A recent New York Times editorial recently made the case for a trading tax. Superficially, it’s tempting: if we have a way to make counterproductive gamblers pay up for their vices, why not use it? There are several problems with the proposal:

• As Christine Hurt at Conglomerate points out, this tax could hurt the traders who do the worst anyway: “We like to say that the “buy-and-hold” people come out on top, so then isn’t the tax regressive — taxing the silly speculators who don’t understand investing, just like lotteries are regressive taxes on poor people who are bad at math?”
• It’s a tax on liquidity, and we really need liquidity right now. One of the great

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We hate losing money about twice as much as we like making it. Seriously. Several studies show that if you unexpectedly lose $1, you won’t be happy making just $1 back — you need $2 to reach an even keel. That’s one reason market volatility makes folks so nervous; when losses hurt more than gains help, a market that bounces around a particular level still makes people unhappy.

Here are a few ways you can ease the pain:

1. If you’re going to own stocks, own them forever. It’s not hard. Think about a company’s product. Ask yourself if people will still use it in fifty years. If yes, and the stock is fairly cheap, buy. If no, don’t. Sure,

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With the market in the doldrums and the election turning nastier every day, most people are feeling increasingly negative about everything, their finances included. But the markets have (for now) stopped crashing, and some people are taking stock and seeing reasons to be optimistic. Meanwhile, others point out that there are still some financial follies to avoid. And, of course, there’s a new crop of entertaining tax evaders since the last edition of Today in the Taxosphere.

• Legendary investor Warren Buffett says to buy stocks — he is. According to his new authorized biography, the normally cautious Buffett made lots of personal investments in the late 1970′s — using borrowed money. Could be a good sign. Of course,

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$700 billion. It’s an incredible number. The Troubled Asset Relief program (abbreviated TARP, often just called “The Bailout”) is an unprecedented spending spree. The closest comparison, the Marshall Plan, cost about $110 billion in present dollars, so the scope of the TARP is beyond that of any new government program.

When people hear about $700 billion in new spending, their first reaction after scraping their jaw off the floor is to ask: “Who will pay for this?” with the sneaking suspicion that the answer is, as usual, “The taxpayers.”

But it’s not that simple. The first important thing to realize about paying for the bailout is that it’s not necessarily going to mean a higher tax rate or an end… Read more…

It’s hard to miss the headlines about hedge fund collapses. It seems like every day there’s a story of another hedge fund that blew up thanks to esoteric bets on mortgages, metals, or currencies. One easy lesson to draw from this is that the hedge fund concept has been thoroughly debunked. But a better lesson is to ask how you can behave more like a smart hedge fund owner.

I don’t mean to suggest that any small investor should play with the financial high-wire act that some funds use. Nor should typical investors play around with complex securities like stock options — if a team of MIT-educated PhDs could lose billions of dollars on ‘risk-free’ options trading, it might… Read more…

Whether you’re sitting on an employee options grant or day-trading puts and calls, taxes play an important part in determining how much money you keep from every trade. Here are some quick tips to get you started:

When you are granted employee stock options, you won’t pay taxes on the initial grant. This is one of the reasons options have been so popular. They’re a great way to show someone that their work is recognized, but to give them an incentive to stick around for the long term. Since they’re valuable from day one, they provide a nice incentive, but unlike other forms of incentive, they don’t burden anyone with a cash outlay.

When you do cash in your options,… Read more…