A Better Way to Give
Posted on Sunday, January 21st, 2024
It has been freezing here in Atlanta. I have my office space heater cranked to the maximum. I am ready for spring to arrive. While trying to stay warm I’ve been spending a significant amount of time in the office analyzing tax rules, and I want to share another valuable tip with you that could potentially help reduce your tax burden. This strategy is not entirely new but has been improved under the Secure Act 2.0, which was passed by Congress in 2022.
If you are someone who makes substantial charitable contributions, there’s a more tax-efficient way to do it through what’s known as a Qualified Charitable Distribution (QCD). Here’s how it works: If you are aged 70 ½ or older and are required to take Required Minimum Distributions (RMDs) from your Individual Retirement Account (IRA), you have the option to make a direct distribution to a 501(c)(3) charity instead.
Rather than taking your RMD as taxable income, you can directly contribute it to your chosen charity from your IRA. By doing this, the income no longer counts as part of your IRA, thereby potentially lowering your taxable income and, consequently, your taxes.
This approach not only benefits the charitable causes you support but also serves as a strategic way to save on your taxes. If you’re interested in exploring this option further, please feel free to reach out.
The market has been on a good run but one that lacks a bit of oomph. (That’s an industry term.) While we have hit a new all-time high in the S&P 500 this rally lacks enthusiasm. It feels and looks more like all the sellers have gone on strike. Hedge funds have not added to their long positions, and mutual funds/ETFs have seen outflows. Recently, we took note of Goldman Sachs’ quarterly earnings report and, more significantly, their investment holdings. It reminded us of a similar note we sent out to you back in the summer of 2021 as markets then approached all-time highs.
I have spent part of my summer tutoring our middle son in Economics 101. I know what you are thinking – Fun time at the Reilly’s. My son was having trouble making sense of Econ 101. I showed him that it really is basic. They just try to make it sound hard. They fill their definitions with multiple-syllable words in order to make it all sound impressive and confusing. Much like economists bankers like to obfuscate and confuse. In Goldman Sachs’ latest earnings report we see that the investment bank has been “harvesting its balance sheet equity portfolio”. Just like Econ 101 they are just trying to make it difficult. In plain English, they are selling their stocks in size. They have sold 25% of their portfolio in 2021. Goldman is selling. Should we?
In the summer of 2021, the market continued its upward trend for an additional six months, resulting in a gain of 2.3%. However, this marked the highest point it would reach for two years. Guess who has been “harvesting it’s balance sheet equity portfolio” (selling) again? Goldman Sachs sold 43% of their prop trading portfolio in 2023!! The most significant tranche was sold in the last 2 months.
Tech stocks rallied last week but not much else. The opportunity set in this market is balanced, and risks are symmetrical. That means that the market isn’t cheap and it isn’t expensive. Things could go either way. This rally is unloved and has been met with outflows! We have been anxiously awaiting the options expiration that occurred on Friday. This was one of the top 5 options expiring of the year, and how the market performs in the following days will be very important. We will be watching the market intently on the first few days next week. If stocks fail to sell off, then FOMO could set in (and stocks rally) as investors chase performance.
“Short-term volatility is greatest at turning points and diminishes as a trend becomes established.”– George Soros
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.