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Elon Musk has turned Twitter into dead money: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Monday, July 11, 2022
Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
As my career has soldiered on, I have come to terms with one thing: rich, powerful people are going to do whatever they damn well please.
The reason for that is pretty simple — they have the money, connections, and the ruthless aggression to foster whatever reality they so desire.
This might sound cynical, but I have seen it time and time again. And now, everyone is seeing it firsthand with the world’s richest person, Elon Musk, backing out of his $44 billion deal for Twitter late on Friday.
Musk is terminating the merger agreement with Twitter because of what his team believes have been “material” breaches of multiple provisions in the agreement. Some of those provisions appear to include Twitter’s recent decision to can about a third of its recruiting team and not providing Musk with what he views as accurate data on “bots,” or fake accounts.
Twitter chairman Bret Taylor tweeted the company will take this to the courts to get Musk to close the deal or have him pony up the $1 billion breakup fee. Taylor declined to comment to me on the unfolding series of events. On Sunday evening, Bloomberg reported that Twitter has hired the legal heavyweights over at Watchell, Lipton to sue Musk.
A spokesperson for Twitter declined to make CEO Parag Agrawal available for an interview. (A quick aside: Agrawal has been bizarrely quiet since the merger news hit and it would be good for him to show some outward leadership to rally the troops as his company is essentially burning down to the ground.)
“This is a ‘code red’ situation for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum. We see no other bidders emerging at this time while legal proceedings play out in the courts,” Wedbush analyst Dan Ives said in a note to clients following Friday’s news.
Ives cut his price target on Twitter to $30, and we expect other analysts on the Street to make similar moves this week.
To that end, here are eight reasons why Twitter’s stock is probably dead money for the foreseeable future following Musk’s iron fist slamming down on the social media platform:
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Wall Street won’t trust Twitter’s operating metrics in light of the fake account debate.
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Twitter’s advertising business will be hurt for a while due to Musk’s involvement.
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Investor focus will return to Twitter’s subpar operating performance versus Meta (META), Snap (SNAP), and TikTok.
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The talent drain has opened at Twitter amidst the Musk debacle, impacting future product development.
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There is a growing lack of confidence in new, unproven CEO Agrawal.
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Twitter is now locked in a costly long-term court battle with the world’s richest person, which is not a great place to be.
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No other bidders are likely to appear. For years, there was a view from investors that Twitter would eventually be acquired. That has to be completely removed from the equation.
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Musk is likely to dump his nearly 10% stake in Twitter, which would pressure the stock price. Just the potential for this happening could weigh on the stock.
In one fell swoop, Musk has singlehandley destroyed a public company. Destroyed it because he has the money, connections, and the ruthless aggression to do it.
The blunt truth is Musk probably doesn’t give a damn that he has left a platform used around the world in utter shambles. It comes with the territory with people like Musk.
Now, if this disaster is good news for anyone, it could be Tesla (TSLA) shareholders.
Tesla stock has lost nearly 30% since Musk announced his deal to buy Twitter, and Ives thinks this deal going away could offer a relief rally for shares. The looming court battle between Musk and Twitter, however, will likely leave the Street wary about getting too fired up for either company’s prospects in the months ahead, in Ives’ view.
Happy Trading…and we wish you well trying to come back from the abyss, Twitter.
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Uncategorized
American Weed Stocks Are Cheap. They’re About to Get a Sales Bump.

However bad the year has been for most stocks, it has been especially harsh for state-licensed cannabis sellers.
In just the past month, the
AdvisorShares Pure US Cannabis
exchange-traded fund (ticker: MSOS), which tracks America’s multistate operators—or MSOs—fell 25%, while the
S&P 500
dropped 7%.
Uncategorized
How Do Mega Backdoor Roths Work?

