Trading Talk.com

A target price for a stock is an amount published by a securities industry person, usually an analyst. It is only a price prediction about where a stock may be headed. Most of the time target stock prices are associated with a date in which the stock is expected to hit a particular target. Keep in mind where these price figures are coming from…from someone with a vested interest in the issue. For example target price could come an analyst whose firm was the underwriter or one whose firm is brown-nosing the company. It could come from a company with a large position in the stock or an individual who is trying to talk the stock up so he can get out ahead or even. There is also the possibility that the analyst does not have an agenda and actually really thinks the stock price is really going places. But most of the time target prices are nothing more than wishful thinking. A better way to go before jumping on the target price band wagon is to do your own homework and know first hand what you’re getting into.

You incur a capital gain when you sell an asset for a profit. This could be anything from land or a house to stocks and bonds. For investing purposes, you figure out your capital gains tax on the difference between your “basis” in the stock and the sales price. Basis is usually what you paid for stock, unless it’s inherited. Ask your tax person for specific details about that. The difference is your profit or loss. You can have long term capital gains or short term capital gains. For long term capital gains have to hold the stock for at least one whole year to qualify for the long-term capital gains rates. A short term capital gain is for stock held for less than a year. The profits are taxed as ordinary income which would make the tax rate higher than if taxed on a long term capital gain. It’s to your advantage to have long term capital gains. Any qualified tax specialist should be able to help you file your taxes appropriately and keep your tax bill to a minimum.

Less than two months until tax day! It’s important to find out what changes the IRS makes each year to tax laws that may affect you before filing your taxes. Topics for new tax law changes for individuals for the 2005 tax year are:

* Charitable contributions
* Definition of a child
* Earned Income Credit
* Electric and clean-fuel vehicles
* Empowerment zone stock
* Exemption amounts
* Retirement savings plans
* Social security and Medicare taxes
* Standard deduction
* Standard mileage rates
* Tax rate schedules - 2005

For complete details on these changes go to www.irs.gov.

For the fourth year in a row the American trade deficit has hit an all time high with numbers reaching $725.8 billion for 2005, a 17.5% increase over the 2004 deficit. This increase in the deficit is attributed to record numbers of oil, food, cars, and other consumer good imports. In addition, deficits to China, Japan, Europe, OPEC, Canada, Mexico, and South and Central America also reached all-time highs. For complete story details go to Reuters.

The Volatility Index(VIX) implies volatility on the S&P 100(OEX) option. This type of volatility is meant to be a forward looking volatility. As a popular measure of market risk, the VIX is calculated from both calls and puts that are near the money. It is said that “when the VIX is high, it’s time to buy.” Historically with the VIX, when the volatility of the markets jump and then begin to subside, stocks will jump. If you buy Stocks when the VIX is high, you’re taking the risk that the uncertainty of the markets will pass and stocks will rise again. Throughout its history the VIX has proven this theory. Keep in mind however that when the VIX is low does not necessarily mean its time “to go.” InvestmentU.com has a historical chart of the VIX.

For filing taxes in general there is a lot of information, rules, codes, etc. to know about. And when you add trying to figure out how to incorporate your investment earnings and losses there’s even more you need to know. Below are a few links that may have information you can use when getting ready for tax preparation.

I found this article on MSN Money about how “the tax code is built to let you use the money you lost to minimize your tax bill.”

GainsKeeper has a new tool available called DivTracker that “takes the hassle out of calculating qualified dividends. You’ll receive a Qualified Dividend Report displaying your ‘Ordinary’ and ‘Qualified’ dividend income classifications. Qualified dividends are taxed at a lower rate than ordinary dividends, so identifying qualified dividends correctly can save you money.”

Motley Fool has an informative article on preparing to prepare your taxes. They tell you what records and information from your investments you will need for tax preparation.

The most common types of brokerage accounts are cash accounts, margin accounts and option accounts. The different accounts basically reflect your credit and background as an account holder.

A cash is a traditional brokerage account where you pay for all of your purchases in full by the settlement date - you have to have enough cash in your account to cover all of your trades and expenses. With a margin account you can take out loans against securities you own. In order to open a margin account you have to go through a screening process first because the brokerage house is in essence giving you credit. An option account is a type of brokerage account that allows you to trade stock options like puts and calls. In opening this type of account you will have to sign a statement indicating that you are aware and understand the risks that go along with derivative instruments.

Here are some of the benefits of mutual funds over stocks: mutual funds offer a great deal of diversification;
small sums of money get you further in mutual funds than in Stocks; you can exit a fund without getting caught on the bid/ask spread; funds provide an inexpensive and easy way to reinvest dividends; a qualified professional is managing your money.

If you’re looking for aggressive returns on stocks, options or both, you might want to check out NetPicks. Their trading system focuses “on a group of stock that historically have proven to be volatile, trending, liquid and predictable. Our goal is to pursue highly profitable objectives in the short term with holding periods typically ranging from one day to two weeks.” They publish an advisory every evening and morning before the trading day begins and also have intraday updates. They say their evening update is the most important one they provide with “a complete recap of the trading day, after-the-close news and developments, discussion of the critical trading components for the next day as well as an analysis of where the best opportunities might be.” You can check it out with their two week free trial.

A bond is actually a form of debt that a business must pay back over a specific period of time and a certain interest rate. Sometimes you’ll here them referred to as notes or debentures. Corporate bonds are issued by companies of all sizes. Bond holders however are not owners of the corporation. If the company is in financial trouble and needs to be dissolved, bondholders are paid off in full before stock holders are. If the company defaults on a bond payment, any bond holder can go to bankruptcy court and request the corporation be placed in bankruptcy.

Municipal bonds are issued by cities, states and other local agencies. Some municipal bonds are backed by the taxing authority of the state or town, while others rely on earning income to pay the bond interest and principal. Municipal bonds are not taxable by the federal government and so don’t have to pay as much interest as equivalent corporate bonds.

U.S. Bonds are issued by the Treasury Department and other government agencies. They are considered to be safer than corporate bonds, so they pay less interest than similar term corporate bonds. Treasury bonds are not taxable by the state and some states do not tax bonds of other government agencies. Shorter term Treasury bonds are called notes and much shorter term bonds (a year or less) are called bills which have different minimum purchase amounts.