by Joe
on January 28, 2008
A short sale of one’s home is different than we use the term ‘short sale’ when referring to stocks. When you sell a stock short, you sell a stock you do not own, and hope it goes down so you buy it back at a lower cost.
A short sale of a house is when the sale price is not enough to cover the mortgage balance and the bank just accepts the sale price forgiving the balance owed. I wrote back in November that the unfortunate seller still had another issue. He had to pay tax on the forgiven amount. Now, thanks to the Mortgage Forgiveness Debt Relief Act of 2007, there is a three year exclusion for this situation, and no tax is due.
JOE
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by Joe
on January 25, 2008
Well, the truth is, my head is still spinning.
Of course Bernanke must be a smart guy, and I have to acknowledge that too much was already in play at the beginning of his term. Watching Maria Bartiromo interview Greenspan and I was floored at his lack of awareness regarding the quantity and quality of the subprime mortgages there were out there. So I think Ben came in to this as an accident waiting to happen.
Given that it takes X months for a rate drop to have any impact on the economy (economy, not the market) we will likely still have a bagel, but as the cheap money once again floods the market, it may be short lived. As far as the 3/4% drop, I think that was a sign of weakness and panic, and the market reflected that.
In a few years this should be seen as any other dip, a buying opportunity. And the next cycle up is where I shift allocation to the mix I’d have at retirement, as I’m looking 5-7 years out.
Enjoy the weekend,
JOE
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by Joe
on January 22, 2008
In 2008, the (long term) capital gains rates dropped. If you are in the 10% or 15% marginal bracket, your capital gain rate drops from 5% in 2007 to 0% (yes, zero!) from 2008-2010. For those in the 25% bracket or higher, the rate remains 15%. In 2011, these rates revert back to the pre-2003 levels of 10%/20%. See the charts at Fairmark to understand what bracket you fall into. As always, one should not let the tax tail wag the investing dog, it’s just good to know how these laws impact your investments.
JOE
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by Joe
on January 21, 2008
If you haven’t read it recently, read the I have a Dream Speech.
Enjoy the day.
JOE
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by Joe
on January 18, 2008
A quote from “The West Wing”:
Larry: “If the economy is heading into a recession–”
Josh: “No, no, no. We don’t ever use that word around here.”
Ed: “What word? Recession? …What should we call it then?”
Josh: “I don’t care. Call it a boat show or a beer garden or a bagel.”
Larry: “So if it is a… bagel, the Fed thinks it’s gonna be a mild bagel.”
I think that’s the path we are on, a mild bagel with a risk of renewed inflation concerns. The subprime meltdown or whatever you wish to cause the current crisis, has caused liquidity to dry up. The Fed, although a bit late, will need to drop rates and pump money into the system. This may very well pull us out of the, er, bagel, but it will touch off a bit of inflation. Just my thoughts on this. Enjoy the weekend, don’t lose any sleep over the market.
JOE
Edit – If you go to Google and search on “mild bagel” (I’m feeling Lucky) you get my blog.
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