A mega backdoor Roth is a unique 401(k) rollover strategy that’s designed for people whose incomes would ordinarily keep them from saving in a Roth Individual Retirement Account. The advantage of using a Roth IRA to save for retirement is being able to make tax-free qualified withdrawals. But not everyone can contribute to these accounts; higher-income earners are excluded. That’s where the mega backdoor Roth comes into play. If you have a 401(k) you’d like to roll over, you could use this strategy to enjoy the tax benefits of a Roth IRA without having income be an obstacle.
Make sure you’re taking advantage of every opportunity to maximize your retirement assets by working with a financial advisor.
Roth Account Basics
Before diving into the specifics of a mega backdoor Roth, there are a few things to know about Roth accounts, including Roth IRAs and Roth 401(k)s.
First, these accounts are both funded with after-tax dollars. That means when you make qualified withdrawals later, you won’t pay income tax on the money since you already paid it upfront. This is the key characteristic of Roth accounts and what makes them so appealing to investors who anticipate being in a higher tax bracket at retirement.
Next, your ability to contribute to a Roth 401(k) is not restricted by your income. But it is for a Roth IRA. For the 2021 tax year, you must be within these modified adjusted gross income limits to make a full Roth IRA contribution:
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Single filers: MAGI of $125,000 or less
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Married filing jointly: MAGI of $198,000 or less
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Head of household: MAGI of $125,000 or less
You can make partial contributions above those income limits. But your ability to contribute phases out completely once your MAGI hits $140,000 (if you file single or head of household) or $208,000 if you’re married and file a joint return. For 2021, the full contribution allowed is $6,000 with a $1,000 catch-up contribution for savers aged 50 and older.
Finally, Roth 401(k) accounts are subject to required minimum distribution rules just like traditional 401(k) accounts. This rule requires you to begin taking money from your 401(k) starting at age 72. A Roth IRA, on the other hand, is not subject to RMD rules.
What Is a Backdoor Roth?
A backdoor Roth offers a work-around for people whose incomes are above the limits set by the IRS. When you execute a backdoor Roth, you roll money over from a traditional IRA to a Roth account. This way, you won’t have to pay taxes on your retirement savings in the Roth IRA when it’s time to make withdrawals. And you’re not subject to required minimum distribution rules either.
But there is a catch. You have to pay income tax on the money you roll over to a Roth account. So while you could save money on taxes in retirement, you’re not escaping the tax liability of a traditional IRA altogether.
How a Mega Backdoor Roth Works
A mega backdoor Roth is a backdoor Roth that’s designed specifically for people who have a 401(k) plan at work. This type of backdoor Roth allows you to contribute up to $38,500 to a Roth IRA or a Roth 401(k) in 2021. This is in addition to the regular annual contribution limits the IRS allows for these types of accounts. To execute a mega backdoor Roth, two conditions have to be met. Your 401(k) plan needs to allow the following:
You can ask your plan administrator whether your 401(k) meets these criteria. And if your plan doesn’t allow for in-service withdrawals or distributions, you could still attempt a mega backdoor Roth if you plan to leave your job in the near future.
If your plan meets the criteria, then you can take the next steps to execute a mega backdoor Roth. This is typically a two-step process that involves maxing out after-tax 401(k) contributions, then withdrawing the after-tax portion of your account to a Roth IRA.
Again, whether you can follow through on the second step depends on whether your plan allows in-service withdrawals. If it doesn’t, you’ll have to wait until you separate from your employer to roll over any after-tax money in your 401(k) into a Roth IRA.
You also need to watch out for the pro rata rule. This IRS rule says you can’t only withdraw pre- or post-tax contributions from a traditional 401(k). So if you’re completing a mega backdoor Roth, you couldn’t just withdraw post-tax contributions if your account holds both pre- and post-tax funds. In that case, you may have to roll over the entire balance to a Roth IRA.
Benefits of a Mega Backdoor Roth
There are three key benefits associated with executing a mega backdoor Roth. First, you can contribute significantly more to a Roth IRA upfront this way. For 2021, the contribution limit is $38,500 on top of the regular annual contribution limit and any catch-up contribution limits that may apply.
