President Biden signs $1.2 trillion US spending bill
Mar 18, 2024 12:00 AM UTC
4 derivatives
Washington — President Joe Biden on Saturday signed the massive spending package that the Senate approved overnight, avoiding a partial shutdown of the government and ending a monthslong fight over spending that persisted six months into the fiscal year.
The package fully funds the government through September 2024.
The Senate approved the $1.2 trillion package, which was unveiled early Thursday in a vote of 74 to 24. Hours earlier, it advanced out of the House in a 286 to 134 vote.
The Senate slipped past the deadline after an hourslong standoff on amendment votes. Shortly before midnight, Senate Majority Leader Chuck Schumer, a New York Democrat, announced the upper chamber had finally reached an agreement that would allow them to expedite the bill’s passage. Republicans demanded votes on amendments in exchange for speeding up the process. Without an agreement, the soonest the Senate could vote is Sunday.
The missed deadline was not expected to have any effect on government operations. The White House said agencies would not shut down and could continue their normal operations, since it was clear that a resolution was imminent and that President Biden would sign the bill.
President Biden wants to raise taxes on Elon Musk, Jeff Bezos, and their cohort of Americans, who are amassing extraordinary wealth that is not taxable under current law. Biden says his plan would make the system more fair — but experts say it lacks practicality. The president wants to impose a minimum 25% tax on all Americans […]
President Biden wants to raise taxes on Elon Musk, Jeff Bezos, and their cohort of Americans, who are amassing extraordinary wealth that is not taxable under current law.
Biden says his plan would make the system more fair — but experts say it lacks practicality.
The idea of levying higher taxes on those at the top of the economic ladder is not new. Yet the latest proposal raises more questions than answers.
“Are you taxing the rich? Are you taxing the wealthy?” Peter Ferrigno, director of tax service at Henley & Partners, a citizenship investment consulting firm, told Yahoo Finance. “They're very similar, but they are not the same thing.”
Furthermore, the proposed policy challenges a fundamental principle of the US tax code, which treats money earned as income differently from wealth generated through valuation growth.
How could the US government tax wealth?
Biden hasn’t offered many specifics, but to get to a minimum 25% rate, experts say he would have to tax unrealized gains — unsold profits from increases in asset values — as part of billionaires’ income. Under current law, unrealized gains aren’t taxed until the asset is sold at a profit.
The president says this is the proper way to calculate the true income — and true tax rate — of the ultra-wealthy. Billionaires make the bulk of their money through stock or investment growth instead of a wage from a 9-to-5 job. So, the president says, they shouldn’t be able to shelter income simply because they haven’t pocketed the profits.
“Billionaires don't often have a typical paycheck,” Brandon Zureick, managing director and portfolio manager at Johnson Investment Counsel, told Yahoo Finance.
Take one of the world’s wealthiest people, for example: Elon Musk's net worth surged nearly $12 billion over a span of five years beginning in 2018, from $8.4 billion to $20 billion. However, Musk reported only $1.52 billion in income during those years and paid $455 million in taxes.
The 25 wealthiest Americans paid $13.6 billion in federal income taxes from 2014 to 2018. Meanwhile their wealth collectively increased by $401 billion in that same period, ProPublica reported. This means their collective average true tax rate was 3.4%.
To redesign this aspect of the tax code, Biden needs to consider: What happens when unrealized gains turn into losses?
In other words, how will the taxes work when investment values decline on paper?
“When you start taxing unrealized gains rather than realized gains, you're going down a very slippery slope,” Ferrigno said. “You want to tax the going up? Are you going to give money back when they go down again?”
For instance, if Musk’s share in Tesla (TSLA) surges from $100 billion to $200 billion, Biden’s proposed wealth tax would cost Musk $25 billion in that year — 25% of the unrealized $100 billion gain. But if Tesla shares declined by $100 billion the next year, would the government need to pay Musk back?
“That's where you open up a whole reason that other countries don't do this,” Ferrigno said. “Income tax has been around for centuries. And the reason no one's ever done this is because it's practically impractical.”
Democratic Rep. Alexandria Ocasio-Cortez wore a "tax the rich" dress at the 2021 Met Gala in New York City. (Photo by Jamie McCarthy/MG21/Getty Images for The Met Museum/Vogue ) (Jamie McCarthy/MG21 via Getty Images)
Top 1% pays nearly half of US tax
Opponents of a wealth tax reason that the share of federal taxes paid by the top 1% is already adequate. In 2021, the top 1% paid over $1 trillion, almost half of all tax revenue collected, according to the Tax Foundation.
