According to the Mayan calendar, their gods reordered the world on 12/21/12, 5,000 years ago. With today’s reoccurrence of 12/21/12, it is commonly believed that the world is about to end. Knowledgeable archaeologists say it won’t happen. Although I know nothing about these things, I agree with them.
On November 16, 2012, smiling political leaders from both parties stood before the cameras in Washington, D.C. and expressed confidence that an agreement to avoid the “Fiscal Cliff” could be reached by the end of this year. The Fiscal Cliff is the term used to refer to the draconian measures, such as raising taxes and cutting spending, that the U.S. government must take beginning next year when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
In my essay of November 16, I expressed skepticism that a meaningful solution would be agreed to by the end of the year and I said I didn’t want to see another Kabuki Dance take place. Unfortunately, the dancing started almost immediately after the cameramen packed their bags and the battle over raising taxes vs. cutting spending rages on. So what should investors do?
Investors should act upon the things that are likely to happen and be aware of those things that do happen. For example, it is generally expected that beginning next year taxes on long-term capital gains will go up from 15% to 20+% and dividends will be taxed as ordinary income. Consequently, considerable stock selling has taken place since Obama was reelected to lock in capital gains at the 2012 tax rates and many companies have declared sizable special dividends to reward shareholders at the 15% tax rate.
You should consider selling some of your big winners this year and buying them back at 31 days later. You should also consider converting your IRA to a Roth plan before the end of this year. There are other things you can do to avoid and/or defer taxes even after the new year begins. These actions include favoring long-term capital gain strategies vis-à-vis taking short-term profits, forming a Limited Liability Corporation, LLC, and so on. Many of these actions are presented in our all new Retirement Income Workshops for 2013.
Time Magazine named Barack Obama 2012 Person of the Year for a new America. Yes indeed, we are embarking upon a new America. It won’t be what the Mayans had in mind, but it will involve higher taxes. So start Planning for the New America.
Scoring Portfolio Performance.
Mirror, mirror, on the wall, who’s the fairest of them all? Are profits all that count? I don’t think so. I’d willingly exchange some profits for a steady, reliable winner with a low drawdown. See how you can pick the trading system that’s right for you. Join Mr. Todd Shaffer at the VectorVest University to see this week’s Strategy of the Week presentation: Scoring Portfolio Performance.