You’ll need to know the maximum amount you’re allowed to contribute to the after-tax portion of your 401(k). So for 2021, the IRS allows a maximum contribution of $58,000 or $64,500 if you’re 50 or older. You’d subtract your 401(k) contributions and anything your employer adds in matching contributions to figure out how much you could add to the after-tax portion.
Next, you can enjoy tax-free withdrawals in retirement. This is a benefit you may otherwise not being able to get if your income is too high to contribute to a Roth IRA. By reducing your tax liability in retirement, you can help your investment dollars go further. And you may have a larger legacy of wealth to pass on to future generations.
Finally, a mega backdoor Roth IRA would allow you to sidestep required minimum distribution rules. This means that you could retain control over when you choose to take distributions from a Roth IRA.
So who is a mega backdoor Roth right for? You may consider this move if you:
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Have an eligible 401(k) plan at work
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Have maxed out traditional 401(k) contributions
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Are not eligible to contribute to a Roth IRA because of your income
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Have additional money that you want to invest for retirement
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Want to leverage the higher Roth IRA contribution limits allowed by a mega backdoor rollover
Talking to your financial advisor can help you decide if a mega backdoor Roth makes sense. And your 401(k) plan administrator should be able to tell you if it’s possible, based on your plan’s guidelines.
Mega Backdoor Roth Alternatives
If you can’t execute a mega backdoor Roth because your plan doesn’t allow it, there are other ways to increase your retirement savings. For example, you could try a regular backdoor Roth instead. This might be something to consider if you still want to enjoy the tax benefits of a Roth IRA but your plan doesn’t fit the criteria for a mega rollover. You could also elect to make Roth 401(k) contributions to your retirement plan at work. This way, you still get the benefit of contributing after-tax dollars and making tax-free withdrawals. You’d be subject to the regular contribution limits and you’d still have to take the required minimum distribution. But that may outweigh the value of tax savings in retirement.
Investing in a Health Savings Account (HSA) is another option. While these accounts are not specifically designed for retirement, they can yield multiple tax benefits. Contributions are tax-deductible and grow tax-deferred. Withdrawals are tax-free when used for eligible healthcare expenses. And at 65, you can take money out of an HSA for any reason without a tax penalty. You’ll just owe ordinary income tax on any withdrawals that are not used for healthcare expenses.
Finally, you could open a taxable brokerage account to invest. This doesn’t necessarily save you money on taxes since you’ll owe capital gains tax when you sell investments at a profit. But it could help you to diversify your investments and there are no limits on how much you can invest in a brokerage account annually.
Bottom Line
A mega backdoor Roth strategy could work well for higher-income earners who want to take advantage of Roth account benefits. There are certain rules that need to be followed to make it work, however, so you may want to talk to your plan administrator or a tax professional before going ahead. Keep in mind also that even if you can’t complete a mega backdoor Roth rollover, you still have other options for growing retirement savings.
Tips for Retirement Planning
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If you’re saving for retirement in a 401(k) or IRA, pay attention to the fees you’re paying. For instance, check the expense ratios for each fund you’re invested in to understand how much you pay to own that fund on an annual basis. You can then compare that to the fund’s performance to determine whether the fees are justified. Also, consider any administrative fees you might be paying and how those affect your net returns.
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Consider talking to your financial advisor about a mega backdoor Roth and whether it could be right for you. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. You can get your personalized recommendations in minutes just by answering a few simple questions. If you’re ready, get started now.
Photo credit: ©iStock.com/designer491
Uncategorized
Alibaba Is Tumbling. Chinese Tech Stocks Have a New Headache.

Chinese tech stocks were tumbling on Monday as two of the embattled sector’s leading players faced fresh fines from market regulators over disclosure rules.
China’s State Administration for Market Regulation announced Sunday a wave of penalties for improperly reporting past deals, in breach of competition law.
Alibaba
(ticker: BABA) and
Tencent
(0700.H.K.) were among the companies fined as a result.
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