valuecfa

Bookmarked - Thanks!

I suppose the argument is who else can step in to support the housing market with scale and pricing impact to the level the the GSE's have had. With record profits coming out of the GSE's, perhaps the politicians will decide to simply let the GSEs continue to pay back treasury over time, while eventually reinstating the preferred stock dividend.

What is the government's incentive to not wipe out the preferred upon restructuring Fannie & Freddie? (Other than to please the lobbyists that are advocating a beneficial restructuring to pref holders) why not just do a fresh start clean of these liabilities?

Great call on this one. I remember initially considering the idea from the original post, i thought it it would make a good 2% position for me. For some reason, i never gave it more time to look into. C'est la vie Congrats on this one!

I think Japan is a problem...we'll see what happens. That's like saying -i think hamburgers will make you fat...we'll see what happens. ;D kind of a given

But wait, there's more...If you act now we will throw in a free 3 month trial to manual of ideas. Don't get me wrong i used to watch there videos back in the day and enjoyed them, but come on Guy

Despite never turning a profit on a US equity market hedge, i haven't yet learned my lesson. As they say...the best hedge is cash. I'm tempted to speculate with some very minor macro hedging positions if valuations on the US market continue to rise ~ another 5-10%. After some thought, I'm thinking of targeting the Russell 2000. Anyone have insightful thoughts on shorting the index vs the index's puts, given costs/risks of both? Obviously puts loss is limited vs a short position, but puts are a tad expensive at the moment..

I've been trimming equities significantly lately in personal accts...and am reviewing my options for "wait and see mutual funds" in my 401k. Anyone have any thoughts on how a DBLTX would perform under a 27% equity market correction (keeping interest rate assumptions neutral)? BB, relatively high yields, but not corporates, mostly mortgaged backed. I've got some 401k money in this and NELYX as I can't trade individual securities in that acct, and options are limited. By the way, GMO just put out their updated 7yr forecast.

The unemployment numbers from Spain are completely unsustainable... Hunger is growing in Greece as well. People are hungry and we know what that means. Either it explodes or austerity is stopped. Imagine how the markets will react if tomorrow it is officially announced austerity failed and they are changing a direction... Hotels are still a little pricey though (Idon't think the depression in US had hotels at such lofty prices). I checked Madrid about a week ago and it is comparable to other major European cities http://www.theatlantic.com/business/archive/2013/04/spain-is-beyond-doomed-the-2-scariest-unemployment-charts-ever/275324/ "Five years after its housing boom turned to bust, Spanish unemployment hit a record high of 27.2 percent in the first quarter of 2013. It's almost too horrible to comprehend, but 19.5 percent of the total workforce has not had a job in the past six months; 15.3 percent have not in the past year; and 9.2 percent have not in the past two years. You can see this 1930s-style catastrophe in the chart below from the National Statistics Institute." Well, real life case in Granada, which officially is close to a 40% unemployment rate. Interviewing about two dozen people for a maid position, about half of them say "No thanks, I am not interested" when they know that the job involves a formal contract, because they are receiving unemployment or health benefits. Many, many people, specially in Southern Spain are working in the black economy. That's why things don't blow up. This is the worst crisis since Franco died, no doubt about that. There is huge human suffering, specially because people bought houses at totally absurd prices and Spain's mortgage are not non-recourse, so you get evicted and still get a big chunk of your salary seizen by the bank until you pay off all your debt. You have upper middle class families which had lived comfortably for decades suddenly being thrown into the low class. But there is no hunger (thanks to the dedication of NGOs) and amazingly little crime. Last thursday there was a national call to surround the Parliament to protest against the situation. The government was very scared, because it received lots of publicity, and they sent 1400 policemen there to fight the demonstrators. Do you know how many people showed up, in the country with 60% youth unemployment? Around 1000. And many of them had white hair. I live near quite a expensive mall which was opened last year. Go there on a weekend. It is impossible to find a seat in the terrazas. Have a look at the bars and restaurants in downtown Granada. Yes, business is not as good as usual, prices have gone down. But the people drinking nice Rioja and Ribera and eating tapas don't look like a picture out of "The grapes of Wrath". I've been a huge pessimist regarding Spain since 2004. We sold our apartment, have been renting ever since. I got totally out of Spanish stocks in 2006. Two years ago I braced myself for an euro break up. They've cut my scientist salary by 20% in the last 3 years and it is getting nearly impossible to get a research grant, no matter how good you are. My research institute is losing all the young people, no idea when we will be able to hire them back. I am pretty sure than unemployment will increase for at least another year and the economy will contract this year or probably the next. Things look ugly as hell. But whatever little intuition I have as a value investor tells me we are starting to see some light at the end of the tunnel, and it doesn't look like another train coming at us ..:) So after 7 years, when my screens produce Spanish stocks, I buy them... Granada has always been a great bargain for tourists. There used to be a great little hole in the wall tapas bar there call La Bella y La Bestia. You get a free order of tapas of great quality, for every order of a €1 or €2 beer. I hope it survives the downturn.

