Tax-Deductible Sports and Fitness?

As most everyone knows by now, the increase in obesity is threatening the health of millions of Americans. This has a real cost -- estimated at about $100 billion a year. Every extra dollar spent on health care hits you right in the pocketbook, in the form of higher health insurance premiums (which of course also filters into every product you buy -- for instance, $1,500 for every GM car).

Now there is a proposal in Congress to expand Health Savings Accounts, Flexible Spending Accounts, and Medical Savings Accounts to allow reimbursement for exercise, fitness, and organized sports. It's designated H.R. 5479 and called The Personal Health Investment Today Act of 2006 ("PHIT" -- get it? Who makes up these acronyms anyway?). It makes everything from health club dues and exercise equipment, to sports gear, effectively tax-deductible -- if you have a qualifying medical expense reimbursement plan in place (which of course is a good idea already).

This sounds like an idea worth considering, although of course the potential for abuse is there. If you support this idea -- or if you oppose it -- now is the time to inform your elected representatives. You can get your congressional representative's contact information at http://www.house.gov/.

Information about the bill, including its full text, sponsors, and current status, can be seen here. At this writing, it's in the Ways and Means Committee.

Beware of Oil Company Stocks Now

My 2nd post in this blog was entitled "Invest in oil & energy." OK, I need to modify that.

Here's what I mean: Long term, oil and energy companies should continue to do well, especially the ones that are intended to provide income (like Canadian royalty trusts in general). But what I'm hearing now, from the people whose job it is to know these things, is to look for a pause and/or decline in these stock prices over the next few weeks and months.

But "What?" you say ... "We're just now approaching the height of hurricane season." Yes, and when did the highest oil prices, and oil stock prices, occur last year? Look at a chart of XLE, the oil company ETF (exchange-traded fund). Most of the increase came before Katrina. After Katrina hit on August 29, prices rose (relatively) slowly for the next month, finally reaching about 8% higher at the end of September. Then they suddenly plunged nearly 20% in three weeks. It was not until January 2007 that the Katrina peak was exceeded.

In fact, at this writing, XLE's latest close was at 54.48 on July 21, below the Katrina peak of 54.65.

So higher oil company stock prices are not a given. In fact, there are several signs that the XLE is heading into a multi-month decline. If the stock market as a whole declines over the next few weeks, as the odds seem to say, then oil stocks could easily go along for the ride. Oil stocks are, after all, stocks.

Another way of looking at this: In the short term, stock prices are influenced primarily by trader psychology, not fundamental factors such as profits and news events. Everyone has been buying oil stocks in anticipation they will go up. When everyone that wants to buy has done so, then prices have no place to go but down.

Hedge funds especially have been a big influence on the markets over the last few years. They all buy things that go up. When those things start going down, all the hedge funds have to sell at once, and the door is too small for everyone to get out in time.

So right now is probably not the time to jump into oil stocks. In fact, you might want to:

1. Sell some.
2. Donate stock instead of selling it. This is one of the best tax breaks you will find.
3. If you are a trader, you can sell short the XLE, and/or the OIH (oil services ETF) and hold that position for a few weeks or months.
4. If you are an options trader, you can buy put options on XLE and/or OIH.

Numbers 2 through 4 are good if taxes are a concern (and for most of us they are, unless your holdings are in an IRA).

If you don't want to be a trader, just be prepared for oil stock pain. Make sure your portfolio is tilted toward income. If you want to get started buying for the longer term, don't jump in all at once -- either feed money in on a regular monthly basis, or buy some more every time there are a few days of decline.

When I start hearing the message that oil stocks are making a bottom, I'll post it here. I pay a lot of attention to energy investing, as you may have guessed. I own a lot of these stocks, but recently for protection I've been doing all four things listed above. (Again, the best way is not all at once, but gradually.)

Caution Warranted in Stock Market till Autumn

I'm not an investment advisor, but I keep my ear to the ground and subscribe to some good market advice. The advisories I pay lots of attention to are all talking about considerable market danger between now and the September-October time frame. They are talking about reducing risk.

Not, it's not necessarily about the outbreak of fighting in the Middle East (although that could make things worse, at least temporarily). The market often doesn't respond to news the way you think it will. Right now I'm talking about seasonal and cyclical factors.

First, the period from summer through October is often weak in the markets. You may have heard the saying "Sell in May and go away," which is not an old wives' tales -- it has a lot of truth to it. For instance, a lot of money has been lost since the market started tumbling on May 11 of this year.

Second, a lot of market action can be understood by fitting it into a 4-year cycle. Why four years, I don't know, except I suspect it's related to the Presidential election schedule and the efforts of each administration to stimulate the economy to get re-elected. For whatever reason, the market has a strong tendency to reach a notable low point around October of a midterm election year. And of course 2006 is one of those.

In other words, not only are we coming up on the worst part of the year, but we are also coming up on the worst part of the four-year cycle.

Therefore caution is advisable.

The advisors I respect are taking precautionary measures such as selling some growth stocks and concentrating more on safety and income for the next several weeks. It's looking like even oil stocks may not be immune to the weakness, even if the price of oil remain high (and it might also back off, at least for a while).

Stocks could still have a nice bounce in late July or August, but the experts I listen to are saying to take that opportunity to lighten up even more.

But be alert; the period from about November through January is the best part of the year for stocks.

Of course, any given year can vary, but these seasonal tendencies hold true over time.

Free Directory Assistance

Remember when directory assistance was free? Then Ma Bell started charging for it -- first a little, then more, and now a lot. I saw one figure quoted at $1.49.

Of course nowadays you can look on the Internet, but what if your computer is turned off or you're traveling? Anyway, someone has decided to fight back. If you call 1-800-FREE-411 (800-373-3411), you can get directory assistance free.

And it works, at least for the number I tried. It's an automated voice-recognition system so you should speak clearly.