. Do that with your money and you’re a genius. Time and money are the key ingredients in this magical formula. Unfortunately, you usually don’t have money when you’re young, and you have less time when you’re older. Compounding for 20 years—a long time, no doubt—at 10% gives you just over 6X your money. But it’s not until years 40 (45X at 10%) and 50 (117X at 10%) when … [Read more...]

A Dubious Tax Proposal

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President Obama is on the campaign trail promoting the Buffett Rule that the Senate will likely vote on in coming days. The Buffett Rule would slap a minimum tax rate of 30% on anyone who makes more than $1 million per year. Billionaire Warren Buffett came up with the idea. Apparently, he was disturbed by the fact that he pays a lower tax rate than his secretary. Why Buffett is focused on his rate rather than the $7 million he forked over to Uncle Sam is, well, confounding, but I’ll come back to that. If implemented, the Buffett Rule wouldn’t even begin to make a dent in the budget deficit. … [Read more...]

Facebook’s Fatal Flaw Exposed

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Has he gone mad? Mark Zuckerberg, Facebook’s CEO announced this week that his social networking company is buying Instagram. Facebook is paying $1 billion—a 100% premium to the company’s valuation only one week ago. Instagram is the creator of the identically named photo sharing / editing app for Apple and Android mobile devices.. Instagram was founded by two twenty-something Stanford grads about 18 months ago. The company only has about a dozen employees and by all accounts it generates almost no revenue. I am no Instagram expert. I didn’t even know the company existed until this week. But … [Read more...]

Jobless Claims Spike: Will the Fed Overreact?

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According to today’s report, initial claims for jobless benefits spiked to 380,000, the highest since January (See chart below). Compounding the fear about the recovery in jobs was the less than stellar growth logged in payrolls last week. Only 120,000 jobs were created in March, substantially underperforming average economists’ estimates which ranged closer to 200,000. Other economic data contradict the recent bad news. GDP is growing around trend, cars a selling fast and sentiment is trending upward. It’s safe to say that the economic data are mixed. Also mixed is the interpretation … [Read more...]

Hearts of Gold

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Kids are sponges. They remember what you tell them about saving money. They’re also like jukeboxes when it comes to singing back songs. But they might not always understand what they’re singing about—take, for example, “I made enough money to buy Miami / But I pissed it away so fast” from Jimmy Buffett’s “A Pirate Looks at 40.” Understanding some scenarios comes with age. Imagine if you never lost money in the stock market. When kids save money, they’re not worried about the market—they’re too busy counting their cash. They count it again and again and again. Then they tell you how much … [Read more...]

What We’re Reading 4-13-12

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’Fortune 500’ of 1812 Shows U.S. Banks’ Early Influence, Richard Sylla and Robert E. Wright, Bloomberg Surprise! The 1% Are Paying Their Fair Share, Gene Epstein, Barron’s Who Deserves Credit for the Improving Economy?, Kevin Warsh, The Wall Street Journal Tiny porphyrin tubes developed by Sandia may lead to new nanodevices, Phys.org Strategies to Max Out Social Security Benefits, Glenn Ruffenach, SmartMoney … [Read more...]