Orangepants

Wow - up to 45%. It certainly pays you to be so diligent. I have a steep learning curve ahead of me if I could even aspire to such a comprehensive understanding of tax rates, dividends and capital gains. Still trying to get my head around options.

Told OH I'd made a 51% gain on the AMBS stock this week - he asked when he could order the Lamborghini!

Michael

Basic Rules to Keep Taxes as Low as Possible for Incomes Below $450K

• Keep interest income, non qualified dividends, short term capital gains, and an other income that will be taxed as normal income to a minimum in taxable accounts.
• Keep foreign taxes paid to a minimum in non taxable accounts.
• If you retire early and your income is low, you probably should rollover your 401K, traditional IRA, etc. to a Roth IRA and you may be taxed at the 0%, 10%, and/or 15% marginal tax brackets instead of 25%, 28%, 33%, and/or 35% if the rollover occurred while you were working and the taxes will also be higher if the rollover occurs after you start receiving social security benefits.
• Try to rollover the 401K, traditional IRA, etc. over several years to keep your tax rate as low as possible.
• You may want to delay receiving social security benefits until you complete the rollover.
• If you completed your rollover to a Roth IRA, are not yet receiving social security benefits, and have taxable investments, you may want to take some of those long term capital gains so that you'll be taxed at the 0% and 15% marginal tax brackets.
• Once you start receiving social security benefits, taxes becomes more complicated since the code is written so that someone with only social security benefits and a small amount of other income will not be taxed but as income rises, eventually 85% of your social security benefits will be taxable income.
• If you work until your start receiving social security benefits, you may possibly want to take some long term capital gains while working since it will be taxed at the 15% marginal tax rate. However you still have to be careful so that you don't take too much long term capital gains that it pushes you into Alternate Minimum Tax (AMT) which doesn't affect the long term capital gains rate but it causes deductions and exemptions to be eaten away.

Michael

One of the companies that is on the big list of value stocks in the article is Seagate Technology with a trailing p/e of 13 and a forward p/e of 11 and was at $10 per share about 3 years ago, had a p/e of 5, and was paying a 6% dividend at that time. I seriously considered buying that stock (I was following it daily) when it was at $10 per share since Seagate had purchased many of the disk drive manufacturers and Western Digital had purchased the remaining disk drive manufacturers where each had about 40% of the disk drive market. Samsung, Hitachi, and many other disk drive names were all owned and made by Seagate Technology or Western Digital.

I was so close to buying the stock but wondered why the p/e was at 5 and the price of the stock was primarily downward for the previous two years which normally means there is something wrong with the company. Since I am an engineer and analysts were mostly recommending a hold or a sell, I assumed the reason was probably that disk drives are old technology that constantly keep driving the price per GB downward and the analysts must have information that I don't have about the company's future profit potential. While I was trying to make a decision, the price started rising very quickly and I felt it was too late when it hit about $16 per share but now it is $60 per share.

3 Year Chart of Seagate Technology

This month, 2 more analysts upgraded Seagate Technology to a "Strong Buy" but now I have real concerns about Seagate Technology since SSD (Solid State Drives) are starting to take business away from the hard drive manufacturers and expect that SSD drives will have about 10%-20% of the market in a few years. Hard drives will likely remain dominant for the foreseeable future especially for servers since they have a much larger capacity at a much lower cost per GB and are more reliable than SSD drives in that environment but losing 10%-20% of the market can really hurt profits. Seagate and Western Digital are far behind other SSD drive manufacturers such as Micron Technology (Crucial brand) and Samsung. Micron Technology is the top pick as a value stock in the article and is highly regarded for it's technology and pricing by DIYers. However Micron Technology's share price has risen about 700% in the past 2 years so I'm not sure how much further it can go up since it is now a $35 billion company (market capitalization) and maybe it can possibly double to $70 billion but I doubt it can go much further in the near future since it is currently not anywhere near the size of Intel which has a market capitalization of $170 billion.

