Stocks Plunge to 5 Year Lows as Investors Panic
Market News & Commentary by Chris McLaughlin, October 6, 2008
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Panic. Mania. Free Fall. Think of a lot of really bad adjectives and just put them next to the word “stock market” and you pretty much have summed up how bad it was today after lunchtime. The market plunged over 800 points, touching a level of 9,497.72, a level not seen since October 23, 2003. But bargain hunters jumped in at the last minute, with the Dow ending the day down 369.88 to 9,955.50. Fears of global recession sent oil below $90 a barrel, and while the stock market was “only down 369” at the end of the day, investors fear that more carnage may be ahead.
In a real sign of that potential carnage, a CNN/Opinion Research Cop. poll showed that almost 60% of Americans believed that a depression, with 25% unemployment and extensive bank failures, was at least “somewhat likely.”
In real estate related news, the Federal Reserve said that it would lend up to $900 billion in cash to help break the credit crunch adversely affecting banks and consumers. The Fed said its 84-day and 28-day loans that are made to banks will increase by $150 billion each, which adds to the $600 billion already available. “Together these actions should encourage term lending across a range of financial markets in a manner that eases pressures and promotes the ability of firms and households to obtain credit,” the Fed said.
Now, onto our real estate investor education section…
Bonus Depreciation: More Reason than Ever to Buy Short Sales in 2008
Searching for even more reasons to start buying short sales sooner rather than later? Today we will take a few minutes to add to the previously mentioned items on why short sales make more sense now than ever before: Bonus Depreciation for 2008. If eligible, the additional depreciation allows you to take an additional 50 percent depreciation of the qualifying property in the first year – a hefty write-off to be sure!
As part of the stimulus package approved by congress earlier this year, many short sale investors may be eligible for a small windfall in the form of bonus depreciation. The 2008 bonus depreciation covers more than real estate; depending upon qualifying criteria, it may cover tools, software, leaseholds and a host of other potential assets related to your short sale investments. To qualify, the property must conform to one of the following:
· Eligible for the MACRS (Modified Accelerated Cost Recovery System) with a depreciation period of 20 years or less.
· Tangible property including equipment, a qualified leasehold property, water utility property, non-proprietary software program.
· Acquired in 2008 via a binding contract or manufacture, construction or production started during 2008. The contract and work must be dated after January 1, 2008 to qualify.
A few important facts to keep in mind…
1. Bonus depreciation for 2008 can be combined with Sec 179 expensing for even greater savings!
2. The depreciation bonus is due to expire at the end of 2008 for equipment, software and other purchases with a depreciation schedule less than ten years but has now been extended until the end of 2009 for items (like real estate) with depreciation schedules greater than 20 years.
3. Bonus depreciation is discretionary – you are not required to claim it. If you are concerned over large tax bills in the future then it may be better to take the tax hit today and leave additional depreciation available in the future. Remember, depreciation must be recaptured when you sell a property – it is separate from Capital Gains taxes.
4. Bonus depreciation is allowed for those filing AMT or regular taxes.
Ok, enough about depreciation, I know it isn’t your most exciting topic, but you need to see all the opportunities out there! I held a conference call today with realtors and investors focused on short sales and continued my drum beat: some of us will come out of this turmoil making more money than ever before. I don’t know about you, but I plan on being on the winning side of the equation. Henry David Thoreau said “Most men lead lives of quiet desperation and go to the grave with the song still in them.” That group of men has a lot of people that joined it today. I refuse to be a participant.
I know it is tough out there. Your 401(k) stinks, your home equity seems non-existent, and your income compared to last year is way off. So you can join the group of quiet desperation, and you can get all depressed about how things are. Or you can say, you know what, this is what separates the leaders from the pretenders. This is what will set up my business for the next decade. This is the moment. This is the time. Now go seize it!
More on Tuesday …
Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com
Phone: (800) 452-7627
P.S.:
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