Read all of it because it could happen.
Reporting from Laguna Beach, California...
As the Labor Day holiday ended, so did the stock market's holiday from underlying economic trends. Last week, the stock market was all about "better than expected." On the first day this new week, however, the market was all about "worse than hoped."
Last week, for example, the stock market celebrated a loss of 54,000 jobs in August because the private sector added 67,000 jobs. Interpretation: the private sector is recovering. Earlier in the week, some "better than expected" reports on manufacturing and consumer sentiment inspired investors to add a few hundred points to the Dow Jones Industrial Average.
But the reality, of course, is that nothing really changed last week. The US economy is still weak and the stock market is still as ignorant about the future of the economy as a loaf of bread. Truth be told, the loaf of bread might have the upper hand in this contest.
The stock market is often the last one in the crowd to figure out what's really going on. And if the stock market is clueless, how much less we individual investors?
We are like Amish farmers at an adult film convention. We recognize most of the images before or eyes, but do not completely comprehend the context of these images. Back on the farm, the farriers and buggy whip- makers work with horses - exclusively - and these guys would never remove their overalls while wandering around the stables.
Over a span of months or years, the stock market exhibits a large measure of reason: good stocks tend to do well and bad stocks tend to de-list. But over short-term timeframes, there is little rhyme or reason to the share price trends.
Yesterday, for example, the major financial news services declared that "stocks closed lower following new worries about Europe's debt problems." Maybe yes; maybe no. This story of severe capital deficiencies in the European banking system is an old one, even if investors managed to ignore it for a while. Back in March, investors seemed to care about it. Then they forgot about it...until yesterday.
Likewise, two weeks ago, investors were distressed that the US economy was stumbling. A few days later, most investors seemed to believe that the US economy wasn't so bad after all.
At least that's what the news networks told us.
But the truth of the matter is embarrassingly basic. The market did not "respond" to good news; it simply bounced...and probably for no good reason. The Market does what the Market does, whether it makes perfect sense...or perfect nonsense. End of story.
We investors possess no power to impose our sense of reason on the financial markets. The Markets will do whatever they will do.
Likewise, we humans possess no power to impose our sense of reason on the Lord above. He does what He will do. Yesterday, He took back to himself one of his own - a beautiful, wonderful friend, colleague, mother and wife. He took back to himself a young lady named Fanny Gerbet who had managed Agora's French office for the last several years. Her passing, at the age of 35, while leaving behind two very young children and a loving husband, seems the extreme of injustice. Maybe it is; or maybe God has better things in mind.
We hope for the latter. But whatever we may hope or believe, one thing is certain. We don't make the rules.
Successful investors learn this essential lesson early on. That's what makes them successful. They respond to the realities of the market place, rather than lamenting them.
Moving from the realms of finance and theology to the realm of legislation, we individuals also face an increasingly daunting burden of impotence. The laws change and there is nothing we can do about it. We can cast a vote, yes. But after that vote is cast, we usually find ourselves with a heavier burden than the day before.
Given these realities - and the recent legislative initiatives designed to produce socio-economic "fairness" - our colleagues over at The 5- Minute Forecast asked their readers to respond to the trends afoot in the 50 United States. Specifically, they asked small business owners to provide firsthand testimony about complying with some of the newest tax law revisions.
The responses are fascinating...instructive...and troubling. Take a look at this report from The 5-Minute forecast:
We see the president is on the verge of announcing several proposals that aim to help small business...
* A payroll tax holiday
* Permanent extension of the (now-expired) research and development tax credit
* Accelerated write-off of new investment in plant and equipment through 2011.
Hmmm... Two of those three things look like quick-fix adrenaline shots, along the lines of the homebuyer tax credit. What happens after those incentives go away?
And where's the proposed repeal of the requirement to send Form 1099s to every vendor from whom a businessperson buys more than $600 of goods and services each year?
Which brings us to the mail we invited from small-business owners...
Reader A: "My husband and I are both long-haul truck drivers," as we kick off our list of small-business horror stories, "and each fuels our trucks about twice a week, with an average weekly fuel consumption of $2,000-3,000. Can you imagine the horror of us having to send a 1099 form to EVERY truck stop we purchased fuel at for an entire year!!?? This is going to be a nightmare!"
Reader B: "I own and operate two commercial fishing boats in Alaska, and yes, I am not just dreading the changes in 1099 filings, I am PISSED OFF at the thought! I do my own accounting, and a quick glance at my cannery statements suggests the number of 1099s I'm required to file will explode from the current seven per tax year (crew members only) to 40-plus in 2012 when I will send a form (for miscellaneous INCOME) to every VENDOR (not employees, mind you) that I buy from.
"The extra time and/or money I will be REQUIRED to spend (27 minutes per form, by IRS reckoning) on this redundant policy is an indirect tax on my business. Even more reviling is the stat you posted showing that even though an IRS auditor's time is more efficiently spent (in terms of uncovering unreported income) auditing large corporations, their focus is increasingly turning to small businesses and sole proprietors."