3 Year Chart of Micron Technology

If I would have bought Seagate Technology when I wanted to but was only cautious because of the analysts recommendations, I would have profited 600% in three years. Western Digital also rose about 400% during the same time period.

3 Year Chart of Western Digital

The analysts did a similar thing with HP by recommending buys when HP was at $40 per share and while it dropped, they still recommended a buy until it nearly hit bottom at $12 per share and then they downgraded HP to a hold or sell. Then HP started climbing and the analysts kept the hold or sell recommendations on the stock until it hit about $30 per share and slowly they started to recommend buys.

I'm starting to believe that many of the analysts are the dumbest and/or most incompetent people in the world and if they recommend a stock, you should be more cautious than if they recommend a sell.

Michael

Options are really tough and risky and that is why brokerages don't let everybody play the options game since they can be held financially responsible for a clients losses if they let an inexperienced investor with limited financial resources play. They have levels that they allow depending on your investing experience and your finances. The simulator is actually not that great since it seems to allow you to buy or sell the option based on the last trade instead of monitoring current bids and asks so it gives you a false sense of what will really happen when you try to buy or sell options. I suspect the brokerage doesn't have the ability to monitor the bids and asks that are on the CBOE (Chicago Options Board Exchange).

CBOE - Option Levels

Also options aren't straight commissions of $9.99 but are $9.99 plus $0.75 per option contract and an exercise fee of $19.99 if brought to expiration. Therefore a minimum of $21.48 for one contract to buy and sell (a round trip) so that commission has to be figured into the cost. One contract (100 shares) at $2 per share will require you to exceed the strike price by $2.21 to break even so playing one contract is not a good idea. Playing 10 contracts makes the break even point at about $2.03 above the strike price. If you are playing options that cost $0.06 a share on the final week of expiration, the commission for a contract of $0.75 each to buy and sell is 1 1/2 cents per share and the base commission of $9.99 each to buy and sell so that would be about another $0.20 per share if only one option is bought so you you'd have to exceed the strike price by about $0.28 to break even. Therefore you need to buy and sell hundreds of contracts when buying a $0.06 option so that the break even price is only about $0.08 above the strike price. Even though options are very leveraged, you have to risk thousands of dollars per trade to have a reasonable chance at making money. I previously said it was a zero sum game but it is a negative sum game due to commissions. Trading long common stocks is a positive sum game over the long term since stocks tend to rise and everybody can be a winner.

When trading options, time is your enemy (as time passes, the option price drops). You can use this options calculator to estimate what an option price with an expiration date and a strike price for any stock should normally be and you see how time affects the price of an option. For example you can type in GE and it will setup the table for you and then you chose the strike price and the expiration date to determine what that put and call option should be normally trading for. Even the ex-dividend date and amount of the dividend play a role in determining the price since when the ex-dividend date occurs, the stock price drops and the volatility of the stock play a major role in determining the expected price. Once you know what the price should normally be, you then try to buy it cheaper and sell it for more but that is the normal price for only the moment and 20 minutes later, the price of the stock may have moved up or down making the calculation inaccurate. So individual investors are possibly trading against high frequency trading platforms that are constantly monitoring the stock price and calculating expected option prices for different strike prices.

CBOE - Options Calculator

I think what happens when running live is that when you place a bid, the brokerage just places the bid on the CBOE and when and if there is an ask that matches up, the brokerage is notified that the trade was completed with a tag indicating it is your bid.

Michael

Hedge Funds

According to George Soros, the glory days of Hedge Funds are behind us since investors are no longer willing to take the risk of high leverage since they got burned badly during the market crash of 2008 and without the high leverage, hedge funds can't beat the market and still collect their high fees for managing hedge funds.

Ever since the crash, hedge funds have overall underperformed the market with the exception of SAC Capital. A normal hedge fund charges 2% management fee plus 20% of the profits plus expenses with expenses as high as 10% of an investment but SAC Capital was charging 5% management fee plus 50% of the profits plus expenses. SAC Capital was able to charge those fees since it was outperforming other hedge funds by 3x or more. The general consensus by other hedge funds was that SAC Capital was able to turn those profits with "insider trading" information and eventually the justice department indicted and convicted many traders from SAC Capital, shut down SAC Capital, and fined SAC Capital but couldn't prove a link to the owner Steven Cohen.

