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Investment Analysis Clubs / The BMW Method


Subject:  Re: Bargain hunting Date:  11/9/2012  1:17 PM
Author:  Jim2B Number:  40770 of 42233


My warning was not just of the expiration of tax cuts.

There are at least 2 other issues:
1) Sequestration bill
2) Tax hikes mandated by Obamacare.

In the near term, I don't expect #2 to dramatically affect any stocks except health insurance and health care companies.

But either or both of the tax cut expiration and sequestration bills could cause dramatic gyrations in the markets.

As for the expiration of the tax cuts only being minor impact to over all taxes paid. It is true that for the average investor they will not see a significant change to the taxes paid. However, it is not true that the tax implications are not important.

The friction costs of performing transactions and the ROI of dividend stocks will be significantly impacted! Changing dividend taxes from 15% to 28% (as will happen in my case) is a nearly 100% increase in dividend taxes! It cuts a 2.3% dividend return from 1.955% to 1.656%! When looking at trying to keep ahead of increase levels of inflation this .3% of return is a very important edge.

I'm sure you would espouse dumping a mutual fund with a 0.3% load factor above the the average for such funds, so I find it hard to understand why any savvy investor would attempt to explain paying this transaction cost as not important to the markets.

I think of you as a savvy investor, so would you care to explain why you think this isn't important to the markets?
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