So You’ve Made a Killing on Bitcoin This Year?

So you’ve made a killing on Bitcoin this year? Time to celebrate… and pay taxes. I’m interested in the greater debate on the staying power of crypto currency, but this is not the post for that debate. Some people count down until Christmas. We are winding down 2017 and the count down for Bitcoin and crypto traders should be “tax season.” The IRS treats digital currencies, like Bitcoin, as property. This means that traditional property rules are applied under the IRS. We’ll talk specifically about the investment side of digital currency investments. You should note that this is also applicable for goods and services – both paid and compensated – in the virtual currency space. It is the taxpayer’s responsibility to report capital gains and losses. This means that the property is taxed as a capital asset. The IRS defines a capital asset as property held by the taxpayer, weather or not it’s it’s connected with taxpayer’s trade or business. As a result you have to report any capital gains or losses to the IRS. Let’s dive into that now. What is a capital gain?  A capital gain is the profit that you receive when you sell the property. There are two types of capital gains – long term and short term. Short term capital gains are defined as property held less than 12 months. Long term capital gains are defined as property held longer than 12 months. Taxation of Long Term and Short Term Gains?  Short term capital gains are treated as ordinary income for the purposes of taxation. Long term capital gains are taxed at either 0%,...

How to protect yourself after Equifax data hack

I was speaking with a few co-workers and clients yesterday after the bad news broke that Equifax lost approximately 143 million individual’s data. Quick tips on how to protect yourself after Equifax hack. Simply follow these steps to reduce the chances of identity impacts. Equifax is one of the top three credit bureaus that provide the backbone to lenders and borrowers. The other two majors are Transunion and Experian. Interestingly, Equifax’s latest hack ranks in the top tier of hacks recently – Yahoo still takes number one with 1 billion user accounts compromised. What makes this hack unique is all of our personal information is in one spot – Social Security numbers, date of birth, name and addresses. Scary! How do you know if you’re impacted? Easy – visit Exquifax website and punch in some of your vital details. you will receive some preliminary information about any compromises. What do I do now that I’m impacted? You’re compromised!! Get out and place a freeze on your credit with all three major bureaus. Good news – it’s free! Who doesn’t like free? Remember that if you’re putting a freeze on your credit it will limit the ability for financial institutions to access your information for new loans, credit lines and possibly establishing new accounts (bank, investment, lending).  Federal Trade Commission FAQ on credit freezes. Equifax credit freeze – start here Transunion credit freeze – start here Experian credit freeze – start here Lastly, it is best to obtain a copy of your credit report. Additionally, keep a eye on your financial institutions. In a world of constant security breaches, these types of things seem to be “the...
Tesla Stock Innovation – Do you even maths, bro?

Tesla Stock Innovation – Do you even maths, bro?

Tesla stock innovation – do you even maths bro?  Tesla stock innovation is what is driving it’s growth? You think GM and Ford are outdated and not innovative? Would you say the same thing of Toyota? Toyota is the largest global auto manufacture. The fight is one with Nissan for top spot. Toyota was the first manufacture to introduce hybrid technology in a vehicle on a mass scale with the ugly ass designed Prius. Sorry Prius drivers. Toyota debuted the Prius in 1997. Toyota continued across to the  global market in 2000. Now United States accounts for approximately half of the Prius sales. I wrote recently about the insanity of the market capitalization of Tesla compared to General Motors and Ford. You’ve made your case – Tesla stock innovation is key. I started thinking more about the auto industry as a whole – about Tesla’s marketshare. When I drive around my local suburbs, I do see plenty of Tesla’s on the road. Living in a more affluent area is an easy explanation for the volume of Tesla’s in my neighborhood. I see more Toyota, BMW, VWs and Honda vehicles around. I started to do a bit of digging. Let’s look at the global revenue (and marketshare) of the leading auto manufactures here:   I mentioned this in my last post about Tesla – it’s important to consider the fundamentals of the investment as well as the future opportunities. The market capitalization, revenue and net income/loss comparison between the top revenue producers compared with Tesla: Tesla has a hard time keeping pace with the United States auto manufactures marketshare. Stretching out the comparison on the global auto manufacturing market does...
Tesla – the crack of the stock market?

Tesla – the crack of the stock market?

