The Long Term Investor

I remember when I bought my income annuities about 7-8 years ago. The ten year treasury yield was at about 2.5%. LOW by historical standards and compared to the more modern times. I was worried about locking in those annuities at such a LOW rate on the Ten Year. In the end I decided to just bite the bullet and do it. The annuities were going to produce the amount of lifetime income that I needed.....so....I locked them in anyway.

In hindsight.....I dont think the Ten Year yield has ever been that high over the past 7-8 years. We have been in a sustained time period of very low rates. I am SO glad that I did not listen to the little voice in my brain telling me that......SURELY (dont call me Shirley) the rates will go higher some time over the next 7-8 years and I could purchase the annuities at that time and get a little more income per year.

 

You are spot on TomB16. I am so glad that I am no longer a small business owner.....although....most of my employees were extremely long term and very dedicated. What a nightmare for the small business community. In just the past week we had to find a new place to board or dogs when we vacation.....our vet can not find workers for the kennel. Every small business I talk to is having issues with workers. Another vet I talked to is not taking any new patients......because they can not find vet tech and other staff.

This is why I say there is a significant chance that the FED will push the country into a recession over the next year and why the economy is much more fragile than people think. I do not mean to get political when I say this....but government on many levels from local to national.........seems to be in total CONFUSION right now in their actions and in their messaging.

 

This little change is going to have a big impact on a lot of off the books income.

Venmo, PayPal and Cash App to report payments of $600 or more to IRS this year: What to know
Business owners are already required to report these incomes to the IRS

https://www.foxbusiness.com/money/venmo-paypal-cash-app-report-payments-irs

(BOLD is my opinion OR what I consider important content)

"Millions of small business owners who rely on payment apps like Venmo, PayPal and Cash App could be subject to a new tax law that just took effect in January.

Beginning this year, third-party payment processors will be required to report a user's business transactions to the IRS if they exceed $600 for the year. The payment apps were previously required to send users Form 1099-K if their gross income exceeded $20,000 or they had 200 separate transactions within a calendar year.

Democrats made the change in March 2021, when they passed the American Rescue Plan without any Republican votes.

The new rule only applies to payments received for goods and services transactions, meaning that using Venmo or PayPal to send a loved one a gift, pay your roommate rent, or reimburse a friend for dinner will be excluded. Also excluded is anyone who receives money from selling a personal item at a loss; for example, if you purchased a couch for $300 and sold it for $250, the amount is not taxable.

To be clear, business owners are already required to report these incomes to the IRS. The new rule simply means that the IRS will figure out what business owners earned on the cash apps regardless of what that individual actually reports on their 1099-K because it broadens the scope of the threshold. (This rule is separate from another Democratic proposal that would require banks and other financial institutions to disclose accounts with $10,000 of annual deposits or outflows to the IRS).

Form 1099-K is used to report goods and services payments received by a business or individual in the calendar year, but there are certain exclusions from gross income and are therefore not subject to income tax. This includes: Amount from selling personal items at a loss, amounts sent as reimbursement and amounts sent as a gift.

"For the 2022 tax year, you should consider the amounts shown on your Form 1099-K when calculating gross receipts for your income tax return," PayPal said in a Q&A on its website. "The IRS will be able to cross-reference both our report and yours."

The cash apps will now be required to send users who meet the newest requirements Form 1099-K for transactions made electronically or by mail. Although the change took effect in the new year, it is not applicable to the 2021 tax season, meaning that small businesses do not need to take it into consideration until the 2022 tax-filing season begins next year.

The apps may request additional information from users in the near future in order to properly report your transactions, and users may be asked to provide their Employer Identification Number (EIN), Individual Tax Identification Number (ITIN) or Social Security Number (SSN) if it's not already on file."

MY COMMENT

LOL......what a mess on many levels. First the payment apps are going to hate all the additional paperwork. AND....I suspect this will cur into their business. Second......the IRS is already TOTALLY incompetent and swamped with data. This additional millions of reports will swamp them even more.....they are even more SCREWED if that is even possible.

Third......this will put a big.......KINK.....in the under-the-table income......business model. The time is coming very soon when it will be very difficult for business to not report or under-report income. We will be a cashless society.......and.....the government will know all. The only good thing is the massive amounts of data will TOTALLY overwhelm government and it will remain totally incompetent. As an investor and former business person I take.....perverse pleasure.....in seeing government totally screwed up and incompetent.....even if I end up paying the price in the end.

