How to Reduce Taxes on Your Investments

I was reading an article on reducing your 2012 taxes at Fidelity this morning. A lot of it was already familiar to me, such as this bit about investing in municipals:

If generating income is one of your investment goals, you may want to consider using a taxable account to invest in tax-free municipal bond and money market funds—especially if you’re in a high tax bracket. These funds typically invest in bonds issued by municipalities and their earnings are generally not subject to federal tax. You may also be able to avoid or reduce state income tax on your earnings if you invest in a municipal bond or money market fund that holds bonds issued by entities within your state. Interest income generated by most state and local municipal bonds is generally exempt from federal income and/or alternative minimum taxes.

But I would venture to say not a lot of investors may be familiar with tax-loss harvesting:

Use ongoing tax-loss harvesting. Tax-loss harvesting is the practice of selling investments that have lost value to offset current- and future-year capital gains. Unlike one-time or occasional loss sales, however, a systematic tax-loss harvesting strategy requires diligent investment tracking and detailed tax accounting. That means continuous analysis of every tax lot (shares purchased at a given price and time) to determine when the tax-loss benefit warrants selling appreciated positions. Trading a specific tax lot with a specific cost basis is different than selling all of your shares in a particular fund or stock, which may have been purchased at different times over many years and could have significantly different tax implications as a whole than they would individually.

I also found the below table very useful. Especially notable, if nothing changes before end of the year, is that all dividends will be taxed at your income level in 2013:

Your tax rate schedule in 2012 and 2013.

Read the full post on Fidelity here.

On Algorithmic Gatekeepers

Writing for the opinion section of The New York Times, Evgeny Morozov characterizes “one dimensional” algorithms which censor the Web:

The proliferation of the Autocomplete function on popular Web sites is a case in point. Nominally, all it does is complete your search query — on YouTube, on Google, on Amazon — before you’ve finished typing, using an algorithm to predict what you’re most likely typing. A nifty feature — but it, too, reinforces primness.

How so? Consider George Carlin’s classic comedy routine “Seven Words You Can Never Say on Television.” See how many of those words would autocomplete on your favorite Web site. In my case, YouTube would autocomplete none. Amazon almost none (it also hates “penis” and “vagina”). Of Carlin’s seven words, Google would autocomplete only “piss.”

Until recently, even the word “bisexual” wouldn’t autocomplete at Google; it’s only this past August that Google, after many complaints, began to autocomplete some, but not all, queries for that term. In 2010, the hacker magazine 2600 published a long blacklist of similar words. While I didn’t verify all 400 of them on Google, a few that I did try — like “swastika” and “Lolita” — failed to autocomplete. Is Nabokov not trending in Mountain View? Alas, these algorithms are not particularly bright: unable to distinguish between Nabokov’s novel and child pornography, they assume you want the latter.

Why won’t tech companies let us freely use terms that already enjoy wide circulation and legitimacy? Do they fashion themselves as our new guardians? Are they too greedy to correct their algorithms’ mistakes?

Thanks to Silicon Valley, our public life is undergoing a transformation. Accompanying this digital metamorphosis is the emergence of new, algorithmic gatekeepers, who, unlike the gatekeepers of the previous era — journalists, publishers, editors — don’t flaunt their cultural authority. They may even be unaware of it themselves, eager to deploy algorithms for fun and profit.

“I, for one, welcome our new algorithmic overlords.” –Said almost no one.

Nassim Nicholas Taleb, The Incredible Hulk

The Economist reviews Nassim Taleb’s latest book, Antifragile, and has this awesome tidbit about Taleb at the end:

He is a weightlifter and calls himself “an intellectual who has the appearance of a bodyguard”. He avoids fruit that does not have an ancient Greek or Hebrew name and drinks no liquid that has not been in existence for at least 1,000 years. He has little time for copy editors, even less for economists, bankers and those who cluster at Davos. He once spent two years in bed reading every book about probability he could lay his hands on.