SAC Capital is still open but only for investing the $11 billion of Steven Cohen's money. Since the beginning of the year, SAC Capital had a return of 9% up to July 30th well outperforming the 2.5% average of hedge funds and that gets play on "Bloomberg News".

Steven Cohen Still Beating Hedge Funds After Shutting SAC - Bloomberg

That sounds pretty good but if you compare it to the S&P500, the S&P500 retuned 7.54% plus paid dividends during that same period of time so SAC Capital probably slightly outperformed the S&P500 but SAC Capital probably doesn't charge him a high management fee or a share of the profits. However from an after tax perspective, the S&P500 most likely outperformed SAC Capital. SAC capital primarily invests short term and if it is in stocks, Steven Cohen likely pays normal income tax on his investment and if the investments are in futures, those have a special tax break of being taxed at 60% long term capital gains rate and 40% short term capital gains rate 100% taxed at fair value at the end of the year whether the futures are sold or not. Even if the investments were in futures, 100% of the profits for the year will be taxed at about a 26% federal tax rate for billionaires where as only the dividends for a tracking ETF will be taxed at a maximum of 15% and no tax if it is not sold during the year.

John Paulson (Paulson and Company Inc. hedge funds) was considered a genius since he shorted sub prime mortgages in 2007 making a lot of money for himself and investors. However he didn't predict the market crash and got burned badly where only 80% of his funds are now above the high water mark but the S&P500 rose above the high water mark in early 2012 plus paid dividends. He also opened a new gold hedge fund which is which was down 28% at the end of 2013. All the gold funds does is invest in the GLD ETF trying to time the rise and fall of gold prices. Even with a terrible record, Paulson gets good reviews from Forbes.

John Paulson - Forbes

Since the crash of 2008, the average hedge fund hasn't beat the market during any of the years following the crash. As you can see, it is very hard for the professionals to beat the market without insider trading or high leverage but it is very surprising that the hedge fund industry is still very large but still carries a high risk and has performed very poorly.

The only reason that I can figure why the hedge fund industry is so large is that people with millions of dollars to invest have no more knowledge about investing than a novice investor and they go to an investment advisor who directs investments to hedge funds for a very good commission but the millionaire doesn't even know if their investment is giving a good return or not.

Hedging

Hedging is the act of playing both sides of the market or a stock (the long and the short position).

Hedging With Options

One way to hedge is to buy a "put" option on a stock you own. If the stock price rises, the "put" option becomes less valuable and if the stock price drops, the "put" option offsets some or most of the losses of the drop in stock price but whatever happens, maximum potential returns diminish as compared to not hedging.

Often an investor may believe that the stock price may fall in in the very near future but doesn't want to sell the stock (especially if it will create short term capital gains) and therefore buys a "put" option to protect his investment if the stock price falls. However buying a "put" option on a stock that you own causes dividends to become non qualified.

Volatility Index

The volatility index is a complex mathematical formula based on calls and puts. Normally if the volatility index rises, this indicates that investor sentiment is becoming more negative and if it drops, investor sentiment is becoming more positive. A volatility index below about 15 usually indicates a very strong investor sentiment but once it gets above about 25, investors start to become very nervous.

Tracking Volatility: How The VIX Is Calculated (VXX,XIV,UVXY,VIXM)

The volatility index for the S&P500 is known as the VIX and is an option that can be traded. You'll notice in the following 1 month chart of the VIX, the VIX has been hovering mostly between 10-12 but over the past couple of days, it shot up and closed today at 17.03 as the market dropped.

VOLATILITY S&P 500 Index Chart - Yahoo! Finance

Therefore you can purchase "calls" or "puts" on the VIX if you want to try to predict which direction the S&P500 will likely go but unlike a stock a "call" option which rises when the stock rises, the VIX "call" option normally drops when the S&P500 rises and the more the call option drops, the more valuable it is.

