# 685 - 🧾 The IRS did something right…

May 01, 2024

Good morning. Time to make your move, men. As part of its relaunch, dating app Bumble ($BMBL) will now let men send the first message, after a decade of letting women make the first move. Female users can still set a prompt for their suitor to respond to, making the whole chat a bit more of a team effort. Love has been a battlefield for dating apps lately — so Bumble hopes this revamp will swipe away its 85% decline since going public.

Speaking of moves, it’s time to see how everyone feels about the market going into May. Bullish? Bearish? Cast your vote below (results coming on Friday).

📈 Bullish

📉 Bearish

TAXES

The IRS Says Its New Direct File Program Was A Huge Success — Giving Tax Filing Services Reason to Worry

It doesn’t matter who you ask: nobody likes taxes, and nobody likes the Internal Revenue Service (IRS). But with a hefty $80B in new funding, the IRS is pursuing a more aggressive stance against high-income taxpayers, offering faster and better customer support, and taking on the titans of tax season with IRS Direct File.

Direct File, a new program tested in 12 states last year, gave 19M eligible taxpayers a free way to file basic W-2 returns. With tax season over, the IRS says the program was a success — and will now have to decide whether to supersize it.

Free for all: The IRS says that over 140K taxpayers used Direct File to complete their 2023 return during the agency’s pilot — exceeding their 100K goal. The Treasury Department estimated that filers saved a significant $5.6M on tax prep fees, while free live customer support assisted over 25K filers within seconds.

  • More than 3M Americans checked to see if they were eligible to file, showing a strong demand for free filing.

  • According to a poll by the General Services Administration, 90% of Direct File users rated the service as “above average” or “excellent.”

Trouble down the Block

Though the IRS will likely expand Direct File in tax year 2024, critical Republicans argue that private sector options are superior. According to a report by Newsweek, TurboTax owner Intuit ($INTU) agrees, saying that “a government-run tax filing solution will not offer any improvement over filing options currently available.” But while Intuit holds firm that the program won’t affect its business, it has some harsh words:

  • Intuit calls Direct File “a thinly veiled scheme” that will waste billions of dollars for “something already completely free of charge today.”

  • Competitor H&R Block ($HRB) reiterated that there are “more than 30 free tax filing choices” in the market — and insists the IRS should focus funding on existing services.

Saying the quiet part out loud: For decades, these firms have lobbied to prevent such an option like IRS Direct File from coming to market — mostly because of the unknown impact that a no-frills, free file option could have on their business. Regardless, billions will still be up for grabs every tax season for more complex returns, which the IRS has no plans to tackle in the near future.

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LARGECAP RECAP

🛍️ Amazon booms in first quarter, fueled by cloud and advertising demand

Going into this earnings season, analysts had downgraded their expectations for S&P 500 companies — but the Magnificent Seven kept slaying. Yesterday, Amazon ($AMZN) revealed its earnings report, showcasing a 13% revenue increase, driven by its most profitable and rapidly growing segments.

  • Following in the footsteps of other tech giants, Amazon reported strong advertising revenue, buoyed by ads on Prime Video, resulting in a 24% sales boost to $11.8B.

  • Amazon Web Services (AWS), the company’s cloud computing arm, handily surpassed analyst forecasts thanks to higher cloud and AI spending. AWS sales soared by 17% to $25B, crossing the milestone of $100B in annualized revenue for the first time.

But still no dividend… Analysts hoped that Amazon, which has more than tripled its net income year-over-year and increased its operating cash flow to nearly $100B, would declare its first-ever dividend. That would’ve put the company alongside other major tech players like Meta ($META) and Alphabet ($GOOGL), who recently announced their first dividend payments. However, Amazon seems resistant to peer pressure… but with a double-digit growth forecast for Q2, investors have plenty to get excited about. Plus, there’s always next earnings season.

🇪🇺 There’s an economic role reversal unfolding in Europe

The economic narrative in the Eurozone has shifted — once-troubled economies like Italy, Greece, and Portugal are now outpacing some of the bloc’s largest economies, thanks to looser regulations and increased investment in tourism. Meanwhile, mainstays such as Germany have been hampered by an aging workforce, reliance on Russian energy, and regulatory burdens.

  • A decade after grappling with a severe debt crisis, Greece is projected to achieve a near 3% growth rate this year (compared to the EU’s 0.8%) and has finally regained its investment-grade credit rating.

  • Italy has experienced one of the strongest post-pandemic recoveries in the Eurozone, largely attributed to tax incentives that have boosted construction output by 40% since 2019.

Signs of life: These resilient economies still struggle with high unemployment rates, though countries like Spain benefit from an influx of foreign workers (a bit like the US). These nations have also been less affected by the reduced supply of Russian gas since the war in Ukraine began, and the manufacturing downturn that has been hampering Germany. Plus, they’ve been helped by cooling inflation, with the EU’s core rate dropping to 2.7% in yesterday’s reading. All eyes are now on the European Central Bank, which is still on track to cut rates in June.

