Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[lewdog]

And this is pretty shitty.

What you need to know
Both the Senate and the House have passed their own versions of the biggest tax changes of the last 30 years, and lawmakers are making progress on a joint bill through their committee work (reports from yesterday indicate they have a tentative deal). There is one particular part of the Senate bill that could disadvantage you as an individual investor if it makes it through to a vote -- the Mandatory FIFO Proposal.

Here is a brief primer on what this means and why it's important.

FIFO stands for "First-In-First-Out." It is a method for identifying specific tax lots when you have made your total investment over time -- using common strategies like dollar-cost averaging, dividend reinvestment plans, buying in thirds, or simply making annual lump sum contributions.

(By the way, senators, many of your constituents invest this way.)

The Senate's version proposes that all dispositions -- including sales, donations, and gifts of investments -- be on a first-in-first-out basis (FIFO). This means, if you want to sell, you must sell the oldest lot, which in all likelihood (especially after a very healthy 9-year bull market) has the lowest cost basis and the highest embedded capital gains. The proposal eliminates investor choice.

What does no choice look like?
Here's an example that might be common to Motley Fool investors.

Say you own 200 shares of Amazon that you purchased twice during the last five years: 100 shares at $300 per share in 2013, and another 100 shares at $700 per share in 2016. If you sell 100 shares at $1,100, then under the Senate proposal you would have to designate the older shares to sell and pay capital gains taxes on $800 instead of on $400.

Simply put, you wouldn't have the option to choose, for yourself and your family, which of your own shares of stock to sell!

Under current tax rules, individual investors have the choice of which tax lots to dispose of. This allows for such tax planning strategies as tax-loss harvesting and donating appreciated stock to charities.

It also provides individual investors the flexibility to create sensible financial plans that correspond to their circumstances by having the flexibility to take on a higher tax burden when the situation affords it and being more tax sensitive when times are tougher.

These tax-management strategies would be severely limited in the new tax world, and that could leave you and charities worse off.

Who could this hurt?
In a word: You.

More specifically, anyone owning stocks in a taxable account will be impacted.


Retirees will be especially hard hit, since many will have to sell investments in order to pay for medical expenses. Retirees typically have very long holding periods, with the oldest investments generally having the most gains built up over decades of buy-and-hold investing. Forcing retirees to recognize unusually high capital gains could increase the taxability of their Social Security Benefits, and lead to higher income-based Medicare premiums.

Investors that sell stock for a large purchase such as a home or a car are going to be especially hard hit, and the negative tax consequences could have a meaningful effect on consumption habits that would otherwise grow the economy (ahem, again, senators??)

Investors engaging in normal asset class rebalancing activities may place outsized weight on tax implications, resulting in poor investment decisions and an inefficient allocation of capital in our market system. That's the proverbial "tail wagging the dog" that we try to stay away from.

Investors may be tempted to get out ahead of changing tax rules and sell some later-dated tax lots while they still can. On the flip side, the looming tax bill on old tax lots may dissuade selling down a holding when it may be the sensible thing to do.

https://www.fool.com/investing/2017/...vidual-in.aspx

[ChiliConCarnage]

Yeah, the FIFO change would suck. Funds complained and the Senate changed it to only affect regular Joe's holding stock :/

That said as of last night it was currently not in the amended plan though it's still a work in progress. Id rather they make the 401k changes they were discussing than the FIFO change. The media took care of that though, hah.

A rule inserted into the Senate's version of the tax bill was removed when House and Senate negotiators came up with a compromise bill, according to an executive at robo-advisor Betterment. The news was first broken by CNBC's Larry Kudlow, who cited four unnamed lawmakers. The FIFO rule would have forced investors to sell stock in the order they bought it -- "first in first out" -- possibly leading to high tax bills.

Under current law, investors looking to minimize their tax bills can choose which shares of a company they want to sell. That means that if they own Apple (AAPL) and need to sell some, they can sell the shares they bought last year instead of the ones they bought in 2003, which would come with a massive capital gains bill.

The Senate bill would have disallowed this maneuvering for many investors, forcing them to sell the shares they bought first. It would not apply to a "regulated investment company" like a mutual fund, or ETF. But individual investors who pick stocks would have been hit. Robo-advisors were spooked, because their ability to manage their customers' tax bills -- a big selling point for the industry -- would have been curtailed.

[petegz28]

FIFO is not going to be part of the tax bill so no need to continue worrying about it. If it were even a chance you'd see an ass load of tax loss selling right now. Instead we are up 18 points on the SPX

[Hog's Gone Fishin]

Originally Posted by lewdog

I know Rainman mentioned having many good stocks that also provide dividends.

Anyone care to provide a list of solid companies with good paying dividends?

Take a look at Texas Instruments (TXN)

[petegz28]

Originally Posted by lewdog

I know Rainman mentioned having many good stocks that also provide dividends.

Anyone care to provide a list of solid companies with good paying dividends?

JNJ is the King of dividends....

[scho63]

Originally Posted by lewdog

Scho, are you writing any covered calls with portions of the GE stocks you own since you have quite a large volume?

I bought puts as a hedge. I averaged down and the call premiums had no good value to write against the stock. Not worth it.

I've cut about $800 off my $2,000 loses so far.

[Amnorix]

So for those who pay more than $10,000 in combined real estate and state/local property taxes, I'm hearing that it makes sense to prepay real estate taxes for 2018 in 2017, if possible. Also, for those paying quarterly estimated taxes, instead of paying the final state estimated income tax on 1/15/18, prepay that in 2017 also.

