Sunday, April 19, 2009

Sales tax man cometh & FAZ/FAS swing the markets

There was an article in that pinnacle of business reporting the NY Post over the weekend highlighting that this may finally be the year that sales tax becomes pervasive on online sales as Congress may seek to help states with their budget woes by instituting laws that require the big online retailers to charge sales tax.

Hidden deep down in the article is the notice that all consumers are "supposed" to pay the sales tax they owe for online purchases as part of their annual tax return. So if you spend $500 at Amazon.com last year in theory you owe about $40 when you file your taxes. Being married to an extremely honest tax accountant has forced to me to be painfully aware of this little rule for many years.

I will say however, that seeing that little sales tax line pop-up on Amazon makes me hesitate for a moment before confirming my payment. I'm not sure how much of an impact it may have on Ebay or Amazon (I think the state of the economy is likely to have a far greater impact) but this will be an interesting debate to follow.

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If you're a real glutton for punishment consider reading this article at the WSJ which highlights a growing risk to the market caused by the rapid rise of the double and triple ETFs. These funds seek to capture 200-300% of the market move in the underlying index through the use of options. However, these funds are also required to rebalance their portfolios at the end of the day and this is probably leading to some of the sharp swings in the market at 2pm and again at 3:30pm. I think people have devised models to buy (or sell the market) at 2pm depending on what their expectations are for the end of the day action from the ETF's. Leverage once again rules the day!

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