“The income tax system in the United States is highly progressive and redistributive,” Erica York, senior economist at the right-leaning think tank Tax Foundation and author of its latest report on income tax data, told Yahoo Finance. The top 10%, she added, paid almost 76% of all tax revenue.
Critics also note that there is already a separate income tax on the rich, making Biden’s proposal redundant and unnecessary.
The alternative minimum tax (AMT) is a parallel system that sets a floor on what high-income individuals must pay. It removes some benefits and deductions on their tax returns, limiting the reductions to their tax liabilities.
“The US has had the alternative minimum tax for about 50 years,” Ferrigno said. “They already have a tool in the toolbox to try and address [taxes on high incomes].”
Ferrigno said an update to the AMT would be sufficient in taxing billionaires’ incomes.
A number of billionaires left Norway in 2022 after the country implemented a 1.1% capital asset tax. (Westend61 via Getty Images)
Caution: Don’t be like Norway
History shows how exorbitant income disparities can lead to social crises: “Back to the French Revolution and guillotine if not careful,” Ferrigno said.
But he said the Biden administration should start with a lower tax rate on billionaires, like 10%, and progress from there before landing at 25%.
After all, levying an overwhelming wealth tax on the super rich, who are also super mobile, can backfire. A number of billionaires left Norway in 2022 after the country implemented a 1.1% capital asset tax on married households with equity over the equivalent of $3.7 million.
“Find out what works and import it and avoid what Norway did to drive half of [ultra-wealthy] away,” Ferrigno said. “Look at how Spain has a high enough threshold that people just grudgingly accept it.”
Spain has a long-standing regional wealth tax from 0.16% to 3.5%. But instead of emigration, wealthy Spaniards either accepted their wealth tax rate or relocated to a cheaper region within the country.
“[Spain’s wealth tax] has been there for a long time as well, so people are used to it,” Ferrigno said. “Plus the exemptions ensure that few people get into the highest brackets.”
Switzerland also assesses various wealth taxes at the regional level on individuals’ assets worldwide, including bank account balances, equities, boats, and airplanes.
Transformative technology, such as blockchain ledgers and artificial intelligence, is transforming financial systems, yet the US tax codes haven’t kept up.
An overwhelming share of American voters, or 70%, support the idea of raising taxes on billionaires, a recent Bloomberg poll shows.
“Imagine what we can do,” Biden said of taxing the wealthiest Americans, “from cutting the deficit to providing for childcare, to providing healthcare, to continue to provide our military with all they need.”
“This is not beyond our capacity,” Biden said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
By Laila Kearney NEW YORK (Reuters) – Oil prices fell by nearly $1 a barrel on Friday as comments from U.S. central bank officials indicated higher-for-longer interest rates, which could hinder demand from the world’s largest crude consumers. Brent crude futures were down 93 cents, or 1.1%, to $89.95 a barrel by 1:29 p.m. ET […]
By Laila Kearney
NEW YORK (Reuters) - Oil prices fell by nearly $1 a barrel on Friday as comments from U.S. central bank officials indicated higher-for-longer interest rates, which could hinder demand from the world's largest crude consumers.
Brent crude futures were down 93 cents, or 1.1%, to $89.95 a barrel by 1:29 p.m. ET (1729 GMT), while U.S. West Texas Intermediate crude shed 88 cents, or 1.1%, at $78.38 a barrel.
Both benchmarks headed for weekly losses.
Oil prices also were pressured as the U.S. dollar strengthened after Dallas Federal Reserve President Lorie Logan said it was unclear whether policy was tight enough to bring down inflation to the U.S. central bank's 2% goal. A strong dollar makes greenback-denominated commodities more expensive for buyers using other currencies, and higher-for-longer U.S. interest rates could also dampen demand.
Higher interest rates typically slow economic activity and weaken oil demand.
Atlanta Fed President Raphael Bostic also told Reuters he thought inflation was likely to slow under the current monetary policy, enabling the central bank to begin reducing its policy rate in 2024 - though perhaps by only a quarter of a percentage point and not until the final months of the year.
"The two fed speakers certainly seemed to put the kibosh on the prospect of rate cuts," said John Kilduff, a partner at Again Capital LLC.
Prices were also under pressure from rising U.S. fuel inventories approaching the typically robust summer driving season, said Jim Ritterbusch of Ritterbusch and Associates.
"Given the price decline of the past month and the weaker-than-expected demand trends for U.S. gasoline and diesel, some bearish demand adjustment would appear likely," Ritterbusch said.
Next week, U.S. inflation data could influence Fed decisions on interest rates.
