Since our October market update in which I stated that this is the worst financial crisis I have seen in my thirty years as a wealth manager, both consumers and investors are more scared and have retreated even further. The big three U.S. auto companies are in trouble and the markets have made lower lows. Until we see a solid bottom, caution is warranted.
I have recommended our 401K investors to be in fixed income or cash until the dust settles. With the markets trying to find a bottom and the possibility of much lower lows, we sold most of our mutual funds (representing about 10% of our portfolios) in last week’s rally. I have been very disappointed with their ability to protect their investors on the downside. By selling we can lock in capital losses to combat potential tax increases with the Obama administration. What is working well for us is our intraday trading and protecting our portfolios with ultra short Proshares positions. We are very active in protecting our investor’s principal, as I feel it is better to be safe than sorry. The economy is not going to turn up for a while and we are going to hear negative news from different sectors that are adversely affected by the recession. However, I am anticipating that the markets will present great opportunities going into in the second quarter of 2009.
In other news, a new year is approaching and with this new year comes a new President and administration, and more importantly, new tax policies. While President-elect Obama has not been specific with details or commitments, the hints he has dropped indicate that the tax increases he campaigned with will most likely be postponed until after 2009.
Even with this uncertainty, it is prudent to take action now and help shape your income tax liability for 2008. Here are some traditional tax strategies to consider:
- Income deferral into 2009.
- Pay deductable items before the end of the year, such as property taxes, the January 2009 mortgage payment, charitable contributions, state income tax estimates.
- Analyze your stock portfolio and consider tax loss harvesting to offset any stock gains from earlier in 2008.
- Max out your 401K deferral with your employer.
- Business owners should consider any new equipment needs and purchase this year instead of 2009.
These are only a few but enough to start us thinking about tax savings. For more detailed information on 2008 strategies and tax law changes, check out the “Year-End Tax Planning for Individuals” article, which is located in the news and resources section of the Tellone Financial Services website. For questions more specific in nature, don’t hesitate to call.
Filed under: Economy, Investments, Tax Planning & Preparation