The unemployment numbers from Spain are completely unsustainable... Hunger is growing in Greece as well. People are hungry and we know what that means. Either it explodes or austerity is stopped. Imagine how the markets will react if tomorrow it is officially announced austerity failed and they are changing a direction... Hotels are still a little pricey though (Idon't think the depression in US had hotels at such lofty prices). I checked Madrid about a week ago and it is comparable to other major European cities http://www.theatlantic.com/business/archive/2013/04/spain-is-beyond-doomed-the-2-scariest-unemployment-charts-ever/275324/ "Five years after its housing boom turned to bust, Spanish unemployment hit a record high of 27.2 percent in the first quarter of 2013. It's almost too horrible to comprehend, but 19.5 percent of the total workforce has not had a job in the past six months; 15.3 percent have not in the past year; and 9.2 percent have not in the past two years. You can see this 1930s-style catastrophe in the chart below from the National Statistics Institute." I'm aware of the statistics, but from a tourist/outsider's perspective the changes are hardly noticeable, which i find unusual given the severity of the stats, and the strength of the Euro. Though Spain is the 2nd largest tourist destination in the world. My brother went to San Sebastian last summer and also walked around Madrid for half a day while waiting for his connection. He said, "Aside from a lot more anti-austerity demonstrations that Spain hasn't changed much from last time we were there about 4 years ago. The restaurants were still full of people (including locals), and prices at restaurants/hotels were still high" (except Southern Spain, of course). While the stats are horrible, and unemployment is ridiculously high, the first hand comparisons are hardly what one envisions of the great depression in the US.

The unemployment numbers from Spain are completely unsustainable... Hunger is growing in Greece as well. People are hungry and we know what that means. Either it explodes or austerity is stopped. Imagine how the markets will react if tomorrow it is officially announced austerity failed and they are changing a direction... Hotels are still a little pricey though (Idon't think the depression in US had hotels at such lofty prices). I checked Madrid about a week ago and it is comparable to other major European cities

Has someone already posted notes on what was discussed?

No doubt that this particular "dick move" is an Obama administration proposal. And i agree it is a dick move. However, I'm fairly certain that regardless of what party is in power in the future more Austerity is coming. Be it in the form of higher taxes, reduced benefits/entitlements, reduced govt spending on public services, inflation, and other more direct means of confiscating ones wealth. Depending on which political party is in power at the time, will determine who is the winner and who is the loser. Point is there will still be a winner and still be a loser regardless of who is in charge. With such a large deficit, the money has to come from somewhere.