You either sell crack rock or have a wicked jump shot. Tesla seemingly does both – figuratively of course. When I read around some of the media pundits, social media postings and news articles and I find the Tesla stock story fascinating. Lets take a look at some investment analysis of the Tesla stock. I’m not here to be a bull or a bear in this position. There are many things that I love about this organization and Mr. Musk. There is no denying he has a kick ass and take names later attitude that resonates with investors. The thing I find most interesting is when you start to break down the numbers a bit. Let’s take a quick look at the numbers through the first two quarters of 2017. The figures are pulled directly form the respective press releases. The Big 3 It’s hard to deny the market exposure, especially in the Americas, with General Motors and Ford. These two American powerhouse manufactures selling a sh*t ton of vehicles. Check out some of the numbers:  When you look at some of the number it doesn’t make a lot of sense. Tesla’s market capitalization is 114% of General Motors and 135% of Ford’s. In contrast, Tesla’s vehicle delivers are approximately 1% of General Motors and approximately 2.8% of Fords. The revenue for Tesla represents about 7% of General Motors and Ford. The net revenues speak for themselves. It’s interesting to look at these compared to their market cap. It’s clear that investors are relying on the wicked jump shot to lift this organization onto some next level sh*t.   When you look at...

I Hate Annuities – real life story

I’m sure that you have seen the advertisement for Mr. Ken Fisher’s advisory firm – “I hate annuities.” It’s hard to argue with a guy that manages some $65 billion in client assets. In my day to day experience, I meet with hundreds of individual investors seeking advice on a myriad of goals. It’s very common to see an annuity in their investment bag of tricks. I hate annuities. Insurance products can serve a purpose in a client’s investment portfolio. They have some benefits that would be used for a specific need. In my experience, it seems that insurance sales folks see it as every situation and every need is solved with an annuity! When all you have is a hammer, everything looks like a nail. The insurance person is motivated by the comp structure set by the insurance company – big paydays. Let me share with you a real life client story of a gentlemen that was sold one of these products and why I agree with Mr. Fisher. Let’s call this client Jim – Changing the name for obvious reasons. Jim retired from his company and accumulated about $400,000 inside of his 401(k) retirement savings plan. The insurance person he met with, a friend of the family, sold him an annuity with large and reputable insurance company. I’ll refrain from using their name – I don’t need a slanderous litigation coming my way. Jim took his $400k and placed it into this investment product – variable annuity. The variable annuity has two basic components – investment exposure and insurance exposure. This vehicle allowed an asset allocation to...

S&P 500 Price Correction Coming?

  S&P 500 Price Correction Coming? Investors have seen a tremendous market increase since the dark lows of 2009. It has been an interesting run since that time – navigating a unique and unprecedented Federal Reserve policy. As another quarter closes and the U.S. markets look relatively flat YTD… It’s a great time for reflection. Price Pays 205% return from the depths of those lows coupled with $4T+ of Federal Reserve balance sheet and zero interest rate policy! This reminds me of the bizzaro world Seinfeld episode. That crazy Gene and Feldman.   I prefer to use the valuation method from Dr. Robert Shiller – Cyclically Adjusted Price to Earnings Ratio (CAPE). The current level is approximately 27.5 with a S&p 500 close of about $2,066. The 5 year average is 22.7. I wondered if we were to revert to the 5 year mean, what type of price correction would the S&P 500 see? It would see approximately a 22.46% correction. I also find it interesting that (per JP Morgan) we are at the 25 year average. Historically speaking we’re at parity for valuations, but in shorter term duration we’re over valued? Ironically the dot-com bubble CAPE was about 44.       Here are the respective S&P 500 sectors; same valuations:         Things seemingly look a little bleak out there. Wage growth is low, unemployment is reasonable (sort of), inflation is low, market valuations are on the high side, Fed holding $4T balance sheet and sitting at ZIRP. Damn Gina! Whatever your investment strategy is… Make sure that you stay diversified based on the risk profile you have...

