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Welcome to Sound Money, an (especially) well-named newsletter this week, as we contend with a world teeming with both sound and money.
Put on your noise-canceling headphones. Lawmakers continue to shout over Biden’s proposed $1.9 trillion stimulus package, meme stock traders continue their furious war on hedge funds and the pandemic keeps hanging like a cloud over it all. As always, our reporters endeavor to make sense of it. And if you’d rather just crawl into a hole, scroll down for some “safe” investment ideas. I’ll be right there with you.
Long Story Short
Wondering how exactly an army of Reddit day traders exposed the riskiest market in decades? Our investigative finance reporter Antoine Gara has the one recap you need to read, revealing Robinhood’s role in the short squeeze and the hedge funds who lost big. To further make sense of the madness, we also talked to some of the most respected market minds, including renowned economists Burton Malkiel and Jeremy Siegel. Plus, a former SEC enforcement chief explains stock manipulation and how it might relate to Reddit and GameStop.
If the market has you wanting to permanently relocate to a cabin in the middle of the woods, might I suggest opting for safer bets instead? Forbes Advisor offers eight investment ideas for the risk-averse, ranging from high-yield savings accounts to real estate.
A Stimulus Bill, Still On Capitol Hill
As President Biden pushes for $1,400 stimulus checks, Republicans—and even Democrat Sen. Joe Manchin, a necessary vote—remain indecisive. Biden’s not backing down from $1,400, and he is calling on his party colleagues to hold the line. However, don’t count on this $1.9 trillion package to erase student debt— here’s the latest on where student loan forgiveness stands.
MORE FOR YOU
With the broader stimulus package still going through the congressional sausage maker, two Democrats have introduced a bill intended to stave off a nasty tax season surprise for Americans who lost their jobs in 2020. It would waive federal income taxes on the first $10,200 of unemployment benefits an individual received.
Novel graphic: Housing Bubble Redux? Nothing Like A Pandemic To Inflate Median Home Prices
Capital Gains 101
Day trading newbies—meet the IRS. If you sold GameStop shares for a profit recently, you could face an unexpected federal levy. Fear not: Tax lawyer and Forbes senior contributor Megan Gorman has a primer on short- and long-term capital gains taxes, and what they mean for the latest crop of meme stock investors.
The Child Tax Credit could use some work, argues senior contributor Howard Gleckman. While Biden has proposed increasing the credit and making it fully refundable for 2021, Gleckman asserts that these enhancements should only be extended to low- and middle-income families.
Employers willing, new parents can also find tax relief in their 401(k)s. That’s thanks to a little-known provision of the 2019 Secure Act that allowed parents to take up to $5,000 each from their retirement accounts as a special distribution to cover childcare costs. They won’t owe a penalty but will owe ordinary income taxes—and have the option of replacing the money in their 401(k)s later.
For high-paid self-employed folks, former Forbes magazine editor Bill Baldwin explains how to save hundreds of thousands in taxes via a “defined benefit” retirement plan. (It’s not for the faint of heart.)