I'm not arguing you like you like the discussion you had with the other fellow, but one of my best friends is an estate planning attorney and some of it has rubbed off. I also have a trust (though not as large as yours) and have spent some time researching the topic...i find it kind of interesting. So, i'm trying to understand your thinking here. Regardless of what vehicle you choose, roth ira, traditional ira, regular brokerage...if you are over the estate tax exemption limit then you owe estate taxes on those assets. The Roth IRA is subject to federal estate tax just like any other asset held at death. Assets used to pay tax on a conversion to a Roth IRA reduce the owner’s taxable estate. Perhaps you are just talking about if the proposal passes, which changes everything in your circumstance, being over $3 million in an IRA. Then, yes, that would change your specific circumstance...since you paid the conversion tax upfront (and don't have that money paid for conversion compounding anymore). And further, you would not have it grow tax free anymore in its entirety if the IRA is is over $3 million. And on top of that you would pay estate taxes over the exemption limit (but estate taxes would be the case regardless of conversion or whatever vehicle the assets are in). For most people that never attain $3 million in Roth IRA assets, and IF the terms don't change again at some point in the future, then the Roth IRA is brilliant. Also, by naming a trust as the beneficiary, it will bypass your estate. But it will still be subject to estate taxes (just like a traditional or any other asset type) if you are over the $10.5 million exemption, if married and have an AB trust. Given your large asset base you might consider setting up an ILIT as well, and as you already mentioned a Crummey Trust would be beneficial. What you say is all true. I didn't explain myself clearly enough to be understood. Today, I'm in "somewhat" of a pinch because we have just enough taxable brokerage assets to both purchase a home and carry ourselves until we reach 59.5. So we need every penny we have and can't gift any to the children. Now, if my entire net worth were in my taxable brokerage, then I could easily afford to give them $1m for the Crummy Trusts, and my wife could do the same (I think). So we can gift them that amount upfront without triggering gift taxes, and then on top of that we can gift them each about $26,000 per year. We have two kids. Now, in 50 years that $1m (from each of us) and that $26,000 per year (from each of us) will be worth potentially a hell of a lot. And it will be growing outside of our taxable estates. So all the gains on those gifts made today would completely avoid the estate tax, even though the trusts would be paying taxes on gains along the way (if any gains... I might allocate assets to things like Berkshire that are tax-efficient). Instead, the money grows in my RothIRA where we'll get slaughtered on estate taxes -- 45% tax rate or something and it could easily be much higher in the future. The RothIRA eliminates some taxes, but it opens for me this humongous can of worms called the estate tax. Plus, look up GRATs (Grantor Retained Annuity Trusts). They are a vehicle where you can shove all of your assets during market bottoms and where all the gains in the next year or two pass on to your heirs estate-tax free (the appreciation happens outside of the estate). But then you get back all the money you put in (except for the gains!). You can't take advantage of GRATs with RothIRAs. I hope i have this problem someday. :)

I'm not arguing you like you like the discussion you had with the other fellow, but one of my best friends is an estate planning attorney and some of it has rubbed off. I also have a trust (though not as large as yours) and have spent some time researching the topic...i find it kind of interesting. So, i'm trying to understand your thinking here. Regardless of what vehicle you choose, roth ira, traditional ira, regular brokerage...if you are over the estate tax exemption limit then you owe estate taxes on those assets. The Roth IRA is subject to federal estate tax just like any other asset held at death. Assets used to pay tax on a conversion to a Roth IRA reduce the owner’s taxable estate. Perhaps you are just talking about if the proposal passes, which changes everything in your circumstance, being over $3 million in an IRA. Then, yes, that would change your specific circumstance...since you paid the conversion tax upfront (and don't have that money paid for conversion compounding anymore). And further, you would not have it grow tax free anymore in its entirety if the IRA is is over $3 million. And on top of that you would pay estate taxes over the exemption limit (but estate taxes would be the case regardless of conversion or whatever vehicle the assets are in). For most people that never attain $3 million in Roth IRA assets, and IF the terms don't change again at some point in the future, then the Roth IRA is brilliant. Also, by naming a trust as the beneficiary, it will bypass your estate. But it will still be subject to estate taxes (just like a traditional or any other asset type) if you are over the $10.5 million exemption, if married and have an AB trust. Given your large asset base you might consider setting up an ILIT as well, and as you already mentioned a Crummey Trust would be beneficial.