Those steps obviously allow for deduction in 2017, when they would potentially be lost otherwise due to the new tax bill that seems likely to get through Congress.

[Rain Man]

In my current philosophy, I struggle with recommending stocks, because my system of picking is laughable. In terms of recommending, do I talk up stocks that have taken a beating and should turn around, or stocks that are making a run and may be running out of steam? I never know.

That said, here are a few that I like, in no particular order:

TTWO - You know them as the makers of Grand Theft Auto. They don't pay a dividend and I bought them before my dividend strategy was embraced. But wow - this company would've made me affluent if I'd just kept my original holdings and not sold any off. It's quintupled in the last five years.

CODI - Holding company for a bunch of products I've never heard of. The stock price never moves, but it pays an 8%+ dividend. In the current bull market that's not a winner, but in the long run it is.

CVGW - Avocado grower. Pays a 1.3% dividend, and it just always goes up for me.

SEP - Natural gas pipeline company. It's down over the past couple of years, but it pays almost a 7 percent dividend and I keep thinking it'll turn around. I got a good runup three or four years ago.

PSX - I've read that Phillips 66 is more of a refiner than a producer, so they're less volatile to oil prices. Pays a 2.8% dividend.

RCL or CUK - Lots of baby boomers retiring with money, so I like cruise lines, and they countercycle with oil prices. RCL pays a 1.9% dividend and CUK pays 2.8%

MPW - REIT that leases medical office space. Pays a 7.1% dividend. Kind of like CODI above, in that the stock price doesn't move but it returns more than inflation.

GOOG - Probably everyone should have some Google at this point.

NDSN - As near as I can tell, they make nozzles and things for spraying stuff in industrial use. (Shrug.) 0.8% dividend, but it's done well for me. You may have missed the boat on it since it jumped 17 percent yesterday.

VZN - Pays a 4.5% dividend. I've muddled along with this stock but think it's a long-term gainer. Just a hunch.

SSW - I've lost my shirt on this ocean freighter company, with the stock down 40 percent since I bought it. But come on - it's profitable and it pays an 8.5% dividend. I've been buying it the whole way down until I reached a limit on how much I'll put into any stock. If it comes back, it'll produce some big gains and I don't see why it's down so much. I kind of want to buy more.

[kepp]

Originally Posted by Hog's Gone Fishin

Some cheap stocks I've been watching today

OHGI

SIEB

BITCF

Not recommending any but wish I had owned them at 8:00 this morning.

BITCF was the one I was talking about yesterday with the big bid/ask spread. It's still at $1.49/$1.92 (at the time of this post), which is almost a 33% difference. But it has gone up 47% today.

[Hog's Gone Fishin]

Was listening to Bloomberg yesterday. They say professional stock brokers as well as amateurs are wrong 70% of the time. The difference is the pro's cut their losses quickly while most amateurs try to ride a stock until it turns around and many times they add to it to average down and just lose it all.

I'm pretty sure thats right from my own stupid shit I've done.

[ChiliConCarnage]

Originally Posted by petegz28

FIFO is not going to be part of the tax bill so no need to continue worrying about it. If it were even a chance you'd see an ass load of tax loss selling right now. Instead we are up 18 points on the SPX

The sell off happened weeks ago when the news came out. The Senate passed the bill with FIFO in it on Dec. 2nd. Look back at like Nov. 27/28 for almost any stock up huge on the year. The great semiconductors, tech, China stock recession of 2017.



This is Lam Research. Pretty much every semi.. NVDA, MU, AMAT, etc. Then anything up a ton in US Tech or China Tech

[Buehler445]

Originally Posted by ChiliConCarnage

The sell off happened weeks ago when the news came out. The Senate passed the bill with FIFO in it on Dec. 2nd. Look back at like Nov. 27/28 for almost any stock up huge on the year. The great semiconductors, tech, China stock recession of 2017.



This is Lam Research. Pretty much every semi.. NVDA, MU, AMAT, etc. Then anything up a ton in US Tech or China Tech

Interesting as shit. Thanks!

[Rain Man]

Originally Posted by Hog's Gone Fishin

Was listening to Bloomberg yesterday. They say professional stock brokers as well as amateurs are wrong 70% of the time. The difference is the pro's cut their losses quickly while most amateurs try to ride a stock until it turns around and many times they add to it to average down and just lose it all.

I'm pretty sure thats right from my own stupid shit I've done.

You just described my SSW strategy perfectly.

That's not good, though.

[Hog's Gone Fishin]

Bought INTV 2 weeks ago .Up 104% today and 126% since I bought it. Hope the guys don't short it before close today because I'm letting it ride.

GBTC
RIOT
MARA
All kicking ass today

[ChiliConCarnage]

Originally Posted by Rain Man

SSW - I've lost my shirt on this ocean freighter company, with the stock down 40 percent since I bought it. But come on - it's profitable and it pays an 8.5% dividend. I've been buying it the whole way down until I reached a limit on how much I'll put into any stock. If it comes back, it'll produce some big gains and I don't see why it's down so much. I kind of want to buy more.

Healthy companies will rarely have 8.5% dividends so that stands out right away. Unless it's something cyclical and temporary, for instance, Cal-Maine went crazy high during the avian flu thing that caused egg prices to go up. Anything much above 5ish should draw extra attention. REITs don't pay taxes and have to distribute 90+% of profits so they get big divs. The taxes are passed onto the investors because you have to pay on income instead of cap gains.

SSW has a 218% payout ratio. Just the common shares dividend seems more than income can cover. Looking at the balance sheet, they've been diluting shares which probably has caused the stock to sink.

cvgw looks nice though. Put it on my watchlist.