patrick.net

I was talking with E-man about selling out on this, when it mentioned the squeeze on their spread, and then "rebounded" to about $33. Then I got distracted for about a week.... Just noticed it took a real hit today again.

When institutions bail, do they allow the price to recover before attempting to sell? Is it worth waiting for a small uptick and dropping my small position, or is this likely going to correct downwards for quite some time? Book value is going to really be hurt by this, and with low rates and QE3 expected for 2-3 years, it doesn't even have a chance to recover.

Thanks for your insight on that -- helpful and appreciated. I have about 25% of my retirement money collecting dust right now, and I'm trying to find a home for it. I'm gunshy of the "100% in a target retirement account", so I'm trying to do something with it. I am fairly exposed to equities, but have been looking elsewhere (my Lending Club experience has been great so far)...trying not to put too many eggs in any basket, though. REITs seem to come up pretty often on these forums as a good place to have retirement money, hence my interest in AGNC.

Any thoughts on HYI or HIO?

Based on SFace's number, the spread is getting squeezed from 2.2% to 1.4%. Just from eyeballing it, AGNC has a good shot of dropping to $20-$22/share.

SFace says

A 10% dividend yield net of tax in 2012 may be 7.5%. Actually CA prop 30 is retroactive so they already have to pay the higher rate on income earned in January 2012.

This sucks. Basically, there's no place to shield your investment. That would make real estate even more attractive because you can offset your positive cashflow with depreciation.

Remember that good investment properties will always yield positive cashflow even after offsetting the depreciation and maintenance.

Where do you put your money now? In bonds? :)

Hmm, wish I had remembered to sell these reits the other day. Thanks for the dividend update, I thought it was 15% to 25%, but clearly it's a lot larger than that! Wow.

I might look at dropping a few good dividend plays then. It can't hurt, and would preserve the capital until this is all over with. I can see a messy ending to this year.

Well, it's the moment of truth. SPY is sitting right at the 200-DMA. Get ready to buy or hedge your bet.

Good luck to all. :)

It's ironic that Prop. 30 passed while Prop. 38 didn't. Talking about soaking the rich. Well, gotta take it from the haves and give it to the have nots. Someone gotta foot the bill.

SFace says

A 10% dividend yield net of tax in 2012 may be 7.5%. Actually CA prop 30 is retroactive so they already have to pay the higher rate on income earned in January 2012.

A 10% dividend yield net of tax in 2013 may be 4.8%.

Are you pointing this out because it will put downward pressure on prices, or because it cuts the return? More to the point: if I hold this in a tax sheltered account (IRA), how does that affect things?

It's less about how it will effect you, and more about how it will effect the rich, who clearly have large stakes in these companies. While you might see the return as pretty good due to your tax status, the rich might revalue their positions and sell.. and sell.. and sell... This in turn will affect how they value a stock and how much they will be willing to pay for it.

Even if you look at it as a great stock, they might say it's a horrible deal until it mints them the 7.5% rate of return again, which might mean cutting the stock price in half to get it there.

It might turn out to be a great deal eventually... and it might give you some great yields at that time too!

SFace,

Right on. Obamacare is 3.8% tax.

I was calculating my taxes for long-term gain the other day and this is what I came up with. 20% capital gain + 9.8% state tax + 3.8% obamacare = 33.6% in taxes. So for a $3M in gain, I will get to write a check for over $1M in taxes. I'm trying to figure out a way to shelter this gain when I cash out near the top of the next housing market. 1031 will not be a good vehicle at that time. Any ideas?

Well this clearly make sense on why the republican had so many large donors, and why they simply wouldn't give up on these bush tax cuts. They make a huge difference, far more than I realized! I thought it was a general 10% increase, but those cuts were clearly a massive boon to the very wealth for the last decade.

Shoot, had I know that, I would have sold most of my holdings a week before elections :(

I don't have any stock trading account so there's no losses to offset. All the stocks are in my and wife's IRA accounts.

1031 to defer taxes near the top of the housing market may not be the best idea.

Another idea is to sell houses on installment contract to break up the gain. Since the gain maybe sizable, this strategy may not work either.

There must be a way to shelter this gain & leave it to the kids when I drop dead & they get a step-up in basis. :)

pkennedy says

Well this clearly make sense on why the republican had so many large donors, and why they simply wouldn't give up on these bush tax cuts. They make a huge difference, far more than I realized! I thought it was a general 10% increase, but those cuts were clearly a massive boon to the very wealth for the last decade.

Shoot, had I know that, I would have sold most of my holdings a week before elections :(

Well, if you knew Obama would get re-elected, you should have sold those stocks on 11/6 morning. Remember those qualified dividend, which used to be taxed at 15%, now will be taxed up to your bracket, which could be as high as 39.6%, plus another 3.8% obamacare tax.

I was debating on flipping a couple of my rentals, which would net me close to $200k gain. That means about $18k worth of saving on taxes. However, the timing wasn't ideal. :)

Having never owned stocks before the bush tax cuts, I never looked at the tax implications, I didn't know they were going from qualified to ordinary! I figured 10% extra, not a huge deal. Now it makes total sense.

@SFace if Mitt had released his real taxes (not the year he knew he was going to have to release them) and shown us all his great techniques, I'm sure you would have been hitting yourself with so many great techniques you'd over looked over the years :)