Understanding Roth Conversions
By Terry Coxon, Casey Research
If you have a traditional IRA, it’s highly advisable to consider converting it to a Roth IRA now. This isn’t merely recommended; it’s a definitive move that can yield substantial benefits. Delaying this conversion could cost you significantly more in taxes over time. No one wants to see their hard-earned money unnecessarily drain away to the tax man.
Your IRA is a dynamic entity, with contributions and investments fluctuating over time. Its impact is not just reflected in your current brokerage statement, but throughout your financial timeline. This complexity can make the decision regarding Roth conversion seem daunting. However, I will outline a straightforward perspective that simplifies this important choice. Continue reading
A Historic Challenge for Europe
“You have yet to see anything.” – Miguel de Cervantes, Don Quixote
In the late 15th century, fortune smiled upon Spain. With the capture of the Emirate of Granada in 1492, Spain completed the Reconquista of the Iberian Peninsula, marking the end of nearly 800 years of Islamic rule. That same year, Queen Isabella sponsored Christopher Columbus’s voyage, leading to the discovery of the New World.
This monumental event positioned Spain as the world’s foremost power.
For two centuries, Spanish treasure fleets carried enormous wealth—gold, silver, spices, and agricultural goods—from the Americas back to Spain. Rulers believed this abundance would last indefinitely. However, their good fortune ultimately bore a bitter cost.
Over time, the stream of wealth became an expected entitlement, transforming a blessing into a curse. Much like unprepared heirs or lottery winners, Spain mismanaged its riches through a series of costly decisions. Continue reading
After the Federal Open Market Committee’s meeting on March 13, the minutes were released, revealing surprising truths. Traders were shocked to find that monetary easing options were not discussed at all, prompting a swift sell-off on Wall Street.
“The major support for the economy and financial markets over the last two years has been stimulus, and without it, there are doubts about whether these economies can sustain themselves,” noted Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville. The market’s reaction indicates a widespread belief that the economy cannot stand independently without this support.
With gas prices hitting $4 per gallon early, even before the summer driving season, any move towards additional monetary inflation is politically fraught. However, the situation is likely to change in the coming months as the intertwining of finances and politics continues.
What has become increasingly clear since the 2008 financial crisis is just how reliant both the economy and financial markets are on the Federal Reserve’s money creation. After each round of initiatives like QE and QE2, the stock market typically plummets and economic growth stalls once the Fed ends its bond-buying programs. Continue reading
A Forgotten Warning
“Great achievements are not born from those who conform to trends, fads, and public opinion,” once said Jack Kerouac. If Kerouac was reflecting on the stock market, he likely would have seen a stark warning amid recent volatility and investor apathy.
The volatility index gauges investor expectations for stock market oscillations over the next 30 days. Generally, a reading below 15 has indicated a solid opportunity to sell. For instance, in April 2011, the volatility index dipped below 15, leading to a swift 20 percent downturn in the S&P 500.
The first quarter of 2012 has just concluded, and astonishingly, the S&P 500 has started the year with its best performance in 14 years, boasting a 12 percent gain.
Yet, amidst widespread belief of a new bull market beginning, the volatility index did something unusual. Not only did it fall below 15, but on March 16th, it reached 13.66—the lowest level recorded in nearly five years. Continue reading
