🏛️ Mr. Warsh pulled the trigger, and the market is not happy.

A few weeks ago I mentioned that the rate cut everyone's been waiting for was blowing in the wind.

Well, the wind blew exactly as I expected. The wrong way. ☹️

Last week Keven Warsh and the funky bunch (the other Fed Governors, and Regional Fed bank presdients) voted 12-0 to raise rates. This is the first time the Fed decided to push the "up" button in three years (2023 was the last time.)

Mr. Scotty "I am the house" Bessent has been on CNBC and various other finance shows trying to do damage control. He went all-in on lower rates, and found out he didn't hold the nutz, and is bluffing again.

Nobody's buying it. We can read your hand Scotty.

But Romeo, why'd they increase rates 🤔?

Because inflation is a squatter 🏚️ who pretends to be leaving and then tells you that they are going to take a quick nap in the guest room first.

August CPI came in at 3.4%, same as July, same as the forecast, same as your rent.

Gas is up 27% year-over-year and fuel oil is up 52% (all brought to us by our #1 sponsor, the Strait of Hormuz 🌊.)

The kicker? Wall Street is already penciling in another hike in December, and the FOMC members are leaning toward more in 2027.

So if you were waiting for cheaper money to buy a home, do a refi on a HELOC, or float the business line of credit, I have bad news: "it's no-cut-for-you", followed by "maybe-a-hike-for-you."

📉 What actually happened

↳ 🔺 The hike: 25 bps to 3.75%–4.00%, unanimous 12-0, first increase since 2023.
↳ 🌡️ The inflation: 3.4% in August, flat vs. July. Gas +27.4% YoY, fuel oil +52%. Shelter and food actually cooled a bit (small mercies).
↳ 📈 The bond market: Treasury yields have been surging since Warsh's Jackson Hole speech, with the 10-year up roughly a quarter point.
↳ 🎲 The odds: Markets price one more 25 bp hike in December, with more possible into 2027. Year-end Fed projections sit between 4.1% and 4.4%.
↳ 🤷 The Fed's own words: "Economic activity is expanding at a solid pace." Translation: the economy is fine, which is precisely the problem.

So what do we do with this? 🤷

Two things.

First, stop waiting for the housing crash. 50%+ of all mortgages have less than 4% interest rate. People weren't selling those homes before, they aren't going to start now.

Remember, most home sellers are buyers too. They weren't giving up 3.75% for 6.75%, the certainly aren't going to do it for 7.57%.

Second, if you're a business owner sitting on a variable line of credit or someone who's been underpaying estimates, the IRS underpayment rate rides on top of the Fed's rate, and Q4 estimates are due January 15th. Cheap money is gone and cheap IRS penalties went with it.

The Fed spent two years telling us the last mile of inflation was the hardest. Turns out they were right, they just didn't mention the last mile was uphill, into the wind, with the Strait of Hormuz throwing rocks.

Kev, Kev did what he had to do.

Mr. Scotty "I am the house" will get over it.

The rest of us will adjust and touch grass.🌲

🤖 ChatGPT went to Tax Court. The IRS won.

In July I told you the robots weren't coming for your job. I stand by that. But I never said they'd be any good at your job either, and earlier this month a taxpayer named Justin Moore found that out in front of a federal judge. ⚖️

Here's the setup:

Mr. Moore owed the IRS $730,027 (not a typo).

And the IRS gave him a present. A Federal Tax Lien. 🎁

For those who don't know what a Federal Tax Lien is, it basically lets everyone know that you owe the government money. It's filed at the county courthouse, and hits your credit.

Smartly, Mr. Moore asked for a Collection Due Process (CDP) hearing and requested the IRS take back the lien. The IRS said, "Meh, we ain't going to."

So he took it to Tax Court (I've got to admit, I like the balls on Justin 🥜, not so much what happened next.)

Even though his brief cited real cases. They were for things that were never said. Not 'misread.' Not 'outdated.' Made up."

Fake pages, fake holdings, the whole enchilada, dressed up in perfect legal formatting the way only a chatbot can.

That's right, ChatGPT to the rescue (except, with a sprinkle of, "you're right, those Tax Court cases don't exist, let me get you the real ones. Only after your tax court hearing!")

In other words, Justin went on a ride on the "Hallucination Station! 🚂" (if you use AI often, you've been there).

👀 What happened next.

His excellency, Judge Toro wasn't amused. I wouldn't say he got angry, mostly concerned 🤨. And as his moniker suggests, found a bullseye 🎯.

Not only does the lien stay, his Tax Court Opinion doubles as a public service announcement, "...each party remains responsible for ensuring the accuracy of information submitted to the Court." In other words, check your work.

This is Tax Court, not 7th grade social studies.

This isn't even the Tax Court's first rodeo this year. In February, Judge Holmes caught an attorney citing three phantom cases in Clinco, and wrote that the argument collapsed "like an overmixed soufflé" (the client owned a restaurant, the judge has range).

📋 The takeaway

↳ ⚖️ Tax Court hears the case, but it also reads the citations. Every one of them. And the IRS attorney across the aisle is happy to help.
↳ 🤖 AI can summarize a notice, tidy an email, or explain what a CP2000 is. It cannot be your representative, and it will cheerfully invent a precedent to make you feel better.
↳ 🏛️ A lien comes off when withdrawing the Lien helps the IRS collect, not when it helps you borrow. Justin wanted the the loan from the IRS to reinvest in half-empty buildings. The IRS wanted the money.
↳ 📞 If you've got a lien, levy, or CDP notice sitting on your counter, call a human before you call a chatbot. Preferably one who has actually beaten the IRS. (Hi.)

Don't get me wrong. I'm a fan of Tax Court. It's the one place a taxpayer can make the IRS prove its case without paying the tax first. If you've got a real argument and you know how the game is played, go.
​
Just make sure to bring a human (just in case.) 🙋‍♂️

Market Highlights last 30 days. The new Crypto meme is here. Welcome to the stage ZCash.

BTC 🚀🚀🚀 the last 30 days ~ BTC $82,963 (+7.05%) ~ ZEC $1,585 (+94.05%) Gold and Silver heading in the wrong direction ~ Gold $4,153 (-8.29%) ~ Silver $61.04 (-10.14%) S&P and Nasdaq break even ~ S&P 500 $7,683 (-0.36%) ~ Nasdaq $26,820 (+1.58%)

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What's been going on with your Favorite CPA

​

Head down with extension tax season.

Will be coming up for air in 2 weeks, and heading off to Boston.

Talk to you guys a in few weeks ❤️

Romeo Razi, CPA ​Taxedright.com​

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600 1st Ave, Ste 330 PMB 92768, Seattle, WA 98104-2246
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