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Larry House's  Instablog

Larry House
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Larry House is a retired educator and now works full time for Big Brothers Big Sisters, a child mentoring organization. He has been involved with investing for over 30 years and was an account executive with an investment firm in the 1970s. He vividly remembers the oil embargo and hyper... More
  • I'm Closing My IRA

    I hope this doesn't come across as unAmerican, but as the bonds mature in my Traditional IRA, I am withdrawing the funds to deposit in my brokerage cash account.  Why, you may ask? It all has to do with taxes.  My home state, Illinois, is talking about raising the state income tax from 3 to 4.5%.  Also, I believe in the not too distant future, Federal income taxes will be higher--not just for the rich, but for the little guy--me.  I think I can do better tax wise with the (current at least) advantages of long-term capital gains, which, I hope, to achieve in the cash account.  I will settle the tax consequences each year instead of later.  My income in the future will not be substantially lower than now, which offsets the usual banter that you can withdraw from the Traditional IRA later when you make less and are in a lower tax bracket.

    I am NOT recommending this action to anyone else.  I do think it is something that should be considered with Traditional IRAs IF one thinks taxes will be higher in future years, and if other aspects of one's income and tax structure are favorable to it.

    My Traditional IRA with an online account also had some limitations as to what I could purchase in the account.  I am getting out from under those limitations with this course of action as well.

    This will be a gradual process that will take a few years, but I am moving my cash balance now, and as bonds mature, I will withdraw balances until the account is closed.

    I welcome your observations on this action that I think/hope is right for me.
     

    Jul 27 4:46 PM | Link | Comment!
  • Doug Kass: Opportunities Coming--Briefly

    Another voice that I listen to when it comes to the markets is Doug Kass.  I respect Doug as a straight shooter.  He has credibility with me because he has skin in the game.  I like to hear what Doug has to say, and I add his opinions to the cerebral mix with which I deal.  I keep up with Doug's views online.  He is a frequent guest of Larry Kudlow on CNBC, but I can't stand to watch Kudlow, even to get to hear Doug.

    Doug has posted his latest views on TheStreet.com, and I encourage the reading of his entire piece as I am just touching upon his highlights.  Doug speaks with a calm, knowledgeable voice, and he is using broad strokes in this piece to add his voice of reason to the cacophony of market pundits.

    Doug says we have entered the lazy, hazy days of summer (my borrowing from Mr. Cole), and he thinks stocks will behave the same.  He thinks stocks will tread a narrow range (S&P 850-925) for the summer.  He doesn't see much in the way of trading opportunities right now.  He thinks Q2 earnings will be good enough to hold the market in his forecasted range.

    Come fall and winter, Doug sees better prospects for a tradable rally that should take stocks to new rally highs.  He does not see that high holding, and he recommends selling into that rally.  Sad for bulls, Doug says in early to mid-2010, the market will double-dip to last March lows.  After that, he sees bouncy, lackluster stock action for YEARS--not months--due to higher taxes and higher interests rates, leading to subpar economic growth.  Doug adamantly holds to his view that last March's low will hold, and in fact, may never be undercut in a generation.

    So, after some short-term slumber for stocks, he sees mid-term opportunity for the nimble, and he sees inconsistent, muted long-term prospects.  Doug calls 'em like he sees 'em, and his views deserve consideration.

    No positions to disclose.

    Jul 09 5:25 PM | Link | Comment!
  • How can We Play the Game when We Don't Know the New Rules?

    If economic conditions weren't enough (and they are) to cause investors to lose sleep, we now have the political influences with which to deal.  I contend that equity investors face a double whammy (economic conditions being the first) because government action is usually harmful to corporate well being.  We don't know what political actions lie ahead, and therefore, the investor is entering the game blind and susceptible.

    New financial regulations are a case in point.  We have been given a broad overview of the new regulations.  Does anyone know the final specifics of these regulations? Does anyone know what impact the new regulations will have on  the earning power of financial institutions? Look at what has happened to GE the last couple of days.  It looks like GE Capital may be judged to have systemic importance in the financial system and will face new regulations that may affect the whole company.  The stock price reflects the joy (not) with which investors have received the news.  The new financial regulations are a black hole which cannot yet be plumbed.

    The president has called for new taxes.  Does anyone know exactly how much and on whom? This is of concern to everyone.  Here in my infamous state of Illinois, our new governor (after we removed Blagojevich so he could try to become a celebrity) has proposed a 50% income tax increase.  You read that right--50%.  That would put the state at 4.5%.  Not only is Illinios not business friendly, it is fast becoming unfriendly to residents as well.   I don't think Obama's tax plan, when we get to see it, will be friendly to business or residents either.  Until we get the details, we just don't know what it will do to us.

    The president is pushing for new medical insurance coverage.  A noble idea, and one I agee with in theory.  Does anyone know what the details will be or how it will affect businesses and individuals? This is a major undertaking for our country.  Some are talking about part of the plan requiring businesses to provide coverage for employees.  I don't think that will be good for corporate earnings.  Now don't jump at your screen and question my social concern.  The fact is investors invest to see companies increase their earnings over time and share the benefits of that increase with shareholders.  If companies can't do that, they aren't worthy of investment.

    The president is a strong proponent of environmental issues.  Another noble issue with which I agree in theory.  Do we know the details of his plans to tax carbon use? Do we know if companies can even survive with this new tax?

    I think you get my drift.  We are in the infancy of an administration that wants to change our social order.  Redistribution of wealth is his plan.  I doubt that it will be business friendly.  I think this president sees business as a necessary evil, a funding source for what he wants the government to do.  I am sure of one thing, in my mind anyway, there are too many new rules coming for me to feel confident in equities other than to be strategic, opportunistic, and nimble.  I don't like games where the rules change after the game starts.

    No positions.

    Jun 18 3:36 PM | Link | Comment!
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