Prices drew little support from the U.S. oil rig count, which is an indicator of future supply, despite energy services firm Baker Hughes data showing the oil rigs fell by three to 496 this week, their lowest since November. [RIG/U]
Data on Thursday showing China imported more oil in April than the same month last year also helped to keep oil prices from moving lower. China's exports and imports returned to growth in April after contracting the previous month.
The European Central Bank, meanwhile, looks increasingly likely to start cutting rates in June.
In Europe, a Ukrainian drone attack set an oil refinery in Russia's Kaluga region on fire, RIA state news agency reported on Friday, the latest salvo from Kyiv in what has become a series of tit-for-tat attacks on energy infrastructure.
Conflict in the Middle East also continues after Israeli forces bombarded areas of the southern Gaza city of Rafah on Thursday, according to Palestinian residents, after a lack of progress in the latest round of negotiations to halt hostilities in Gaza.
(Additional reporting by Natalie Grover in London, Katya Golubkova in Tokyo and Sudarshan Varadhan in Singapore; Editing by Marguerita Choy and David Gregorio)
Gasoline prices increased this week to hover above last year’s average amid rising oil prices, falling inventories, and a more expensive summer blend of gas. The national gas average on Friday sat at $3.53 per gallon, nearly $0.10 higher than a year ago, according to AAA data. “Gas prices are a lot like seasonal temperatures. […]
Gasoline prices increased this week to hover above last year's average amid rising oil prices, falling inventories, and a more expensive summer blend of gas.
The national gas average on Friday sat at $3.53 per gallon, nearly $0.10 higher than a year ago, according to AAA data.
“Gas prices are a lot like seasonal temperatures. They start to rise with the arrival of spring," said Andrew Gross, a spokesperson for AAA.
The national average on Friday sat at a higher levelthan a year ago for the first time since late December.
Prices in California, the most expensive state for gasoline, approached $4.97 per gallon, $0.14 more the same day last year.
Gasoline prices typically rise heading into the spring as more motorists get on the road and refineries introduce a more expensive summer driving fuel blend. This year's retail prices have also been impacted by a steady climb in crude oil futures.
As of Friday, West Texas Intermediate (CL=F) contracts were hovering around $81 per barrel while Brent (BZ=F), the international benchmark price, traded near the $85 level. Brent and WTI have gained about $10 per barrel since the start of the year.
Ongoing output cuts from oil alliance OPEC+ along with Russian refinery interruptions stemming from Ukrainian drone attacks have lifted crude prices in recent weeks.
"While inventories are shrinking, most traders feel the latest rally in prices has happened a bit too far too fast and a corrective phase is needed. Still, the decline in Russia’s global exports (due to Ukrainian attacks) will be a supply factor as driving season begins, " Dennis Kissler, senior vice president at BOK Financial, said in a recent note.
The overview USD/JPY sits in a narrow trading range, sandwiched by bullish fundamentals and threat of intervention from the Bank of Japan to support the yen. The latter has reduced the odds of near-term upside for USD/JPY despite the release of important inflation updates in the United States this week. Unless the Japanese government softens […]
USD/JPY continued to sideways range trade, with bullish fundamentals offset by the threat of BOJ intervention
US CPI and PPI reports, the ECB interest rate decision and geopolitics loom as the key drivers for USD/JPY this week
Near-term bias remains to sell rallies in USD/JPY rather than buying dips
The overview
USD/JPY sits in a narrow trading range, sandwiched by bullish fundamentals and threat of intervention from the Bank of Japan to support the yen. The latter has reduced the odds of near-term upside for USD/JPY despite the release of important inflation updates in the United States this week.
Unless the Japanese government softens its public stance towards weakness in the yen, the preference is to sell rallies rather than buy dips or breaks. Geopolitical tensions in the Middle East are another wildcard for traders to navigate.
Key events for USD/JPY
There’s no need to reinvent the wheel when it comes to the likely USD/JPY drivers this week with the US interest rate outlook and geopolitics the key areas to focus on. As the latter is impossible to predict, what we as traders can do is look at the events that are likely to have the largest impact, taking into consideration positioning and technical factors.
Over the week, three such events stand out: the US consumer price inflation report on Wednesday, the US Producer price inflation report on Thursday and the ECB interest rate decision, also on Thursday. While the Fed speaking calendar is extremely busy, they key point to remember is the tone will be heavily influenced by these events, along with last Friday’s blockbuster US non-farm payrolls report.
There’ll be plenty of headlines to navigate, including from the FOMC minutes on Wednesday, but the vast majority will be noise and not impact USD/JPY meaningfully.
