Thursday, March 8, 9:30 a.m. It’s that time of year again. IRS wants what’s coming to them, but not a penny more. Here’s my best advice. Don’t prepare your taxes yourself. Have an expert do it. I’m surprised by the number of investors I talk to who prepare their own taxes, and are convinced they [...]
Thursday, March 8, 9:30 a.m.
It’s that time of year again. IRS wants what’s coming to them, but not a penny more.
Here’s my best advice. Don’t prepare your taxes yourself. Have an expert do it.
I’m surprised by the number of investors I talk to who prepare their own taxes, and are convinced they don’t miss anything. I would not argue. It’s their decision and only they know how much they know. But I do wonder how they can be confident they haven’t missed anything given the complexity of the tax code and the constant changes.
I was reminded of that by the latest issue of Investor’s Edge, edited by my friend Joseph Shaefer, founder of Stanford Wealth Management LLC.
Joe is on a bit of a rant about the IRS tax code.
He points out that the U.S. Income Tax Code is 13,458 pages long, seven times the size of the Bible. It includes 727 potential forms just for the investment section of your tax return. And it’s not a static publication, but is revised each year as Congress and the IRS see endless ways to make ‘improvements’.
Among some of the changes this year, Joe points out there is a new 6-page form (form 8949)that requires you to provide more details on your capital gains and losses prior to transferring them to Schedule D. And you must fill out a separate form 8949 for each of three categories, those “reported on Form 1099B with basis reported to the IRS”, those" “reported on Form 1099b but not reported to IRS.” and those “for which you cannot check box A or B”.
Joe also notes a change in the ‘30-day wash-sale’ rule this year that can effect many investors. The original 30-day wash-sale rule came into play near the end of each year. It was to prevent investors from selling a holding at a loss near year-end solely for tax purposes and then buying it back after the first of the year. Without the rule, an investor who had sold a holding with a profit earlier in the year, could use the loss to offset the profit, even if they were taking the loss only for that tax purpose and then bought the holding back again in January. Under the original wash sale rule the IRS would disallow the loss, allowing it to only be used to lower the cost basis of the new purchase of the same holding.
But this year, concurrent with the 2011-forward “cost-basis reporting” regimen, apparently the rule will be applied through the year, which, as Joe puts it “raises hell with dollar-cost averaging. . . . If you bought some shares in 2009, more in 2010, and more say in July, 2011, and then sell some in August at a loss, you may have just violated the wash-sale rule.” Why? Because even though you may have elected FIFO accounting with your brokerage firm, the IRS will not accept that you are selling shares bought years ago. Quoting from the rules, “The IRS does not allow specific identification when applying the rule.”
We read all the time about how the 1% don’t pay near as much in taxes as a percentage of their income as the rest of us. I wonder if the difference would be as great if they did their own taxes rather than leaving it to their tax-specialist accountants and attorneys.
Can Jobs Report Prevent a Correction?
Markets bounced back from Tuesday’s rout yesterday, and although off earlier highs this morning, are looking to try to bounce again today.
The catalyst seems to be yesterday’s ADP jobs report, which was that there were 216,000 new jobs created in February in the private sector. As always, the important report will be the Labor Department’s Employment Report tomorrow morning, which includes private and government jobs.
But if the ADP is right that 216,000 private sector jobs were created, tomorrow’s report may come in better than the consensus forecast of 213,000 jobs. But that Labor Department report has a reputation for most often coming in with a surprise in one direction or the other.
So we shall see.
Will decline to 50-day m.a. be all she wrote?
When I began warning of the risk of a short-term correction of 5% to 7%, the market’s short-term overbought condition above 50-day moving averages was one of the reasons I expected a correction.
With the declines of the last month in indexes like the Russell 2000 and DJ Transportation Avg., and the last few days in the rest of the indexes, the question is whether the 50-day moving averages will be support that will halt the correction.
The Dow and NYSE Composite may have provided some hope in that regard. They came down close to their 50-day moving averages and bounced yesterday.
