March 4, 2023 | Economic News, Apartment Rent, Capital Gains Taxes, Crypto Market and Alternative Investments in Retirement Accounts

Economic News
Some people wonder why I don’t get so upset over the negative economic news that comes out. In the first half of last year, I kept saying yes it will be a difficult year but we’re not going to have a major recession. Looking back at some headlines, in March 2022 Goldman Sachs economists were forecasting a 20 to 35% chance of an economic contraction within 12 months. The CEO of JP Morgan Chase, Jamie Dimon, used the word hurricane in the economy going forward. Bank of America predicted a mild recession would hit before the year closed. Fast forward from the fourth quarter of 2021 to the fourth quarter of 2022, the US economy grew at 1%. It’s easy to be negative but one really must look at the data and say where will we be 12 to 24 months from now. I think our economy will continue to move along and inflation will continue to decline slowly. With that said I will continue to invest in good quality public companies and see what they will be worth in the next 12 to 24 months.

Apartment Rent
As I suspected, the large increase in apartments is putting downward pressure on rents. Nationwide rents have fallen about 3 1/2% since last August. It was also the first time in five years that rent fell every month over the preceding six months. If one drives almost anywhere in San Diego, you see new apartment buildings going up and nationwide, we are seeing the biggest supply of apartments delivered since 1986 with nearly a half million apartments coming online. This is good for two reasons. First is that obviously people will be spending less on rent and the second reason is this will ease some of the inflation pressure since housing is a big part of the CPI.

Capital Gains Taxes
One of the major benefits of being a long-term investor is the benefit of capital gains taxes. Rather than ordinary income rates, at the federal level gains are taxed at 0%, 15%, or 20% as long as the position is held for more than 365 days. In 2023, the standard deduction and income thresholds for capital gains increased which is a benefit for investors. In fact, you may qualify for the 0% long-term capital gains rate with taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly. This means you still may be able to make over $100,000 as a married couple and be in the 0% range after the standard deduction.

Crypto Market
Another hit to the crypto market! Silvergate Capital (SI), a cryptocurrency focused bank, plunged 58% in a single day of trading this past week. The reason for the massive decline was the company delayed its filing of the annual report as it needed more time to assess additional losses, regulatory scrutiny, and the big one its ability to continue as a going concern. In other words, they may not be able to operate for another 12 months, this is a major hint towards a potential bankruptcy. I've stayed away from crypto, and I'll continue to stay away from crypto. We've seen the fall of FTX and other exchanges and now the major concern from Silvergate leads me to believe there are more issues around the corner with more exchanges. This also continues to fuel my belief that the argument for wider adoption of these cryptos is fading fast.

 

Harrison: "Alternative Investments in Retirement Accounts”