Short Selling

What A Short Seller Is On the Hook For When A Stock Is Shorted (i.e. dividends, rights offerings, etc.).

Hedging with Shorts

Some investors short their own stock or an ETF to hedge against market movements. The main reason for shorting against your own stock is for tax purposes since there is nothing to gain and nothing to lose except the commission.

Naked Shorting and Naked Puts

Naked shorting and naked puts are not hedges but a bet that a stock or market will fall. Naked shorting can actually make a stock fall if there is enough investors shorting that stock. When there are a large number of shorts against a stock, long investors tend to get nervous and tend to sell their position causing the stock price to fall. If a company is trying to raise capital either by a floating of a stock or bond issue, investors tend to have little interest in buying the stock or bond issues and the stock can fall since the company can't raise capital that it needs.

General Electric Company (GE) Short Interest - NASDAQ.com

AcelRx Pharmaceuticals, Inc. (ACRX) Short Interest - NASDAQ.com

The tables for "short interest" in the above links are only updated twice a month.

If we look at the GE link for 7/15/2014, we will notice that there were about 58 million shares shorted out of a total of about 10 billion shares or about 0.06% of the shares outstanding and the average length of time that the short is held is less than 2 days. This probably indicates that the short is primarily being used as a hedge.

If we look at the ARCX link for 7/15/2014, we will notice that there were about 8 million shares shorted out of a total of about 300 million shares or about 2.7% of the shares outstanding and the average length of time that the short is held is about 9 days. Since the percentage of short interest is much higher than GE and the time held is about 5x longer, it is likely that most of the short interest are naked shorts with investors thinking that the stock will fall. Long investors get very concerned when the short interest hits 20% but even at a much lower levels, long investor concern heightens as the short interest rises.

Shorting ETFs

ETFs can be shorted much the same as stocks but many investors want to short ETFs but doesn't want to pay dividends, may want to short more than 1x but doesn't want to pay margin interest rates and/or the brokerage has difficulty finding investors that will to lend out their ETFs.

Therefore short ETFs were created but the ETFs are not actually carrying short positions but use derivatives to create the short. They use derivatives instead of actually shorting the ETFs since if they shorted the ETF, they'd have to pass on all those costs to the investor. However by using derivatives, the tracking is only fairly accurate for one day and tends to fall greater over a long period of time than the ETF would rise over that same period.

Inverse ETF Definition | Investopedia

The first link is a single short ETF against NASDAQ 100 ETF QQQ over a 5 year period and lost little more than 2/3rds of the investment and the second link is an ultra short (3x) ETF against the NASDAQ 100 and lost 96.3% of the investment during the 5 year period. Therefore you can see that these are not ETFs to hold but only to play short term market moves when you think the market will drop.

ProShares Short QQQ ETF Chart - Yahoo! Finance

ProShares UltraPro Short QQQ Stock Chart | SQQQ Interactive Chart - Yahoo! Finance

Summary

It is highly unlikely that you will use little or any of this information in your investment strategy but it helps you to understand why the market moves when often it is very difficult to understand why the market moves. CNBC always has a reason why the market moves but that is just Monday night quarterbacking. If there is good news and the market drops, CNBC will find a reason why investors are fearful and if it rises, then it is because of the good news. However the market normally moves in a specific direction when enough investors see a chance to profit. Many times the good news is too good to allow the bears to take control but other times, like the past 2 days, the good news (very good GDP growth and good job creation) can be perceived as bad news and then the bears take control. It is likely that in a few days, the good news will be perceived as good news and the bears will lose control and the market will rise again.

Shorting is not necessarily bad for the market. Without some degree of shorting, the market would likely continue to rise until a gigantic bubble occurs and then the market would collapse causing severe recessions or depressions at a regular interval. However excessive shorting can cause a stock with some potential to become insolvent before it has a chance to show that potential and can cause the market to crash much worse than it should causing businesses and consumers to lose faith in the market.

