JoeTaxpayer

Yet another term being thrown around the business news is Cap and Trade. What does this mean? The Cap is the limit that large companies will have on the amount of greenhouse gas they can emit. The Trade is that since some companies can reduce their emissions more cheaply than others, a market will be created where companies can trade their right to pollute.
Sounds pretty straightforward. But as with many new taxes, there’s an unintended consequence. The added cost these companies will have to bear will be passed along in increased cost to the consumer. As the Congressional Budget Office estimates, The middle 60% of income earners will see an increase in their expenses ranging from $880 to $1500 per year. This is the group our president promised not to tax more heavily. This isn’t a tax directly on the consumer, but one that will have the same impact.

I’ve always respected Vanguard founder Jack Bogle, he is considered to be the “Father of the Index fund” and has saved investors many billions of dollars in fees by creating low cost index funds, starting a new industry within the financial services market.
The natural follow on to index mutual funds are the ETFs which are now also commonplace. Vanguard recently announced that if you hold a Vanguard Index fund for which they also offer an ETF, you can now swap the fund for the EFT with no tax consequence, and only a nominal fee ($50). Here is the Q&A from the Vanguard site:

Can I convert conventional Vanguard mutual fund shares to Vanguard ETFs?

Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Bond ETFs do not allow the conversion of bond index fund shares to bond ETF shares of the same fund.)

Vanguard will charge $50 for each conversion. (This fee is waived for Flagship clients.) Your brokerage provider may charge an additional fee for this service. For more information, contact your brokerage firm, or call 866-499-8473.

Once you convert to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs.

When the market is up from where you bought in, this can let you make the swap without having to declare capital gains. In this down market, it can benefit you by not forcing you to declare a loss when it may not be advantageous to do so.

If you are looking for a broker check out Craig Ford’s How to Find an Online Discount Stock Broker, a great read.

Joe

A few interesting posts this week.

First I’d like to share a site titled Serene Journey. While not a Financial Blogger, I found this site through Sherri’s tweets and have found her posts great reading. This past week, she offered two posts titled Who Me? Worry? You Bet! Part 1 discusses why we worry and why worrying is no good, part 2 follows with strategies for how to stop worrying and having consideration for a spouse who worries. As with other articles I’ve read here over the part few weeks, I always leave her site thinking about how I’d make some change, for the better, in my own life. If every aspect of your life is absolutely perfect, you may not enjoy this blog, but for the rest of us, Serene Journey is a great find.

From Lazy Man and Money comes Save Money on Groceries (20 Tips inside!) These tips are grouped into four categories, General, Plan Ahead, Buy in Bulk, Get the Best Deals, and Change Your Eating Habits. Some tips are similar to those I’ve discussed in my Frugal Friday series, such as buying in bulk, and knowing the cost of things you buy to recognize a deal. Other tips hadn’t occurred to me, such as keeping a laminated spreadsheet of your refrigerator contents to use/reuse as a shopping list. Cool idea, just one of many you’ll find at the Lazy Man’s site.

This week, I also read posts regarding credit cards, a topic that gets addressed on a near daily basis as credit cards play such a role in our lives. Today, I received a new Citibank/Amex card, with a note telling me to destroy the one I now had. It seems the card was somehow compromised at a vendor, but when I called to activate the new card, Citibank would not tell me who. At The Digerati Life, we find a post discussing how Advanta closed their credit card account as Advanta shut down new lending. Clever Dude shares how Capital One (fortunately, not in my wallet) raised the rate of a close family member from 5% to 15%, with Capital One telling her on a phone call,”it’s nothing that you did. The company decided to increase across the board due to the economy. Ouch. Lastly, Mirana Marquit posting on her blog Yielding Wealth asks “Credit Card Bailout for Consumers?” It seems that many who are late on their payments have gotten away with making an offer when the call comes. In some cases for just fifty cents on the dollar (yes in plain english, half).

I may not have mentioned, I am now on twitter where there tends to be some random dialog, much of it financial. Follow me @JoeTaxpayerBlog. I have also continued my frequent visits to help answer questions at Moolanomy Answers.

I wish you a great week ahead.
Joe

Hmm, seems like yesterday Hillary was taking a crack at this.