And according to New York Magazine, Taleb revealed the following to New Scientist, that he is not “some pantywaist writer dweeb.” He is the Invisible Hulk who uses the pen as his sword:

I lift stones and do weightlifting. I don’t go to the doctor except when I’m very ill, and when I go to India, I drink a drop of local water. Things like this harness the body’s antifragility. I have never had personal debt and never will. I also picked a profession in which I am antifragile, because any attack makes me stronger.

Love it.

The Quiet Ones

We’re a tribe, we quiet ones, we readers and thinkers and letter writers, we daydreamers and gazers out of windows. We are a civil people, courteous to excess, who disdain displays of anger as childish and embarrassing.

This is a quote from a very thoughtful essay titled “The Quiet Ones” by Tim Kreider, published in The New York Times. Kreider laments that the beauty of quiet is disappearing, and there’s not much we can do about it:

Those of us who despise this tendency don’t have a voice, or a side, let alone anything like a lobby. There are anti-noise-pollution groups, but they can fight only limited skirmishes over local nuisances; the war is lost. It’s impossible to be heard when your whole position is quiet now that all public discourse has become a shouting match. Being an advocate of quiet in our society is as quixotic and ridiculous as being an advocate of beauty or human life or any other unmonetizable commodity.

I’d never heard of Kreider before reading this essay; his collection of essays We Learn Nothing has promising reviews on Amazon.

The Rise and Fall of Medbox

Earlier this week, WSJ/MarketWatch published a piece “How to Invest in Legalized Marijuana.” One of the suggested stocks mentioned was Medbox ($MDBX), a company that creates medical-marijuana dispensing machines:

For regular investors looking to get in on the action — and without having to actually grow or sell drugs — there are several small-cap stocks that stand to gain from marijuana’s growing acceptance. Medbox , an OTC stock with a $45 million market cap, for example, sells its patented dispensing machines to licensed medical-marijuana dispensaries. The machines, which dispense set doses of the drug, after verifying patients’ identities via fingerprint, could potentially be used in ordinary drugstores too, says Medbox founder Vincent Mehdizadeh. Based in Hollywood, Calif., the company already has 130 machines in the field, and it expects to install an additional 40 in the next quarter…

That article propelled the stock to a meteoric rise from roughly $4/share to a whopping $215/share in a matter of two days (thereby increasing Medbox’s market capitalization from $45 million at the start of the week to a staggering $2.3 billion by Friday). So much interest was expressed in the stock that company executives had to go on record to “dampen investor enthusiasm.” It seems to have worked: the stock traded in a wide range today, ultimately finishing at $20/share.

Pretty wild stuff.

The Silk Road and Carpet Making in Uzbekistan

The Wall Street Journal has a short piece on the dying art of carpet making in Uzbekistan. Profiled are the cities of Samarkand and Bukhara.

This was the most fascinating bit from the story, I think:

Out of the 300 or so carpets the Samarkand workshop produces by hand each year, around 40% are private commissions. These range from ancient Persian designs to hand-drawn images sentimental to the person commissioning the carpet. One Japanese client, intent on creating one of the finest carpets in the world, has commissioned a 90-centimeter-by-55-centimeter piece at a cost of $85,000, which will take seven years to complete. It is so fine it can only be worked on an hour a day, so as not to ruin the eyesight of the weaver.

Click through to see pictures accompanying the piece.

Saving Real Oviedo

Real Oviedo, a soccer club in Spain, has been undone by years of financial negligence and political strife. The current owner, charged with tax evasion, is missing. The club’s tax bill of 1.9 million euros is due at the end of the year. So a campaign was born to save the club by issuing shares:

Fueled by Twitter messages by a British sportswriter in Spain, fans from Britain, South America, China and elsewhere have snapped up thousands of shares. Real Oviedo alumni playing in the English Premier League bought some and urged fans to do the same. Real Madrid said it would buy 100,000 euros’ worth of shares. One fan near Portland, Ore., promised to get a Real Oviedo tattoo if others bought 100 shares. She got the tattoo.