JOE’S MARKET PULSE

🔗 PayPal / HSBC

[Insert AI smart home products are here: RYSE is prepping the launch of their new AI-powered SmartCurtain — just months after breaking into over 100 Best Buy stores. Companies that leverage AI to slash energy costs have already been acquired for billions. Invest in RYSE before the window of opportunity closes →*

Markets & Economy

Boardroom drama heats up at Paramount ($PARA) amid merger talks: Skydance — backed by KKR ($KKR) and RedBird Capital — has tabled its “best and final” offer for Paramount. CEO Bob Bakish, previously against the merger, is out — replaced by a three-person “Office of the CEO.” [Read]

L’Occitane ($LCCTF) goes private to speed growth: Owner Reinold Geiger is buying up the rest of the skincare company’s shares at a valuation of $6.4B — and he hopes delisting will give the company space to make long-term investments in marketing and IT systems without having to appease public markets. [Read]

Satellite company SES ($SES) buys Intelsat for $3.1B: The merger aims to establish a European challenger to US giants like Starlink and Amazon’s Project Kuiper — but there’s still a big gap to make up, and the deal will come with mounting debt. [Read]

Business & Wealth

Walmart ($WMT) unveils new grocery brand, Bettergoods: The country’s largest grocer wants to expand its private-label offerings with affordable, store-brand frozen foods and snacks with a bit of “culinary flair.” Meanwhile, the retailer is moving away from its push into healthcare. [Read]

Where do you stand in the cola wars? “Better for you” sodas like Olipop and Poppi feature novelty flavors, like Strawberry Vanilla and Banana Cream (our unexpected favorite, FWIW) — and as Gen Z drinks them up, mainstream soda brands are responding with offerings like Pepsi Peach and Dr. Pepper Creamy Coconut. [Read]

New safety rule mandates automatic emergency brakes in all cars: These sensors help prevent collisions — but very few vehicles currently come equipped with such cutting-edge technology, so carmakers have until 2029 to make the change. [Read]

*Thanks to our sponsors for keeping the newsletter free.

PARTNERED WITH NEOS FUNDS

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Learn more about SPYI and QQQI to see how you can pursue tax efficient monthly income within your portfolio.

CHART

DIGIT OF THE DAY

Tough Times for High Earners: Hiring Rates Hit 10-Year Low

While the economy booms and unemployment stays low, white-collar workers are feeling the job market blues. Job searches are lasting longer, and offers are harder to come by. Vanguard, a major player in retirement savings, notes that while blue-collar jobs are thriving, white-collar opportunities are dwindling.

  • In March, the US added 303K jobs, but only 7K were in professional and business services, where many white-collar jobs reside.

  • Hiring remains strong for those earning under $55K, at 1.5%, but it’s slowed to 0.5% for those making over $96K — marking the worst dip since 2014, excluding COVID-19 impacts.

The future of high-skilled employment: Vanguard’s Fiona Greig suggests companies are cutting high-earning roles to save money, which could lead to lower job satisfaction and morale. Guy Berger from the Burning Glass Institute warns that AI may threaten traditionally stable high-income jobs as it takes over tasks like writing and analysis — pointing to a future where highly educated professionals could face tougher competition and fewer opportunities.

EXTRA JOE

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Masterworks disclosure: Past performance of whole art and Masterworks offerings are not indicative of future returns or artwork not yet sold. Investing involves risk.

User will receive $100 via check after completing a call with an advisor. Terms and conditions apply. Complete details here.

The content is not intended to provide legal, tax, or investment advice. Past performance is not indicative of future performance. Investing involves risk.

Art sales price data is comparative only. Each painting is unique and historical data is not a direct proxy for any specific painting or investment.  Data represents whole art not an investment into our offerings which includes fees and expenses.

Art asset class is based on repeat-sales index of historical art market prices computed based on a value weighted-basis and focused on the Post-War & Contemporary Art category.  While Masterworks believes art market comparisons to other asset classes can be useful to help potential investors discern long term trends in these asset classes, there are significant limitations to the utility of such comparative data, particularly over shorter time periods.  Potential investors are cautioned not to place undue reliance on such data.

“Net Annualized Return” refers to the annualized internal rate of return, or IRR, net of all fees and costs, to holders of Class A shares from the primary offering, calculated from the final closing date of such offering to the date the sale is consummated. A more detailed breakdown of the Net Annualized Return calculation for each issuer can be found in the respective Form 1-U for each exit. The 3 median returns above represent the ones closest in percentage to the median of the 12 exits with holding periods over 1 year.

See important Reg A disclosures at masterworks.com/cd.

NEOS Funds Disclosure: 30-Day SEC Yield: QQQI = 0.33% | SPYI = 0.75%

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For standardized performance and most recent month-end performance for each ETF, call (866) 498-5677 or visit the corresponding ETF Fund pages linked here: SPYI Performance | QQQI Performance.

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Covered Call: A covered call is a popular options strategy used to generate income in the form of options premiums. To execute a covered call, an investor holding a long position in an asset then writes (sells) call options on that same asset.

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Distribution Yield: The annual yield an investor would receive if the most recent fund distribution remained the same going forward. The distribution yield represents a single distribution from the Fund and is not a representation of the Fund's total return. The distribution yield is calculated by multiplying the most recent distribution by 12 in order to annualize it, and then dividing by the Fund's NAV.

30-Day SEC Yield: A calculation based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income, as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (in the case of bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield. This yield metric does not include premiums received from the sale of option contracts.

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