As a professional musician.....I DO report all my income. I am at a high enough level that I DO get a 1099 every year so I have no choice on reporting it on my tax return each year. I actually dont mind. I have seen many musicians screwed when they dont qualify for Social Security because of taking payment under the table in cash. A lot of local bands do not report their small income and it is never reported by the clubs that pay them. The guys that I play with were lucky that they do get a 1099 and report their income. When the pandemic hit most of them were able to get the government benefits by being able to show income on a tax return.

 

What a brutal day for the markets. I had a single stock in the green today.....Honeywell. All the rest were significantly DOWN. A couple were in the 1-2% down range.....ALL the rest were down by over 2%. Needless to say I got beat by the SP500 by 0.99%. The ONLY positive spin I can put on today is that the SP500 beat me by less than 1%. That is about as crappy of a positive spin as possible.

Day over......lets move on.

 

I just got back from the HEB. Grocery store for those not familiar with Texas. I was AMAZED. The shelves were very empty in ALL sections of the store. They were more empty than they were at PEAK Covid. It was not like that last month or any other month in the past 18 months. Something is going on. Either the supply chain is royally screwed up way more than a few months ago.....or.....the OMI fear mongering is driving people to shop like there is a pandemic going on.....or.....both. Very interesting.

 

I am NOW down by about 2.48% year to date. It seems worse than that......but I ran the numbers. Thank you to the FED........they are going to drive the country into a recession with just not being able to keep their mouth shut. The markets would probably add about 5% a year if they would just BAN the FED from opening their big mouths or releasing anything.

 

Speaking of the FED.

Stock market news live updates: Stocks drop, tech shares sink after Fed minutes hint at earlier liftoff on interest rates: Nasdaq slides by 3.3%

https://finance.yahoo.com/news/stock-market-news-live-updates-january-5-2022-231453181.html

(BOLD is my opinion OR what I consider important content)

"Technology stocks came under renewed pressure on Wednesday while the Dow Jones Industrial Average pulled back from a fresh record high, with investors turning away from tech and growth stocks in anticipation of higher rates.

The S&P 500 declined to pull back further from Tuesday's record intraday high. The Nasdaq underperformed against the other two major equity indexes. Apple (AAPL) shares built on losses from a day earlier, bringing the stock back down further. after reaching a $3 trillion market capitalization for the first time ever at the start of the week.

Investors eyed the meeting minutes from the Federal Open Market Committee's (FOMC) December meeting, which suggested the central bank was considering a faster removal of its monetary policy accommodation than previously anticipated. Policymakers suggested that against the backdrop of a firming economic recovery and elevated inflation, interest rates could rise sooner than anticipated. And some policymakers also telegraphed they would opt for shrinking the Fed's balance sheet soon thereafter.

"Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated," the minutes said. "Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate."

Investors Wednesday morning also digested fresh upbeat economic data, as private payroll gains handily exceeded estimates for December. ADP said Wednesday that private sector employers added back 807,000 jobs during the final month of November, nearly doubling expectations as job growth picked up to help alleviate some labor shortages.

In the first few trading days of the new year, investors have piled into cyclical areas of the market, with shares of companies seen as the biggest beneficiaries of a firming economic recovery and rising interest rates outperforming. The energy, financials and industrials sectors outperformed in the S&P 500 on Tuesday, and the Dow Jones Industrial Average composed heavily of cyclical stocks rose by more than 200 points to set an all-time closing high.

Treasury yields jumped to build on gains after moving sharply higher on Monday and Tuesday, which had added pressure to technology and growth stocks valued heavily on future earnings potential. The benchmark 10-year jumped to a 9-month high following the release of the Fed's meeting minutes Wednesday afternoon."

MY COMMENT

The rest of the article is just a re-hash of the morning news. So.....the FED left this "stuff" off the table when they discussed their meeting in December.........effectively......sand-bagging the markets today. What a bunch of MORONS. History show us that the majority of recessions are ACTUALLY caused by the actions of the FED misreading the economy. I have a strong suspicion....that is where we are heading this year.

 

In spite of the negative start to the year.....I am STILL expecting a positive year for investors this year. Raise rates, taper, whatever, whenever. I have lived through many, many, markets when interest rates were being raised 0.25% at a time on a regular schedule and each time stocks STILL did just fine. Typically the markets would react for a few days or perhaps a week and then move on.

Of course......the big unknown right now is the HUGE number of younger and newer investors in the markets that have NEVER seen a time period of rising rates. They have ALSO never had to invest in a challenging market or a down market. I dont see anywhere for them to go with their money except for stocks......but....you never know how people are going to react to an unknown situation.

 

As to rates.