McDonald’s Brand ReInvention – Ronald’s Trying Hard

You either have it or you don’t… A real life example of brand reinvention is the NBC’s Tonight Show. If you compare the vibe of  Tonight Show with Jay Leno versus Jimmy Fallon you can see an effective reinvention of the Tonight Show brand. As with Fallon/Leno – You either have it or you don’t. Is McDonald’s brand reinvention working? McDonald’s doesn’t have it right now. I find it entertaining watching them find it. Some of the most recent moves to attempt to right the ship. McDonald’s Brand Reinvention McDonalds continued sales decline; New CEO tasked with pulling them out McDonalds going to try all day breakfast McDonalds swag; don’t just eat your burgers – wear ’em Table Service in Germany Burbon Burger These things are all just rolling out recently… With the decline of sales and a continued pressure on the the obesity epidemic – I think they may be hurting. Since we’re among friends here, I’ll let you know that I would not mind owning a burger shirt. I’m not saying I would actually wear it. I’m just saying I’d own it. If you look at their share price, it’s only approximately 3% off it’s 52 week high (as of March 30th closing price). Take a look at their stock chart. The price continues to move upward as their sales decline. So what you do you think? Will these things impact their sales over time? Can they appeal to a younger generation?     Full disclosure: I have no direct position in MCD. Maybe some exposure through mutual funds/ETFs.   Update: McDonald’s now raising pay across the board by 10%....

Fed Rates Impact More Than Bonds

Fed Rates Impact More Than Bonds Federal Reserve rate increases have a large ripple throughout the investment world, however it also has consequences for the U.S. Federal budget and deficit. Fortune Magazine estimates that rate increase will add $1 to $2 trillion dollars to the deficit over the next decade. This could be another reason why the Fed will want to carefully consider rate increases. I don’t believe that the Fed should sit at ZIRP forever… The Fed kept a ZIRP policy longer during this recovery. Check out this chart of the last Fed rate hikes. The Federal Government relays on borrowing to fill the gap of their “lack of income.” Interest on the borrowing is what the Fortune article is referencing. If we take the 2015 Federal Budget you can see it is an estimated $469B.   If the Fed raises interest rates 1% over the current Fed Funds rate that will equate to approximately $4.69B in additional interest rate payments. Let’s assume they raise up to 4% range… it’s $18.76 BILLION!                 The Federal Government has been running a budget deficit for what seems like forever. As I posted, 2018-2019 has a significant amount of treasuries maturing as a result of QE… When we see higher rates when that debt seemingly rolls over, we’ll be paying higher costs for supplementing our nations lack of income. Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions for a full...

Does the Federal Reserve Care about my Fixed Income Portfolio?

Does the Federal Reserve Care about my Fixed Income Portfolio? It’s fairly reasonable to make assumptions, based on Fed language, that the Federal Reserve are looking to raise interest rates… It appears some time this year. Now, Ms. Yellen has been very political-esq in her choices in language. She doesn’t give any more or less than she needs to in order to say something while saying nothing. Wait, what? Yep – that’s’ right. So what happens to my fixed income portfolio if the Federal Reserve raises interest rates 1%. JP Morgan has put together a quick chart on this…  I won’t bore you with the math (until later). The basic sense is 1% price decline per year of duration. So you can do the rough estimation on your fixed income portfolio. However, you need to keep in mind the volatility, credit risk and place in the market. I would suggest reaching out to your financial advisor professional to see if you’re properly allocated based on your risk level. JPM also put together this visual of the yield curve at the end of the year. Keep in mind the 30 year U.S. Treasury had the 4th largest bull market run. Interesting factoid.   I know you’re really excited about the math. Here you go.. directly from JPM: Change in bond price is calculated using both duration and convexity according to the following formula: New Price = (Price + (Price * -Duration * Change in Interest Rates))+(0.5 * Price * Convexity * (Change in Interest Rates)^2). *Calculation assumes 2-year Treasury interest rate falls 0.67% to 0.00%, as interest rates can only fall to 0.00%....

CNBC: Equity Fund Outflows Pre Crisis Pace, Really CNBC?

CNBC posted an article today that says that investors are fleeing out of equity funds at pre-crisis levels.  They claim this is due to volatility increases. I see it slightly different. Currently the Volatility Index (VIX) displays at approximately 15. Compared to the last market correction, some 40 odd months ago, at 43. Pre-Crisis level (January 2008) the VIX sat at 26. In October of 2008 it sat about 59. So, CNBC – I call bullshit! See some captures of the 5 year and 10 year VIX charts from Yahoo Finance:   Alright, so let’s give CNBC the benefit of the doubt here… Take a look at the flows of funds from investors in the past: I’m not claiming that the U.S. markets are not overdue for a market correction. Typically, investors see that occur approximately every 20 months. The U.S. market has not seen a market correction dating back 40+ months (Summer of 2011). The further we go from the average, the more likely it will happen. However, the market can be irrational longer than you can be solvent. It seems that Janet Yellen has all but said the Fed will raise rates sometime in 2015. This might be the time that the market starts to see some type of correction… Through all of this, make sure that you’re staying diversified to your risk profile.     Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions for a full...
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