By Wednesday, the team had raised about 1.57 million euros, mostly from people who had never been to Spain, let alone seen Real Oviedo play live. Nearly 40 percent of the more than 20,000 new shareholders are from 60 countries outside Spain. After the spasm of support, well-heeled investors from Britain, Mexico and Spain are studying the club’s books to decide whether to buy stakes.

It’s a pretty cool story. If you want to participate, here’s the link.

Gold: A Letter to Nate Silver

I laughed out loud reading this piece by Paul Rudnick, who pens a letter to Nate Silver in the voice of an eleven-year-old Emma Gertlowitz:

I asked my mom if I should tweet about you using #NotAStalkerButLookOutsideYourWindowRightNow, but she said that there would be an 88% chance that you would think that was creepy, so I said, “But what if I used #MaybeIfYouTweetMeBackIWon’tKillMyself,” and she said, “Much better.” And then I asked her if I should call you Nate or Nathaniel or Crunchmaster Natty and we agreed that your e-mail address is probably Nate@HotNumber.com or maybe 100%Hot@SilverIsGold.org.

I was thinking that if you came over we could watch “iCarly” on Nickelodeon and we could decide if after five years of wacky high jinks the teen-age actors on the show now look 81.12% like tattered divorcees who could use a drink. And then we could watch “Glee” and we could figure out that our relationship is 21% Rachel and Finn, 32% Kurt and Blaine, and 12% mysterious, like the characters who got kicked off the show after last season because, while some of them were overweight, that’s still not as cool as being gay or being in a wheelchair, and I could ask you if high-school bullies make pie charts of who they like bullying the most, and whether transgender kids would get a bigger slice than Asian kids, and whether a morbidly obese transgender Asian kid is just a Fox sitcom waiting to happen.

Hilarious. The Ann Coulter quip at the end is great.

The Girl That Doesn’t Feel Pain

Justin Heckert, writing for New York Times Magazine, spent some time with Ashlyn Blocker and her parents, Tara and John. Ashlyn suffers from a rare condition called congenital insensitivity to pain in which she doesn’t feel pain:

Tara and John weren’t completely comfortable leaving Ashlyn alone in the kitchen, but it was something they felt they had to do, a concession to her growing independence. They made a point of telling stories about how responsible she is, but every one came with a companion anecdote that was painful to hear. There was the time she burned the flesh off the palms of her hands when she was 2. John was using a pressure-washer in the driveway and left its motor running; in the moments that they took their eyes off her, Ashlyn walked over and put her hands on the muffler. When she lifted them up the skin was seared away. There was the one about the fire ants that swarmed her in the backyard, biting her over a hundred times while she looked at them and yelled: “Bugs! Bugs!” There was the time she broke her ankle and ran around on it for two days before her parents realized something was wrong…

The article goes a bit into the genetic reason for Ashlyn’s insensitivity to pain, namely a mutated SCN9A gene. Interestingly, SCN9A.com lists an older NYT article about the gene.

Epic Scathing Review of Guy’s American Kitchen & Bar

I don’t typically link to restaurant reviews, but you’ve got to read this scathing review of Guy’s American Kitchen & Bar in the Dining Section of The New York Times. It is, let’s just say, epic:

Did you notice that the menu was an unreliable predictor of what actually came to the table? Were the “bourbon butter crunch chips” missing from your Almond Joy cocktail, too? Was your deep-fried “boulder” of ice cream the size of a standard scoop?

What exactly about a small salad with four or five miniature croutons makes Guy’s Famous Big Bite Caesar (a) big (b) famous or (c) Guy’s, in any meaningful sense?

Were you struck by how very far from awesome the Awesome Pretzel Chicken Tenders are? If you hadn’t come up with the recipe yourself, would you ever guess that the shiny tissue of breading that exudes grease onto the plate contains either pretzels or smoked almonds? Did you discern any buttermilk or brine in the white meat, or did you think it tasted like chewy air?

This was my favorite line:

Why is one of the few things on your menu that can be eaten without fear or regret — a lunch-only sandwich of chopped soy-glazed pork with coleslaw and cucumbers — called a Roasted Pork Bahn Mi, when it resembles that item about as much as you resemble Emily Dickinson?

A must-read in its entirety.