But then others have quite some distance to go to reach their 50-day m.a.
And still others raise the question of whether the 50-day ma. will be support. For instance the DJ Transportation Avg., which often leads the rest of the market, has already broken decisively beneath its 50-day m.a.
To read my newspaper column ‘Is This As Good As it Gets For Now?’ Click here.
Yesterday in the U.S. Market.
A partial bounce back from the previous day’s rout.
The Dow closed up 78 points or 0.6%. The S&P 500 closed up 0.7%. The NYSE Composite closed up 0.7%. The Nasdaq closed up 0.9%. The Nasdaq 100 closed up 0.7%. The Russell 2000 closed up 1.1%. The DJ Transportation Avg. closed up 0.5%. The DJ Utilities Avg closed down 0.1%.
Gold closed up $13 an ounce at $1,686.
Oil closed up $1.52 a barrel at $106.22 a barrel.
The U.S. dollar etf UUP closed down 0.1%.
The U.S. Treasury bond etf TLT closed down 0.8%.
Yesterday in European Markets.
European markets also bounced back some yesterday. The London FTSE closed up 0.4%. The German DAX closed up 0.6%. And France’s CAC closed up 0.9%.
Subscribers to Street Smart Report: There is an in-depth U.S. Market Signals and Recommendations report in the subscribers’ area of the Street Smart Report website, from yesterday. There will be an in depth ‘Gold, Bonds, Dollar’ report on the weekend or before.
Asian Markets Bounced Back Some From Losses in Previous Sessions.
The Asia Dow closed down 1.2% Sunday night, down 1.5% Monday night, down 1.2% Tuesday night, but bounced back 1.1% last night.
Among individual markets last night:
Australia closed up 0.7%. China closed up 1.1%. Hong Kong closed up 1.3%. India closed down 0.2%. Indonesia closed up 0.6%. Japan closed up 2.0%. Malaysia closed up 0.2%. New Zealand closed up 0.3%. South Korea closed up 0.9%. Singapore closed up 1.9%. Taiwan closed up 1.0%. Thailand closed up 1.3%.
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European markets are off their earlier highs but still up sharply this morning. The London FTSE is up 1.1%. Germany’s DAX is up 1.72%. France’s CAC is up 1.6%
Oil is up $0.13 a barrel at $106.29.
Gold is up $10 an ounce at $1,694 an ounce.
This Morning in the U.S. Market:
This week is another fairly heavy week for potential market-moving economic reports, including Factory Orders, the ISM non-mfg Index, the ADP Jobs report, and The Big One, the Labor Department’s monthly employment report for February. To see the full list click here, and look at the left side of the page it takes you to.
Monday’s reports were that Factory Orders fell 1.0% in January. But the ISM non-mfg Index, rose to 57.3 in February from 56.8 in January, considerably better than economists’ consensus forecast of a decline to 55.5. Globally, it was reported yesterday that the eurozone PMI Index declined to 49.3 in February versus the consensus forecast of 49.7. A sub-50 reading means business activity shrunk in February. And the U.K. PMI fell to 53.8 in February after providing some encouragement by rebounding to 56 in January.
Yesterday’s reports were that 4th quarter Productivity was revised up to 0.9%. And the ADP jobs report was that there were 216,000 new jobs created in February in the private sector.
This morning’s report, also related to jobs, was that new weekly unemployment claims rose 8,000 last week to 362,000.
Our pre-open indicators have come off earlier highs but are still up quite sharply.
Our Pre-Open Indicators:
Our pre-open indicators are pointing to the Dow being up 75 points or so in the early going.
To read my weekend newspaper column ‘Is This As Good As it Gets For Now?’ Click here.
Subscribers to Street Smart Report: There is an in-depth U.S. Market Signals and Recommendations report and a hotline in the subscribers’ area of the Street Smart Report website, from yesterday. There will be an in depth ‘Gold, Bonds, Dollar’ report on the weekend or before.
I’ll be back with the next regular blog post on Saturday morning, as usual later than the week-day reports, probably around 11:00 a.m.
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