The 2009 401k contributions limits are up from last year. You can contribute up to $16,500. If you are 50 or older the limit is a whopping $22,000 this year.
I’ve been a capitalist from a very young age. I had a paper route when I was 11 years old and a bank account even longer. I’d save up my earnings from allowance and odd jobs to buy things big things… a pellet gun or even an ATV.
I’ve worked either a “real job” or summer job since I was 16. I’ve degreased deep fat fry filters, changed industrial light bulbs and ballasts, cleaned up manure, supervised inmates, helped survey roads and building sites, painted walls, and written software. All that just and more in high school and college.
When I finally got a “real job” (e.g. one that utilized my four-year degree) I was taken aback by the paltriness of my first paycheck. OMG, I’ve paid taxes on $5- to $12-dollar- an-hour jobs, but suddenly taking home only 60 percent of my salary. Not all of that missing 40% was taxes. Some was medical and dental insurance premiums. But between state, federal, Social Security and Medicare 30% of my check was just — POOF! — gone.
Once I got done with all the swearing, months later, I started to investigate where all my money was going. On the state level it was pretty obvious. Schools, colleges, roads, infrastructure, police, fire dept., etc. Actually the state stuff all seemed pretty reasonable.
At the federal level not so much. What do you mean a big part of Social Security dollars aren’t going to recipients nor are they being invested either? Its being spent on other stuff? Other than the Interstate system, National Parks, and defense where do I get squat that actually helps me or any of us working folks?! Ah, but I digress.
Capitalism has been getting some flack in the press and the political circuit the last several years. There is even talk about the failure of the capitalist system during the “Great Recession of 2008”. I do like the term Great Recession and I think its fairly apt. Historically this recession is looking like a doozy. With official unemployment flirting with 10 percent, and real unemployment/underemployment closer to 15% this one sucks. However, it is a recession and not a depression and certainly not particular failure of capitalism.
Market cycles are perhaps a failing of capitalism but not a failure. I ask you this:
Would you rather have up-and-down, dynamic system that generally goes up and creates all sorts of wonders in the process or a flatter, grayer system that goes nowhere and only creates malaise, sameness, and despair?
While I am a capitalist I am not opposed to smart regulation. Capitalism is one thing but capitalist anarchy is quite another. Basic laws and rules are necessary and even beneficial to the long-term heath of the capitalist system.
Regarding the over-the-counter (OTC) derivatives market, I believe that legislation to shine some daylight could be very helpful. I believe this OTC activity should be disclosed to the shareholders of public companies who participate in such trading. The idea of a clearinghouse is even sensible. Who is exposed to how much risk is a question that should be answered on at a least a quarterly basis.
So I’m a Capitalist. Let me end by putting out some ideas where the US [government] is not being capitalist enough:
- Making it illegal to buy prescription drugs from Canada? That’s not free trade. Let citizens buy whatever they want from whomever they want. Caveat emptor of course.
- Marijuana is illegal? While I don’t condone its use, wouldn’t a true capitalist society allow its sale and trade? Imaging how much California, alone, could make by taxing the stuff?
- “Scalping” tickets is illegal in some places? Pul-leez people! If enterprising people want to buy tickets and try to resell them for more so be it. Sounds like capitalism to me.
My employer has generously given our lab the day off to celebrate some of our recent successes, giving me a four-day weekend. What a precious gift — time. Time to relax and see a concert, time to clean the house, time to blog at balhiser.com. This gift off one day plus the Labor Day Weekend got me thinking about time and investing and how the two relate.
Time is a critical factor in investing. Interest and dividends are paid out over time. Inflation adds up over time, as does compounding. Annuities pay out over a lifetime. And, of course, pundits debate whether it is worth it to try to time the markets.
Time shows up in just about every financial formula, starting with the basic time value of money computations.
And, naturally, savings accumulates (or debts) over a period of time.
Putting this all together time is generally on your side as an investor. Especially if you are in your 20’s, 30’s, 40’s or even 50’s and investing in retirement. Having a 20-year plus time horizon is very likely to help smooth out the huge market ups and downs.
The biggest gotcha about time is inflation. Certainly inflation is my greatest concern. A dollar today is not worth what it was 10 years ago. I paid $1.00 for a Hershey Bar this week. 10 years ago I could have bought 2 for $1.oo. The other big gotcha about time is uncertainty. What will taxes be for IRA and 401(k) withdrawals? What will the economy look like? Will I have a job and will my pay keep up with inflation and taxes?
That said, I still believe time is on the side of long-term investors. Tax-deferred compounding of IRA and 401(k) assets is very helpful. The tax deferral of unrealized capital gains in taxable accounts is another investing boon. Finally the tax-free advantages of Roth IRA and 401K assets is another helpful option to help leverage the power of time.
Enough about that. A quick Crazy Ivan Account update: $21,750. Nice appreciation of late. Even my Barclays ADR (BCS) is up from the initial purchase price. Quite wild ride on the banks. The covered call I sold on SPY is in the red, but the 100 shares of SPY are in the black by more. That how covered calls generally work out — smoothing the volatility out of both the ups and the downs.