Michael

On CNBC today they had the CEO of TD Ameritrade on the show as a guest and someone criticized TD Ameritrade for making derivative trading too easy for the average investor. The CEO defended TD Ameritrade by saying that they educate their investors about the risks and have different levels of trading depending on the investors knowledge and finances.

The discussion got a little sarcastic when someone asked if a background check was done to make sure and the CEO responded that clients have to submit a disclosure form.

Orangepants

If we look at the ARCX link for 7/15/2014, we will notice that there were about 8 million shares shorted out of a total of about 300 million shares or about 2.7% of the shares outstanding and the average length of time that the short is held is about 9 days. Since the percentage of short interest is much higher than GE and the time held is about 5x longer, it is likely that most of the short interest are naked shorts with investors thinking that the stock will fall. Long investors get very concerned when the short interest hits 20% but even at a much lower levels, long investor concern heightens as the short interest rises.

So now I have to consider the short interest as well? This is getting complicated. So for DDD which I bought a couple of weeks ago and they missed their earnings last week - stock price has dropped 10%, I am guessing that this stock was shorted quite heavily last week but I wont know until TD +10? And if I'm reading it right, 1.38% of the outstanding shares are being shorted and are between 6 and 9 days.

Wasn't short selling prohibited in London recently?

So much to learn..

Michael

You are reading it wrong. DDD has 110 million shares outstanding and the "Short Interest" is 38 million shares which is the amount that was shorted on 7/15/2014 or about 36% of the shares outstanding. The daily volume is just the shares that were traded in and out of the short position daily over the 15 days.

DDD - Stock Quote for 3D SYSTEMS CORP - MSN Money

3D Systems Corporation (DDD) Short Interest - NASDAQ.com

DDD has been under a major "bear" attack since the beginning of the year (as can be seen by the short interest climbing since the beginning of the year) and the share price has fallen about 50% since then and the attack will likely intensify since the bears see another weakness with an earnings miss. HPQ was also under a "bear" attack when it dropped from $40 to $12 but HP is a very strong company and the "bear" attack created a lack of confidence among investors but HP was in no real danger of failing.

Does that mean that DDD is in trouble? Not necessarily since they are profiting (but not much at less than 1% of capitalization) but I'd have to look deeply into the financials and cash flow to be sure. Also I don't know what their business plan is and whether they need to borrow to produce the products that they want. Also there is a mistake for DDD on moneycentral.com for it's p/e which should be about 100 instead of 1.33 and forward p/e should be about 75 instead of 0.41 (unusual to see a mistake with p/e since it is very easy to calculate).

1 Year Chart for DDD

There are other web sites that have the percentage of "naked short sales" and "short squeeze rankings" but those are for premium members that pay a monthly fee.

I believe only Germany and France banned "naked shorts" in early 2009 to try to stop the market slide but by that time, "naked shorts" had very little to do with the collapse of the market. "Naked shorts" and rumors caused Lehman Brothers to declare bankruptcy when they could no longer keep paying expenses since other banks wouldn't lend Lehman Brothers money in the Libor market (bank to bank lending). Lehman Brothers was using the Libor market to borrow overnight money to pay expenses and when that dried up, it was too late to sell assets to try to keep the bank afloat so over the weekend, Lehman Brothers collapsed.

If you want to understand what caused the stock market to crash in simple terms, watch the following "great" PBS Frontline documentary.

Inside The Meltdown | FRONTLINE | PBS

There are many forces working against each other in the market including short interest, derivatives, pension funds, mutual funds, hedge funds, the economy, banks, earnings, growth, government policies or inaction, and the Federal Reserve. Some are positive and some are negative. Hedge funds became a big negative during the crash as they were heavily leveraged and "had to sell" since many were long in their positions and "margin calls" occurred. With so many shares dumped on the market by hedge funds and few buyers, the market collapsed. A "margin call" occurs when the investor's ownership of a security falls below a certain percentage. Typically individual investors can buy a stock for 50% of the value and borrow the rest but when their ownership falls below about 25%-35%, then a "margin call" will be made by the brokerage and if the investor can't quickly come up with the cash to bring the ownership level up, the brokerage sells the security. That is a 2:1 leverage but if the investor pay 50% of the value of the security and borrows the rest, the share price only needs to drop 25% to be down 50% on his/her investment with the investor owning 25% of the stock and borrowing 75%. For a hedge fund, a 2:1 leverage that an individual investor can get when purchasing securities would be considered low leverage (either can get much higher leverage with derivatives but hedge funds can normally get higher leverage with stocks than an individual investor).

