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Friday, December 03, 2010

Sell Your Stocks December 14th

With Congress messing around with extending the "Bush Era Tax Cuts" there is a stock market crash being brewed that could wipe out any gains you've seen this year.

Unless Congress acts before then, on January 1st the capital gains rate will go up from 15% to 20% for most people who claim them, and from 0% to 10% for the lowest two tax brackets. This means that folks will look to realize any gains in 2010 to avoid the higher taxes. Don't believe it, look back to the 1987 increase.

Here's my thought, I'm pretty sure that those rates are going to jump. Why? To get a compromise to get none of the personal income tax rates raised the GOP will have to give in on something. Capital gains taxes are the easiest, because the general public doesn't understand them, and doesn't think they pay them.

So December 15th looms as the big day for the market; for a bad reason. That is the day most options contracts are due, which means people who have an options contract, and will realize a gain, will probably sell it instead of hanging on. Think of all of those getting dumped in one day....Uh Oh.

So, if you want to avoid the Christmas Rush so to speak, sell on the 14th when the market will be teeting on the edge instead of fully falling. But sell if you want to get a lower rate on the gains. Or, you can hang on to the stocks, and hope that in 2012 there is a change in Senate and Whitehouse occupants that would restore the lower rates.

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