Absolutely. You're right. Let me change my quote to- "Basically you may get screwed" Okay, now you are a tease. :) I completely understand your frustration. I would be just as peeved if i were in your shoes and this proposal passes, having just made the a Roth conversion. Austerity isn't fun.

Absolutely. You're right. Let me change my quote to- "Basically you may get screwed"

I think it goes without saying that someone who contributes to a traditional IRA is guaranteed to realize an immediate tax benefit, whereas someone who contributes to a Roth IRA must wait for a number of years before realizing the tax benefit, and that person assumes the risk that the rules might be changed during the interim. Basically, you got screwed. At least a Roth will reduce your estate taxes (assuming you will meet the now unknown exemption limits at some point far off into the future when you die) since tax dollars have already been subtracted. A traditional IRA is valued at the pre-tax level for estate tax purposes.

They won't pay a penalty

By the way Ericopoly, i don't know your particular circumstances, but wouldn't a simple AB trust (i assume you are married) take care of your problem? Effectively, getting a $10.5 million exemption edit: this obviously won't effect the proposed $3 million retirement cap that is the subject of this thread...I was just referring to passing on that large sum to your heirs in general.

You are referring to estate taxes (and on the balance over the exemption limit, as opposed to an income tax on just the gains in the Roth), right? By the way, be careful which state you reside in when you die as well

I can not stand this guy

Very cool. But kind of creepy that my phone knows when i'm looking at it and when i am not.

Quoted for truth. ;D We were both only connecting through London, and going to different places... It would have gone nowhere.

I had a kinda similar thing almost happen to me when i was around 19 years old. I was doing a long backpacking trip with my younger brother throughout Europe and northern Africa. When we got to Marrakesh (our last city to visit) to fly back to the US with a London connection, i was standing in line at the airport and struck up a conversation with a young, attractive/cool hippie looking girl who was traveling with one of her girlfriends. I think she was from Holland. We chatted up while waiting in line to check in and the ticket person informed her that she would have to pay extra for her all her additional bags (they had lots of souvenirs in cheap plastic bags). She saw that i only had one bag that i was checking in with no carry-ons, and asked if i can carry one of her other bags as a carry on to the gate, and then give it back to her, on the other side so she could avoid the large fees. I said, sure no problem. It wasn't until i got to the security checkpoint that it had occurred to me that i may be doing something very stupid. This is a muslim country, there are very stiff drug penalties. I didn't know this person, and she looked like the type that may try to sneak something through. Though, we had already walked from the check-in all the way to the security area, right by the gate, and i had already agreed to it, and most importantly i didn't want to be uncool and change my mind at the last minute. My heart was racing, when the bag was placed onto the conveyor belt. I though of that movie, Brokedown Palace for some reason, and pictured myself in a third world prison as i was was watching the security guard's face the entire time the bag rolled across the belt. It went through, and everything went fine. I gave the girl back her bag at the gate, and she offered to buy me a drink to thank me when we arrived in London. For some reason, perhaps b/c of the internal drama i just went through, i said no thanks and just went to sit with my brother near the window of the gate. This sticks out as one of the more stupid things i have done, and of course all b/c of a pretty girl. As a side note, a few weeks earlier, while i was in Asilah, my private tour guide offered to take me to the marijuana fields. We were kids, and my brother was all about it, and thought that would be cool. The guide said, "yeah it would be a cool souvenir to take pics in front of the massive fields to show your friends back home". En route to the fields in the Riff mountains, I backed out, even though my brother was really pissed. I later found out from a local that it is a common tourist scam to take college backpacking kids to the fields, have them take pictures in front of the rows of plants, and then take their camera and extort them into paying them a great deal of money to not turn the pictures into the police who were in on the scam. Anyway, it is kind of unrelated, but this story reminded my of that incident.