Margin Call Definition | Investopedia

I have a "margin account" with TD Ameritrade but it is only for one reason. Settlement time for trading common shares is 3 days so I don't keep cash in my brokerage account but when I purchase a security, I initiate a transfer from my Capital One account to my TD Ameritrade account to pay for the security that I purchased. Since ACH transfers take 3 days, the account is settled when the transfer is complete and no interest is charged. I could do that without a margin account but if the transfer takes 4 days instead of 3 days, I forget to initiate the transfer, I make a mistake in the amount of the transfer, the brokerage may possibly sell one of my securities to cover the purchase (however the brokerage should notify me before they sell a security). The only time I paid interest was when I accidently used my TD Ameritrade checkbox to pay my property taxes and about 2 weeks later, I noticed that my cash balance in the TD Ameritrade account was a negative balance.

Since options have a built in leverage, TD Ameritrade doesn't allow for options borrowing even though my margin account says I can borrow 1/2 the amount for options that I can borrow for stocks. The reason for that is that if I borrow 100% to buy option contracts, I really didn't borrow the money against the options contract purchase but instead borrow the money against the stocks that are in my account.

Michael

Bulls vs. Bears

Many perceive the bad guys as the "bears" but it is most often the "bulls" that cause most of the problems in the market. In most cases, it is the bears that keep sanity in the market.

For instance, in the 1990s, almost everyone perceived that almost anything to do with high tech and the internet was a good thing to invest in and the bulls controlled the market. IPOs were coming out on a daily basis raising tens or hundreds of millions of dollars for research and development with founders and venture capitalists having paper values in the hundreds of millions or billions of dollars and when they floated the IPOs, the prospectus would indicate that "this issue is highly risky with little or no chance of making a profit for 5 years or more".

Hundreds of companies previously with a sound business plan jumped into the game and started investing in research and development in the internet but no longer had a solid business plan and didn't know if the money they were spending would lead to profits but they were rewarded with big increases in their share price even as their profits fell since the companies were perceived as "on the cutting edge of technology" which would eventually bring the companies large profits. Although it was considered a merger, it was AOL that purchased Time Warner for $164 billion since AOL was larger in market capitalization and the purchase price was the equivalent of the GDP of Switzerland at the time. By many, the merger was one of the biggest mistakes in corporate history and the following chart reflects that.

Time Warner Chart

The bears saw the fallacy of what was happening and shorted many of the companies only to lose their money as stock prices continued to climb but eventually the bubble had to burst when the vast majority of companies weren't producing any sellable product and few if any were profitable. When the market collapsed, founders, venture capitalists, and millions of people that thought they were rich discovered that they weren't rich at all and previously sound companies became insolvent and that spread throughout the economy as companies and individuals pulled back on spending.

Banning "naked short sells" would have only prolonged and exasperated the problem causing much more damage to the economy.

Was the trillions of dollars that was wasted worth it? The answer is probably "yes" but if the bears had gained control earlier, much of that wasted money would have likely been put to better use, the economy wouldn't have been as damaged, and Amazon, EBay, and many of the successful companies would still likely be around today and companies like Time Warner wouldn't have had to struggle with massive layoffs in it's core business and other sound companies wouldn't have become insolvent.

Since then, there has been much more of a balance in the high tech market with companies like Apple prospering as they developed products that consumers wanted and Google, Facebook, LinkedIn, and many other companies became public and prospered. There are still a lot of high tech companies that fail but for every ten that fails, one becomes successful. As far as DDD, is it overvalued? It hard to say but how long will it take or will it ever return $5 billion (it's current market capitalization) to it's investors?

