Business Frame Weekly – Investors are betting the stock market will return to normal/ IRS Proposes Rules on Energy Projects for Low-Income Areas

Wall Street's insistence on clinging to the past is about to screw over a lot of investors.

A program established by the Inflation Reduction Act incentivizes solar and wind power in certain low-income communities.

In this newsletter:

• Investors are betting the stock market will return to normal. They're so, so wrong
• IRS Proposes Rules on Energy Projects for Low-Income Areas
• A Wall Street trader made a $7.5 million windfall on a suspiciously-timed investment ahead of a surprise debt limit deal concession
• A pandemic-era tax break that remains rife with abuse — the ERC
• Gold rebounds after US services slowdown boosts Fed pause bets

June 06, 2023

Investors are betting the stock market will return to normal. They're so, so wrong

Wall Street's insistence on clinging to the past is about to screw over a lot of investors. Wall Street desperately wants the stock market to go back to the good ol' days. You know, like during the pandemic, when interest rates were at zero, the government was mailing checks everywhere, and it seemed everyone had so much real money, they were using it to buy fake money. In that environment, any idiot — or anyone on Wall Street — could buy almost any asset, sit back, and watch its value increase. Stocks didn't just go up, they soared.

IRS Proposes Rules on Energy Projects for Low-Income Areas

A program established by the Inflation Reduction Act incentivizes solar and wind power in certain low-income communities. The IRS and the Treasury Department issued proposed regulations on May 31 for applicants investing in certain solar- and wind-powered electricity generation facilities. The IRS on Feb. 13 provided guidance to establish a program—the Low-Income Communities Bonus Credit Program under Section 48(e) of the Internal Revenue Code—to allocate amounts of environmental justice solar and wind capacity limitation to qualified solar and wind facilities eligible for the investment tax credit. This program incentivizes solar and wind power in certain low-income areas under the Inflation Reduction Act of 2022.

A Wall Street trader made a $7.5 million windfall on a suspiciously-timed investment ahead of a surprise debt limit deal concession

As part of the debt ceiling deal, one surprise concession that made it into the bill was the approval of the Mountain Valley Pipeline, a 304-mile natural gas connection from northwest West Virginia to southern Virginia. A pet project of West Virginia Sen. Joe Manchin that had been mired in Congress, the law forces action on permits that should push the project forward. However, there was no public reason to believe that the pipeline was in the deal at all, which makes the actions of one mystery trader — who made a killing on its inclusion — somewhat suspicious, according to a Bloomberg analysis of trading data.

A pandemic-era tax break that remains rife with abuse — the ERC

It began as a way to help business owners and workers by providing a tax credit for employers that continued to pay employees at the height of the COVID-19 pandemic. But the employee retention credit (ERC) became so rife with abuse that the IRS cannot keep up with the legitimate filings. The Service has published at least six warnings about ERC abuse since October 2022, including making it No. 1 on its annual "Dirty Dozen" list of the 12 top tax scams earlier this year. It added a seventh release last week with another warning about "a barrage of aggressive broadcast advertising, direct mail solicitations, and online promises" from ERC promoters.

Gold rebounds after US services slowdown boosts Fed pause bets.

Gold rebounded on Monday after weaker U.S. services sector growth reinforced bets for the Federal Reserve to stand pat on interest rates next week. Spot gold gained 0.6% to $1,958.89 per ounce by 1:40 p.m. EDT (1740 GMT), erasing losses from earlier in the session, when it touched its lowest since May 30. U.S. gold futures settled up 0.2% at $1,974.30. The U.S. services sector barely grew in May as new orders slowed, with the Institute for Supply Management's non-manufacturing index falling to 50.3 last month from 51.9 in April and missing expectations for an uptick to 52.2. "The market is really taking it in as a reason to pencil out some rate hikes here ... It's certainly something that the Fed is pleased to see with respect to its fight against inflation," said Daniel Ghali, commodity strategist at TD Securities.

Random Ramblings

• What do taxes have to do with the NBA finals?
• How to harness the power of data analytics for business growth?
• 6 common scenarios when you might need a tax attorney — and why you should hire one sooner than later.
• Is artificial intelligence a good investment
• The ‘great resignation’ — a trend that defined the pandemic-era labor market — seems to be over.