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Short Term Options:
For a minute, I thought we were going to have a green day. Markets giveth and markets taketh away, or should we say Biden's proposed tax hike took all of my weeks gains away and utterly destroyed my short term options that I still had open. I finished down 3.8% for the day, and now for the week, I am down 6.44%.
I think that this proposed tax hike is a gross overreaction. I'm not a fan of raising taxes, but the proposed tax hike on capital gains is only affecting you if you make more than $1 million per year, and there is no guarantee that it will pass the house and senate. The proposed tax increase would actually pay for the Biden infrastructure package because it is estimated that it would raise $1.5T. I'm actually liking the sound of that. The only thing that I don't like is that for earners of more than $1M/year, there is no real difference between long and short term capital gains, therefore no incentive not to sell. If you add on state levies, you might end up paying more than 50% of your profits to Uncle Sam.
At the proposed rate, someone making at least $1 million could pay as much as 39.6 percent in capital gains taxes. Then there's the investment income surtax, which would bring the total tax rate to 43.4 percent. Those making more than $496,601 per year but less than $1 million will retain their 20 percent long-term capital gains tax rate whether or not the proposed increase goes through. And if you are making less than $496,601, your long term capital gains taxes are only 15%, which is the majority of people.
It was no surprise that Biden was going to increase taxes. He has been saying that the whole time, and for the first time in my life, I also agreed that since this is an extreme time (Covid19), a tax hike is justified. I support, for the most part, the infrastructure package and think that the US is in need for it.
Yet investors hate this, and the markets fell almost a percent each. Only thing that I found was up was our $V play. Luckily I took profits on most things early on in the day. For the rest, I cut losses when things started slipping. I do believe that there will be a bounce tomorrow, as usually there is after such an overreaction takes place. Wait for the markets to digest the news. Doubtful it will even pass; there are to many senators making over $1M - They won't go for it.
INTEL (INTC) Surpasses Earnings Estimates Yet Shares Fall
I'll be keeping a close eye on the huge semiconductor companies reporting earnings. Since there is a chip shortage, a huge $SOXL jump could be in store if the earnings come out positive. SOXL has been to choppy this week, but it is bouncing on the 50 day MA at time of writing. Usually it likes to ride along the 50 day. If earnings come out well, I expect SOXL to push towards $45-$50 relatively soon. This could make for a perfect swing trade, or an entry for buy and hold for this 3X semiconductor ETF.
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