Reader C: "We have two big issues to face. First, we will have to file hundreds, if not thousands, of new 1099s in the future. It will cause us a great deal of extra time and money and force us to buy new software to keep track of it. Second, we will have to provide our taxpayer ID to all of our customers and then try and reconcile the hundreds of 1099s we receive from them to our sales or other receipts.
"I believe that the second one is going to be the bigger problem. Everyone knows that many of the 1099s being filed now are incorrect. We are going to see that problem multiplied a thousandfold. Are we are going to have to get a taxpayer ID for every one of our customers in order to be able to confirm the amounts they are reporting as payments to us on a 1099? Also, they are going to give us a 1099 based on their total payments to us. Our reported income does not include the sales tax or pass-through expenses, so the 1099s will always be more than our reported income.
"What are we going to do when the IRS comes in and says we are underreporting based on hundreds of 1099s filed for payments to our business? How are we going to reconcile all of them to our receipts? Many times, our customers set up accounts under various names or DBAs. They may have multiple locations and have an account for each one. They could be sending us a 1099 under a corporate name that we don't even recognize."
Reader D: "I am a sole proprietor of a small Internet-based retail business located in Southern California. My income goes on a 'Schedule C,' as I am not incorporated.
"This is a second job for me, and based on all the questions and uncertainties, I am 'coasting' right now. My inventory is lean, I am spending nothing on advertising and have no plans to risk any money outside of normal operating expenses or to expand in any way right now.
"The 1099 is upsetting, but it's certainly not the only worry. The thought of a VAT or even having to charge my out-of-state customers sales tax is frightening, as most of my business comes from out of state. Who is going to want to pay shipping charges (what I sell is heavy and expensive to ship) if they have to pay sales tax too? My California customers won't be enough to keep the lights on.
"Sometimes I feel like I purposely want to make less money in both my sole proprietorship AND my day job just so the government has less of my tax money to do damage with!"
Reader E: "[My wife and I] are realistically considering whether or not to continue our C-Corp as a going concern. By the time we account for compliance costs, the marriage tax penalty on our personal income, the increased payroll tax burdens and generally every expense of running a business... it's about not worth it anymore.
"She (my wife) can stay home and not do anything, we can get the extra exemption on our income taxes, reduce our tax rate and the way it looks now we'll actually come out better in the long run, without all the headaches and pressures of running the business. Not to mention I can free up my time spent on the business and focus more on my true passion, which is trading. It may be slightly less income at first, but just the change in quality of life may be worth it."
Reporting from Laguna Beach, California...
As the Labor Day holiday ended, so did the stock market's holiday from underlying economic trends. Last week, the stock market was all about "better than expected." On the first day this new week, however, the market was all about "worse than hoped."
Last week, for example, the stock market celebrated a loss of 54,000 jobs in August because the private sector added 67,000 jobs. Interpretation: the private sector is recovering. Earlier in the week, some "better than expected" reports on manufacturing and consumer sentiment inspired investors to add a few hundred points to the Dow Jones Industrial Average.
But the reality, of course, is that nothing really changed last week. The US economy is still weak and the stock market is still as ignorant about the future of the economy as a loaf of bread. Truth be told, the loaf of bread might have the upper hand in this contest.
The stock market is often the last one in the crowd to figure out what's really going on. And if the stock market is clueless, how much less we individual investors?
We are like Amish farmers at an adult film convention. We recognize most of the images before or eyes, but do not completely comprehend the context of these images. Back on the farm, the farriers and buggy whip- makers work with horses - exclusively - and these guys would never remove their overalls while wandering around the stables.
Over a span of months or years, the stock market exhibits a large measure of reason: good stocks tend to do well and bad stocks tend to de-list. But over short-term timeframes, there is little rhyme or reason to the share price trends.
Yesterday, for example, the major financial news services declared that "stocks closed lower following new worries about Europe's debt problems." Maybe yes; maybe no. This story of severe capital deficiencies in the European banking system is an old one, even if investors managed to ignore it for a while. Back in March, investors seemed to care about it. Then they forgot about it...until yesterday.
Likewise, two weeks ago, investors were distressed that the US economy was stumbling. A few days later, most investors seemed to believe that the US economy wasn't so bad after all.
At least that's what the news networks told us.
But the truth of the matter is embarrassingly basic. The market did not "respond" to good news; it simply bounced...and probably for no good reason. The Market does what the Market does, whether it makes perfect sense...or perfect nonsense. End of story.
We investors possess no power to impose our sense of reason on the financial markets. The Markets will do whatever they will do.
Likewise, we humans possess no power to impose our sense of reason on the Lord above. He does what He will do. Yesterday, He took back to himself one of his own - a beautiful, wonderful friend, colleague, mother and wife. He took back to himself a young lady named Fanny Gerbet who had managed Agora's French office for the last several years. Her passing, at the age of 35, while leaving behind two very young children and a loving husband, seems the extreme of injustice. Maybe it is; or maybe God has better things in mind.
