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The Chestnut  

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  • Bitcoin ETF Is A Way To Corner The Bitcoin Market And Create A Bubble [View article]
    Hey. Interesting article! Bitcoin--while bearing many of the flaws you mention--is somewhat analogous to a commodity. Both have a fixed supply, both at prone to large price swings, and neither result in any real, year-over-year earnings growth (unlike stocks, for example). Even the makers of bitcoin view it as a kind of digital commodity (e.g. the term used for finding bitcoins is to "mine" bitcoins).

    What troubles me about the ETF is not so much the inherent bubble-like tendencies of bitcoin. Rather, it's the myriad of risks that come with a digital commodity. What happens if the ETF's serial numbers, which correspond to the bitcoins the ETF owns, are stolen? A lot of unknown risks exist here, due to the digital nature of the bitcoin, which makes the prospect of investing in the ETF downright scary.
    Jul 5, 2013. 11:39 PM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    If it helps, I agree with rlp2451 and Arthur. Section 408(e) states that IRAs are exempt from taxation, except for taxes imposed by Section 511. Section 511 lays out UBIT, and expressly states that trusts are subject to UBIT. And, per 408(a), the term "trust" includes IRAs. And so the Code subjects IRAs to UBIT. UBTI might be generated by the IRA itself or by a pass-through entity held within an IRA, which then passes through to the IRA.
    May 26, 2013. 12:33 AM | Likes Like |Link to Comment
  • China's exports of rare earth metals have rallied in recent months, a trend attributed to low rare earth prices and Japanese demand. But Molycorp (MCP -2.9%), whose shares have jumped 30% in the past two weeks, says it might be premature to assume a firm turnaround in global demand: "Inventories have been built up over the past several years, and they are returning to more normal levels now." [View news story]
    I have to say - the fact that your screen-name is "molycrappumpdumb" lends a little less credibility to your comment.

    I agree this company has many issues. But, they do make real product. Stock is in a much better range near $5-7.
    May 23, 2013. 05:12 PM | Likes Like |Link to Comment
  • How Does The Loss Limitation With MLPs Work? [View article]
    Thanks alschroed, will do.
    May 22, 2013. 02:15 PM | Likes Like |Link to Comment
  • How Does The Loss Limitation With MLPs Work? [View article]
    Thanks rlp2451. I'll make sure to reference the K-1 in future articles.
    May 22, 2013. 02:14 PM | Likes Like |Link to Comment
  • How Does The Loss Limitation With MLPs Work? [View article]
    Great point, robertlgtiffin. Thanks!
    May 22, 2013. 02:13 PM | Likes Like |Link to Comment
  • Apple's Magic Is Broken [View article]
    (I'm not an Apple investor or a Samsung investor).

    Thanks for the Article, Paulos.

    In my opinion, the issue isn't whether the phone are equals, or whether Apple is a better product, or whether Apple has "lost its magic." At least in the short term, the quality of a company's product is rarely indicative of its share price. Of course Samsung will continue to sell more phones, and of course Apple's margins will shrink. That is the nature of competition. The question is whether Apple can continue to innovate and produce new, cutting-edge products. Who knows? Jony Ive may have a few more tricks up his sleeve.
    May 20, 2013. 01:09 AM | 1 Like Like |Link to Comment
  • Protecting Your Portfolio From Inflation [View article]
    Thanks for the article FundGurus!

    I-Bonds are another way to hedge against inflation. The interest includes a fixed rate and a rate that is tied to inflation, and so the bonds never actually lose money in real terms. I-Bonds come with some nice tax-savings, too. The interest accrues, tax-deferred, until the bond matures (for up to 30 years). As Bogle mentions, I-Bonds represent one way to "extend" the fixed-income portion of a tax-advantaged account. Of course, there are drawbacks. These include, inter alia, a lack of liquidity for the initial year of investing (when an investor can't redeem the bond) and a 10K/year purchase limit...

    TC
    May 12, 2013. 12:01 AM | 1 Like Like |Link to Comment
  • Why Passive Index Investing Is Merely An Illusion [View article]
    Thanks for the article, Tim! I especially liked this quote:

    "As a company becomes cheaper and more undervalued, it gradually becomes a smaller part of the index. And as it becomes more expensive and more overvalued, it comes to represent a larger part of the overall index."

    Unfortunate, to say the least...

    TC
    May 11, 2013. 11:53 PM | 7 Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    Hey GD! Sure. I was just responding to Phil's question of whether an uninformed investor, who doesn't understand MLPs or their tax treatment, should put them in an IRA. I said no, because (1) the investor assumedly would not know how to fill out a K-1 or to keep track of his carryover losses, etc. (since he's uninformed) and (2) he would be unaware of the potential of UBTI (putting aside the likelihood of its occurrence). That's all I meant, really, and it's not IRA-specific, either -- assuming he's truly an uninformed investor, perhaps he shouldn't be investing in MLPs in the first place. (Just as with all other investing strategies, in that it's often wise to understand what you're investing in/the risks you are assuming, before you invest).
    May 2, 2013. 04:10 PM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    Phil,

    Thanks for the response! And for presenting it in such a civil manner. I am open to accepting that the IRS totals UBTI across accounts, but I would like to see Code cites first. I didn't see any Code cites in that article.

    As for your hypothetical question, as to whether I think uninformed individual investors should put K-1 investments into their IRAs--I agree with you. I don't think so.
    May 2, 2013. 08:26 AM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    This is a great strategy. Simple, yet effective. Bogle talks about it on his site somewhere, and he gives it a clever name that I now forget...
    May 1, 2013. 09:18 PM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    This is an interesting question, and one I've wondered about myself. For a definite answer, consult a tax specialist and/or accountant. What I was driving at is not what WmHilger1 mentions--another reason to read carefully--but something else. The Code applies UBTI to each enumerated "organization," which includes tax deferred accounts such as IRAs (see I.R.C. 511). Of course, the UBTI WITHIN each account, when totaled, triggers the tax. But if the UBTI did not exceed the threshold WITHIN the account, would it be totaled with the UBTI across other tax-deferred accounts? Perhaps not, because those accounts are separate organizations. That was the point I was making, though perhaps I could have made it clearer. Again, this is just one interpretation, and by no means authoritative. Consult a tax specialist/accountant for a definite answer.

    Also, as WmHilger1 astutely mentions, there may be serious accounting/monitoring costs associated with holding MLPs in multiple tax-deferred accounts. Hence, my use of the word "grudgingly."

    As a side note, I do love the word "veracity."
    May 1, 2013. 09:16 PM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    Phew, WmHilger1! For a second there, I thought you meant the other author of this article....

    Thanks for the feedback! It's an excellent point, and one that should be taken into consideration when selling MLPs.
    May 1, 2013. 09:03 PM | Likes Like |Link to Comment
  • What Happens When You Sell An MLP? [View article]
    Hi BruceM! Excellent point, and thanks for the correction. Perhaps you can clarify what you mean by "capital appreciation from debt"...and I would be surprised if an MLP didn't carry debt.
    May 1, 2013. 01:43 PM | 1 Like Like |Link to Comment
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