Under the Radar Tax Law Changes

Consider this edition of TGIF 2 Minutes an “automatic Part 1” in a 2-part series on changes to the taxation of 401k contributions.

Calling these tax changes “under the radar” may be underestimating the level of attention paid by the average TGIF 2 Minutes reader to tax news. But fear not! Missing these tax changes is common and mostly due to

  1. the IRS typically making substantial tax law changes overnight in the last two weeks of December (see: 2015, 2017, 2020, 2021, 2022 and prior) thus easily missed by the most attentive of savers amidst year-end and holiday activity,
  2. the complicated language used in the changes, confusing both savers and employers and their HR departments.

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2023 So Far So Good…

Superstition is not a strategy, although elite, professional athletes subscribe to superstitions all the time*. The reason for bringing up the topic is that talking about the stock market’s positive performance year-to-date in 2023 could warrant dialing back the optimism – for superstitious reasons! Hence, the “…” in the title “So Far So Good…”.

This said, the US stock market just finished a strong 2-month set of returns, in addition to an excellent January and stable returns in between. This positive performance has no guarantee of continuing but is evidence that staying in the stock market for the long-term – with a plan – can have positive long-term consequences.

  • The S&P 500 is up 16.4% year-to-date.
  • The Nasdaq over the same period is up over 31%.
  • The Russell 2000 Index of small companies is up 9.2%.
  • The Dow Jones is up 6.1%.

Continue reading “2023 So Far So Good…”

The Million Dollar House Down the Street

What happens when the house down the street suddenly sells for over $1 million dollars?! (And all the other very nice homes on the street were purchased for $550,000 or less within the past 10 years or so, maybe $700k for a couple of more recent sales?)

A couple of possible answers with explanation:

Real estate in desirable areas is still white hot. And while areas in the US northeast, California, and Florida (among other high-priced areas for homes) commonly see homes priced in the $3 million to $5 million+ range, homes nationally sell for an average of much less. Depending on which source or what inputs (new or existing, list price, sales price, or market price, etc.) the average home sale price in the US is between $391,000 and $507,000*. Therefore, in most neighborhoods when a home suddenly sells for $1.1 million (or $2.1 million) dollars it is consequential for the local market, especially the neighbors!

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The Car Buying Conundrum

From the TGIF 2 Minutes Archives… with an update on buying cars for kids.

There are few things as exciting as getting a new car: the “new car smell”, the test drive, sound system, sunroof, heated seats… the feeling of “everything is new”. And these days cars are advanced computers on wheels and can be very cool.

With that said (back in mid-2021) yours truly bought a new car – the first new car in 15 years! The 2005 (Certified Pre-Owned) B-mer went 180k miles and could have gone another 100k but with too much maintenance. It was time for a new vehicle. But what new car to buy? New or used? Sedan or SUV? Buy or lease? And the cost: go expensive or go reasonable in cost?

Any major purchase – housing, appliances, transportation, kids’ education, family vacations, etc. – needs to be evaluated both from a financial and emotional perspective. The emotional side is fairly obvious, but the financial side has both obvious and not-so-obvious factors. Cash flow considerations are obvious and not-so-obvious too.

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Coffee Dilemma

TGIF 2 Minutes went on a summer break to the UK and is back in action. Thanks to all who checked in the last 2 Fridays!

Beware international – and ALL – travelers. Today’s edition poses a question, call it a coffee dilemma, if not a sort of moral dilemma.

How much is a “6-shot coffee” worth these days? Hint: in the airport, apparently nearly 45+ minutes plus a lot of hassle for fellow coffee and tea drinkers waiting on line.

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Crypto Quarterly 2Q 2023

On balance, the news regarding cryptocurrency is still fairly skewed to the negative. But crypto remains alive, although widely a mystery to most of the population (including yours truly). Reporting on crypto is thus difficult – but even a small amount of information can be worthwhile.

One of the key events of the tragic crypto downturn remains the November 2022 fall of FTX and arrest of its founder. Interest rate increases also gradually revealed weaknesses in various cryptocurrency exchanges and functionality.

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Be on Lookout for Small Caps

A short and punchy note today. Recent data speaks to money flows and trends favorable to small company stocks. 

Taking a step back, at most basic, small companies (when successful) become large companies – a good thing. Also, small company stocks are bought much cheaper (lower ratios of price to book value) in the marketplace. The caveat is that small companies typically have less of a track record and can be more volatile.

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Review: What Could Happen in 2023

Since it is approaching mid-year, it makes sense to look at a few data points from the start of 2023. Back in January, TGIF 2 Minutes took a look at two charts:

  1. How much more expensive growth stocks were (and are) versus value stocks (top chart)
  2. Average US stock returns following big downturns in markets (bottom chart)

Read on for the review from earlier in the year, followed by a June 2023 update. Continue reading “Review: What Could Happen in 2023”

The Mega-Cap 7 or 8

There is a narrowness to the US stock market’s “strength” so far in 2023 that warrants attention. Out of the five hundred US companies in the S&P 500 index, if not for seven of them (or eight, if Netflix is included) the index would be down for the year.

These seven or eight companies are all mega-capitalization technology companies: Nvidia (whose chips are currently fueling white-hot artificial intelligence), Apple, Microsoft, Amazon, Meta (formerly Facebook), Alphabet (parent of Google), Tesla, and the 8th is Netflix (arguably as large and hot as the rest).

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Why Save & Invest?

 

The question, “Why save and invest?” is one not emphasized nearly enough. Often, savers and investors – whether having accumulated millions of dollars or those just getting started – focus almost exclusively on the various investments themselves, without first and often taking a step back to establish the “WHY” of investing.

The WHY can vary greatly, which is the reason the question is so meaningful.

Just this week I heard about the show currently on Netflix called “How to Get Rich” (haha, I may have just lost a few readers who will jump to find out more about the show). But it is not the show that is the focus of this week’s edition of TGIF 2 Minutes but rather one of the ideas behind the show. The idea comes from the author and successful entrepreneur, Ramit Sethi. One of the key ideas Sethi emphasizes is the “rich life” we all may wish to attain.

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