Crypto is NOT a Tax Safe Haven
Weekly Roundup
We made it past FOMC day. Now what? Some are already talking about a 2008-like meltdown for stocks. Others are hollering for an EOY rally. So who and what are we to believe?
That’s quite literally the million dollar question. But it does’t have to be so hard…
In fact, if you’re ever feeling confused or lost about the markets, your first instinct should be to check your cash position. Now is not the best time to be assets rich and cash poor. So if you’re feeling overexposed, there’s no question about it.
How to Declare Crypto Tax Losses
Sit down to assess your positions and start cutting the fat. Now is the best time to do so anyway, given that it’s tax loss season and you can write off those losses before the year is out and get a nice fat tax rebate.
Many of us were affected by the FTX situation and overall market downturn. On a personal note, I’ll be writing off some big losses this year. There’s no shame in admitting it.
Also, if you haven’t been declaring your crypto taxes, take my word for it…you need to start. Tax fraud is no joke. Many countries take it so seriously that if you skip out on your taxes, you could be facing serious time in prison. It could also bury you financially.
The government has a sneaky way of getting its hands on your money, even if it’s squirrelled away in some obscure account behind several layers of security. If you’ve ever had your belongings searched at a US port of entry, you know how efficient those officers are at locating items they deem inadmissible.
It’s the same thing with your money. If it’s out there, they will discover it eventually. But if you’re trying to hide it, the consequences could be severe. It’s not worth taking that chance. Crypto is not a tax fraud safe haven.
Since all the money I earn is paid in crypto, I use a web application called Koinly to do my crypto accounting. It’s super easy to connect your API’s and input reports from your various exchanges and wallets. Then, just print out the full report and let your accountant handle the rest! If you use THIS link, you’ll get a free $20 credit. Don’t skip your taxes this year!
Events This Week
Let’s talk about the economic calendar for this week.
Consumer Confidence
This economic indicator is put out by The Conference Board, and while it is not talked about as much as Michigan Consumer Sentiment, it still provides some valuable insights. Here’s a snippet from the November report.
This along with the decline in personal savings rate we talked about last week, makes it clear the average American consumer is slowing down whether or not he or she will readily admit it.
Personal Consumption Expenditures (PCE)
FOMC committee members use Core PCE (which excludes volatile food and energy prices) as their primary gauge of inflation. That’s why it’s such a talked-about and highly anticipated data release.
There are a few reasons why the market performed poorly to end the week, but this is definitely one of them:
Again we see this persistent inflation, higher for longer theme continuing with renewed Fed hawkishness. If November Core PCE does come in on the lower end, around +0.2%, the market likely bounces this week. If it comes in at +0.4% or higher, I’d expect further selling. Check the latest crypto and stock index chart updates here.
Personal Income & Spending
Personal income recorded an uptick in October, largely due to increases in compensation and government social benefits. Some States issued one-time refundable tax credits and wages in both the goods and services industries remained strong. Personal Spending was only negative in one month of 2022 – July. It remains high but is expected to have slowed in November. These numbers won’t have a big market impact but the trends are worth watching. Also if they come in low, it’s good news on the inflation front.
Personal Income
Personal Spending
Michigan Consumer Sentiment
Consumer sentiment has been trending up since June. This study assesses how consumers view prospects for their own financial situation, as well as for the general economy over both the near and long term. Consumers remain sanguine, but how will the coming labour market cooldown affect this in 2023? Stay tuned.
Hot Takes
This chart seems to be making its way around Twitter.
But I like TGC’s comeback to it:
Lesson here? When a mean reversion move retraces more than 50% of the decline preceding it, the chance of making new lows is diminished. The 2022 structure is different from 2008.
Final Thoughts
It’s all about the PCE numbers this week. That’s the final major data point for 2022. We’re still waiting for the market to set up for some bigger swing trades, and they will eventually come.
Keep it tuned here for the next big update where we dive back into the charts! And remember to record your crypto losses for the year! You’ll thank me later.
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