Michael

DDD P/E Ratios

Apparently there was a temporary glitch since the DDD p/e ratios corrected themselves on msn money. P/E ratios change as the share price changes and is currently 134 and forward p/e is 41 which should be correct.

Steve_

So when does your book come out? Or is it out already???

Anyway I just wanted to post here because you need to be really careful as an expat living in the US, especially if you're in a non-immigrant category or you're planning on living abroad in retirement or whatever.

You can get into all kinds of dodgy situations with the IRS and the SEC. And tax authorities wherever you live. For example, the cost basis of capital gains. Buy in place A, move to place B, place A and B might tax you and there is no foreign tax credit. I.e. the IRS may well tax you on the cost basis when you bought it, not when you immigrated. And things that are tax shelters where you came from are generally not in the US and vice versa. Pension plans are usually covered in some way or another but there's usually some paperwork you have to file to claim the tax treaty treatment, it's not automatic (e.g. IRS Form 8833). Things that are not pension plans though are rarely if ever covered.

Just as an illustration, there is a tax deferred savings plan for disabled people in Canada called the RDSP. So the parents of a disabled person for example can put money into it, claim a tax credit and that money can be used to help support the disabled person after they die.

IRS doesn't recognize RDSPs as being a tax shelter. There was a case in Calgary where a Canadian couple adopted a child who is developmentally disabled, they were friends with his parents who are now deceased - and US citizens. So they started an RDSP for the child, but the IRS requires taxes be paid on the phantom income the RDSP generates (i.e. income, but not real income as it is trapped inside the RDSP) because the child is a US citizen and the income is not for example exempt under the foreign earned income tax credit.

They tried to have his US citizenship renounced, but they can't because he's not considered to be mentally competent to do it.

In the US there are a very wide array of saving vehicles and people will tell you, use one or the other, but bear in mind if it's not a pension-related tax saving it's almost certainly not covered by any tax treaty benefit if you leave the US.

One thing you're usually advised to do if you move from country A to B is to "step up" the cost basis of your investments, i.e. sell them then buy them again after you move, thereby fixing the cost base for capital gains to being in country B. Sometimes it's not necessary, but it saves you from having to be a tax treaty expert.

Steve_

It's called: "retirement".

The problem with investing basically is that you have to watch the markets like a hawk because at the first sign of trouble you have to dump investment X. If you don't have the time it's better to stick with safer stuff but at the moment the safer stuff isn't generating any money. Not unless you do like Michael does and watch it like a hawk...

Michael

That is only a small part of investing. Prior to the crash in 2008, analysts were saying that S&P500 earnings will rise by 8% for the year and even two months after the crash, they still predicted that earnings would rise by 8% but instead earnings dropped by 90%.

There are a lot of issues going on in markets around the world and investors seem to be ignoring some and over reacting for others. For instance when the Fed started tapering for QE3, investors panicked and jumped out of fixed income securities causing interest rates to rise quickly but just as quickly sanity returned and interest rates started dropping and has been on a decline ever since.

Currently there are a lot of issues with the Euro area economies with projections for Germany's gdp growth to be flat in the next quarter, Italy in a recession, and a 0.1% growth in the Euro area overall. In Japan, last quarter saw a 6.8% drop in gdp annual growth and China keeps missing it projections. With all of that, you'd think that markets would be moving lower but each time there is another announcement, that market seems to rise. It's also very difficult to determine how foreign markets will affect the US market.

Most fund manager do OK during a bull market but do horribly during a bear market. World markets are not very healthy right now so the primary problem is try to understand what each news item means and that is the hardest part.

jmood

I have a small 401k sitting with JP Morgan for the last 10 years. Is there any and what is the benefit of putting it into a new scheme with a single brokerage like you suggest above, when/if I start a new one with a new employer?

kodokan

As far as I'm aware, whilst you're with an employer, the 401k has to stay with them. It's only after you leave that you can roll it over (into an IRA, I don't thiiiiiink it stays as a 401k plan when it's rolled over) to an external brokerage, like Fidelity, Vanguard, etc.