Quote:
Originally Posted by GregWeld
Greg enters the room with a funny hat/towel wrapped around his head - sits down at small table and stares into his crystal ball.... soft music (like Led Zeppelin or ZZ TOP) playing in the background...
And pronounces.......... wait for it.........
I have absolutely no idea.
IF -- HUGE - GIANT - LARGE - MONUMENTAL "IF" - Congress can do ANYTHING - they'll do it ALL WRONG. That's my bet. Don't even get me started with those 535 assholes - 536 if you count the head asshole.
If taxes revert to the code (we're currently enjoying a tax holiday) then it's a math issue. The TOTAL RETURN - vs some other investment. And there are calculators that will calculate the return you have to have, say, in a dividend at "X" tax rate to equal the return on a tax free bond.
So as interest rates RISE -- BOND face values will get hit first... since they are a known time - known interest rate... they'll sell off - because they have an inverse relationship - their face value has to DECREASE in order to pay the equivalent "new" interest rate. Too complicated??
Stock prices will no doubt DECREASE -- based on the same issue - the price has to go down in order to keep the dividend % "higher". Again - an inverse relationship. And if the dividend is now taxed at ordinary income levels -- people will sell and look for "other" investments - thus the price will decline (more sellers than buyers - and that in a nutshell is ANY MARKET FOR ANYTHING). They will also decrease because as the cost of money rises - it come out of operating profits... and the costs increase faster than the ability to raise prices and margins etc.
I'm very heavily invested in stocks and bonds - and I would tell you that I'd begin to move from taxable investments to more tax free income - but I'm LIVING off my dividend and interest income. If I was in an IRA/401K situation - I'd do absolutely nothing because those dividends etc aren't taxed until withdrawal.... so like most answers to these questions -- it all DEPENDS... age - length of time - what kinds of accounts - etc.
|
thank you Greg. Having a discussion regarding this on another board, and not sure that raising capital gains like that wouldn't have unintended consequences.