TREASURIES-U.S. yields surge after Fed minutes; 5-year hits highest since Feb 2020

https://finance.yahoo.com/news/treasuries-u-yields-surge-fed-201728810.html

(BOLD is my opinion OR what I consider important content)

"Fed says may need to raise rate sooner, faster than expected *

U.S. 2-year yield hits highest since March 2020 *

U.S. 10-year yield rises to strongest level since April 2021 *

U.S. 30-year yield touches more than 2-month high *

U.S. yield curve flattens after Fed minutes

"(Reuters) - U.S. Treasury yields soared on Wednesday after minutes of the last Federal Reserve policy meeting came in more hawkish than expected, flagging three or more interest hikes this year to quell surging inflation.

U.S. 2-year and 5-year yields, which mirror rate hike expectations, climbed to their highest since March and February 2020, respectively.

The benchmark U.S. 10-year yield rose to its strongest level since April 2021, while 30-year yields climbed to more than two-month peaks. In its minutes of the December meeting, the Fed said it might need to raise interest rates sooner than expected but also reduce its overall asset holdings to tame high inflation. The minutes also showed some participants noted that it could be appropriate to begin reducing the size of the Fed's balance relatively soon after beginning to raise the federal funds rate.

"This is news. This is more hawkish than expected. This shift towards hawkishness could be problematic for both stock and bond markets. Markets could struggle with this new shift," said David Carter, chief investment officer at Lenox Wealth Advisors in New York. "Indications that the Fed is very concerned about inflation could quickly create a view that the Fed will aggressively tighten in 2022," he added.

Futures on the federal funds rate on Wednesday have priced in a roughly 80% chance of a quarter-percentage-point rate increase by the Fed at the March meeting following the release of the minutes. Rate futures are also implying about three Fed hikes in 2022.

In afternoon trading, the U.S. 10-year yield rose to 1.712%, the highest since early April 2020. It was last up 3 basis points at 1.6999%. U.S. 30-year yields also climbed to 2.106%, their strongest level since late October, and were last flat on the day at 2.0838%. On the short end of the curve, U.S. 2-year yields zoomed to their highest since March 2020 of 0.834%, and were last up 6 basis points at 0.8256%. U.S. 5-year yields also gained, surging to their highest since February 2020 at 1.4390%. The yield was last up nearly 6 basis points at 1.4293%.

The U.S. yield curve, meanwhile, flattened following the Fed minutes, after steepening the last two session, with the gap between 5-year and 30-yields at 65 basis points. The U.S. 2-year/10-year yield curve was also flatter at 87 basis points. A flatter curve suggested that investors are bracing for rate hikes that should push short-term rates higher.

January 5 Wednesday 3:04PM New York / 2004 GMT Price Current Net Yield % Change (bps) Three-month bills 0.09 0.0913 0.005 Six-month bills 0.2275 0.2309 0.010 Two-year note 99-215/256 0.8316 0.068 Three-year note 99-188/256 1.092 0.070 Five-year note 99-30/256 1.4342 0.060 Seven-year note 98-80/256 1.6316 0.055 10-year note 97-4/256 1.7052 0.039 20-year bond 98-8/256 2.1219 0.017 30-year bond 95-72/256 2.0882 0.010 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 19.50 0.75 spread U.S. 3-year dollar swap 19.50 0.50 spread U.S. 5-year dollar swap 8.75 0.25 spread U.S. 10-year dollar swap 5.25 0.50 spread U.S. 30-year dollar swap -20.00 1.25 spread."

MY COMMENT

OBVIOUSLY now the talk is going to be 24/7....ALL.....about interest rates and the FED. It is going to get real BORING real soon. We are going to see total, obsessive, media focus on this issue and of course massive fear mongering.

It will be so nice to see earnings reports come in a few weeks from now to give us a break from the incessant focus on rates and the FED.

At least the markets are TOTALLY aware of this issue and it is totally BAKED IN. This sort of issue and economic time is all about messaging.....and.....I have ZERO confidence in the ability of the FED to handle the messaging. Dropping this little report on the markets as they did today is simply IRRESPONSIBLE. It REEKS of incompetence. (I am shaking my head and smiling as I type this)

 

It was good to see Zukodany back posting a few times on here today.....one of the stalwarts of the thread. We still seem to be missing Emmett....he must be goofing off on vacation or something. Perhaps he is on location in some exotic spot shooting and staring in his latest film.

 

The one good thing for me if this little ROUT turns into a correction is the fact that I will have about $15,000 to invest in about a month or so. I dont try to time the markets......but.....if it happens that the timing is right I will gladly take it. Those funds are allocated (mentally) to go into the SP500 Index.....but.....I might have to give that plan some thought depending on what the markets are doing in a month when the funds are available.