Thanksgiving 2020 thoughts as we finish out this week...
Updated: Feb 4
It is always not what you make, but what you keep
While there is a greater sense of relief that the drama leading up to the election has eased, we are left with uncertainty, regardless of your political affiliation. If you were looking for some legislative clarity, instead, control of the US Senate hangs in the balance: there will be a cloud over the Holidays until January 5th of 2021. Too late to give us new options in our 2020 tax planning, we must work the current tax tools we now have. President-elect Biden’s proposal is to increase the ordinary income tax rates for those making more than $400,000 per year, and to tax long-term capital gains equal with the ordinary income tax rate for those earning more than $1 million. One option I have not written about is whether we should consider selling stocks with a low cost basis…ones that have appreciated substantially since you invested in them: especially interesting for those who want to “fill their tax- rate bucket” this year. Another thing to look at are expenses that may qualify as itemized deductions and consider if it might be smart to defer these deductions to 2021, when they would be more valuable if tax rates do increase. Meanwhile, taxpayers of all income levels might consider deferring any expenses that will not be useful as an itemized deduction in 2020 to help bundle deductions in 2021 if the rules are changed. Why does this matter to you? Making decisions when the ground is shifting under-foot is not easy, but along with your CPA, we can do this! Once again…ROTH Conversions are one of the strategies we have today that are really forward thinking.
It was a short, but strong week on Wall Street: the Dow and S&P 500 ended today up more than 2%, the third weekly gain this month. The Dow broke above 30,000 for the first time earlier this week, and the small-cap Russell 2000, surged to all-time intraday and closing highs as traders piled into beaten-down value stocks at the expense of high-flying growth names. We are witnessing the rise of optimism and the premise is that the economic environment for risk assets like stocks…has been getting better as drug makers release more positive Covid-19 vaccine data. The main motivation for these highs is there finally is an easing in the Washington drama as no matter what your political views are…the market does NOT like uncertainty. Despite the relief that comes from commercials being over, there will be some difficult days coming as we get Covid 19 under control. Why does this matter to you? We know that there are still serious threats to our economy and way of life and that a vaccine is not going to be broadly available until later in 2021. Is the worst over for stocks and the economy? I do not usually recommend a newscast, but I have found Catch the News with Shepard Smith at 7 p.m. ET on CNBC to be a mixture of good news, business stories, and fact-based reporting. The nightly newscast provides deep, non-partisan coverage and perspective on the day’s most important stories that I think will be especially interesting to many investors.
This is the stuff of Isaac Asimov and sci-fi writers from our college years! Renewable energy technologies have developed drastically in recent years, with improved efficiency and lower cost, but one major barrier to wider implementation is the fact that they do not provide a constant supply of energy. Wind and solar farms only produce energy when the wind is blowing or the sun is shining – but we need electricity around the clock, every day. Ultimately, we need a way to store energy on a large scale before we can make the switch to renewable sources and a possible way around this would be to generate solar energy in space. There are many advantages to this as a space-based solar power station could orbit to face the Sun 24 hours a day. The Earth’s atmosphere also absorbs and reflects some of the Sun’s light, so solar cells above the atmosphere will receive more sunlight and produce more energy. But one of the key challenges to overcome is how to assemble, launch and deploy such large structures as a single solar power station may cover as much as 4.9 sq miles – equivalent to 1,400 football fields. Why does this matter to you? Technological transitions will create new jobs and whole new industries: will we see resources from space for manufacturing, such as materials found on the Moon?