We hope for the latter. But whatever we may hope or believe, one thing is certain. We don't make the rules.
Successful investors learn this essential lesson early on. That's what makes them successful. They respond to the realities of the market place, rather than lamenting them.
Moving from the realms of finance and theology to the realm of legislation, we individuals also face an increasingly daunting burden of impotence. The laws change and there is nothing we can do about it. We can cast a vote, yes. But after that vote is cast, we usually find ourselves with a heavier burden than the day before.
Given these realities - and the recent legislative initiatives designed to produce socio-economic "fairness" - our colleagues over at The 5- Minute Forecast asked their readers to respond to the trends afoot in the 50 United States. Specifically, they asked small business owners to provide firsthand testimony about complying with some of the newest tax law revisions.
The responses are fascinating...instructive...and troubling. Take a look at this report from The 5-Minute forecast:
We see the president is on the verge of announcing several proposals that aim to help small business...
* A payroll tax holiday
* Permanent extension of the (now-expired) research and development tax credit
* Accelerated write-off of new investment in plant and equipment through 2011.
Hmmm... Two of those three things look like quick-fix adrenaline shots, along the lines of the homebuyer tax credit. What happens after those incentives go away?
And where's the proposed repeal of the requirement to send Form 1099s to every vendor from whom a businessperson buys more than $600 of goods and services each year?
Which brings us to the mail we invited from small-business owners...
Reader A: "My husband and I are both long-haul truck drivers," as we kick off our list of small-business horror stories, "and each fuels our trucks about twice a week, with an average weekly fuel consumption of $2,000-3,000. Can you imagine the horror of us having to send a 1099 form to EVERY truck stop we purchased fuel at for an entire year!!?? This is going to be a nightmare!"
Reader B: "I own and operate two commercial fishing boats in Alaska, and yes, I am not just dreading the changes in 1099 filings, I am PISSED OFF at the thought! I do my own accounting, and a quick glance at my cannery statements suggests the number of 1099s I'm required to file will explode from the current seven per tax year (crew members only) to 40-plus in 2012 when I will send a form (for miscellaneous INCOME) to every VENDOR (not employees, mind you) that I buy from.
"The extra time and/or money I will be REQUIRED to spend (27 minutes per form, by IRS reckoning) on this redundant policy is an indirect tax on my business. Even more reviling is the stat you posted showing that even though an IRS auditor's time is more efficiently spent (in terms of uncovering unreported income) auditing large corporations, their focus is increasingly turning to small businesses and sole proprietors."
Reader C: "We have two big issues to face. First, we will have to file hundreds, if not thousands, of new 1099s in the future. It will cause us a great deal of extra time and money and force us to buy new software to keep track of it. Second, we will have to provide our taxpayer ID to all of our customers and then try and reconcile the hundreds of 1099s we receive from them to our sales or other receipts.
"I believe that the second one is going to be the bigger problem. Everyone knows that many of the 1099s being filed now are incorrect. We are going to see that problem multiplied a thousandfold. Are we are going to have to get a taxpayer ID for every one of our customers in order to be able to confirm the amounts they are reporting as payments to us on a 1099? Also, they are going to give us a 1099 based on their total payments to us. Our reported income does not include the sales tax or pass-through expenses, so the 1099s will always be more than our reported income.
"What are we going to do when the IRS comes in and says we are underreporting based on hundreds of 1099s filed for payments to our business? How are we going to reconcile all of them to our receipts? Many times, our customers set up accounts under various names or DBAs. They may have multiple locations and have an account for each one. They could be sending us a 1099 under a corporate name that we don't even recognize."
Reader D: "I am a sole proprietor of a small Internet-based retail business located in Southern California. My income goes on a 'Schedule C,' as I am not incorporated.
"This is a second job for me, and based on all the questions and uncertainties, I am 'coasting' right now. My inventory is lean, I am spending nothing on advertising and have no plans to risk any money outside of normal operating expenses or to expand in any way right now.
"The 1099 is upsetting, but it's certainly not the only worry. The thought of a VAT or even having to charge my out-of-state customers sales tax is frightening, as most of my business comes from out of state. Who is going to want to pay shipping charges (what I sell is heavy and expensive to ship) if they have to pay sales tax too? My California customers won't be enough to keep the lights on.
"Sometimes I feel like I purposely want to make less money in both my sole proprietorship AND my day job just so the government has less of my tax money to do damage with!"
Reader E: "[My wife and I] are realistically considering whether or not to continue our C-Corp as a going concern. By the time we account for compliance costs, the marriage tax penalty on our personal income, the increased payroll tax burdens and generally every expense of running a business... it's about not worth it anymore.
"She (my wife) can stay home and not do anything, we can get the extra exemption on our income taxes, reduce our tax rate and the way it looks now we'll actually come out better in the long run, without all the headaches and pressures of running the business. Not to mention I can free up my time spent on the business and focus more on my true passion, which is trading. It may be slightly less income at first, but just the change in quality of life may be worth it."