US CPI preview
Having topped market expectations at the headline and underlying level in the first two months of the year, markets may receive greater clarity as to whether the inflation acceleration is the start of a new trend or simply a seasonal anomaly.
Both headline and core CPI are forecast to lift 0.3%, down a tenth from February. While a deceleration, both would be incompatible with inflation returning to the Fed’s 2% inflation mandate in a timely manner.
The core services ex-housing figure, known simply as “supercore” inflation, will be influential given the Fed has nominated it as something it’s watching. It decelerated noticeably in February, minimising the damage to the dovish rates case despite the heat in other readings.
Potential USD/JPY market reactions
If that happens and we see no upside surprise in the core or headline inflation rates, it’s likely US front-end bond yields will decline, dragging back-end rates lower with it. That should narrow the yield differential between the US and Japan and weigh on USD/JPY. However, if we see another upside surprise, especially at the core level, USD/JPY and yields would likely lift, reflecting the diminishing case for Fed rate cuts in 2024.
Source: Refinitiv
US PPI, ECB rates decision in focus
The same approach applies for Thursday’s producer price inflation report with a hotter reading likely to lift USD/JPY, and vice versus if cold. A 0.3% gain is expected.
The ECB monetary policy meeting is the other key event simply because the euro is the largest weight in the US dollar index, making its fluctuations influential on other G10 FX names, including the yen. While no change in policy rates is expected, there is a growing risk it may signal the likely timing of its first rate cut will be brought forward from June. If that eventuates, EUR would likely weaken against the USD, dragging JPY along with it.
As for geopolitics, the rule of thumb is that if the tensions in the Middle East are subsiding, it should boost USD/JPY. If they escalate significantly, the likely repatriation of capital to Japan would weigh heavily on USD/JPY.
USD/JPY technical setup
With markets continued to pare rate cut expectations from the Fed, widening interest rate differentials with Japan, fundamentals suggest the bias for USD/JPY should be higher heading into the US inflation reports this week. However, with the threat of intervention from the BOJ elevated, rallies continue to suffocate on pushes towards resistance at 152, creating what I’ve described previously as a stalemate scenario.
With USD/JPY sandwiched by the intervention threat and bullish fundamentals, I’ll direct you to recent trade ideas that remain valid and have already worked since written. They can be accessed here and here.
The one overriding message is that while the technical picture looks bullish for USD/JPY, with a break of 152 pointing to the potential for substantial gains, the threat of BOJ intervention has greatly reduced the odds we’ll see significant upside should a topside break occur.
That suggests there’s limited reward and ample risk of going long on pushes toward 152. If the BOJ were to intervene, or even just signal such a move was imminent, USD/JPY could fall hundreds of pips in the space of seconds. As such, unless the Japanese government’s stance towards the weaker yen shifts substantially, selling rallies, rather than buying dips or breaks, remains the preferred strategy.
Resistance is located just below 152 with support located at 151.50, 151.20, 150.80 and 150.27. A more pronounced support zone is located between 149.58 and 149.00. Good luck!
The Covid-19 Pandemic and subsequent global lockdowns impacted billions of people, and its repercussions are still being felt. Within the financial industry, the S&P 500 took a hit from 3,337.75 in February, 2020 to 2,304.92 by March 20: a thousand point crash in only 30 days. Since that time, the Dow Jones Industrial Average has […]
The Covid-19 Pandemic and subsequent global lockdowns impacted billions of people, and its repercussions are still being felt. Within the financial industry, the S&P 500 took a hit from 3,337.75 in February, 2020 to 2,304.92 by March 20: a thousand point crash in only 30 days.
Since that time, the Dow Jones Industrial Average has climbed to new heights, largely on the back of “The Magnificent Seven”, which are: Microsoft (NASDAQ: MSFT), Meta Platforms (Facebook) (NASDAQ: META), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG), Apple (NASDAQ: AAPL), Tesla (NASDAQ: TSLA), and Nvidia (NASDAQ: NVDA).
Nvidia has been one of the leaders of this post-pandemic surge, so let’s take a look as to why Nvidia stock, which has gained over 13X since that time roughly four years ago, was able to accomplish so much.
Nvidia's GPUs for 3D graphics have fueled the AI boom.
Nvidia’s beginnings were filled with struggles. Within its first three years of operation, founder and CEO Jensen Huang had to fire half of his employees trying to get the RIVA 128 graphic accelerator for 3D graphics completed and out to market. Having burned through $20 million in Venture Capital funding down to being a month away from bankruptcy, Nvidia finally succeeded, and the RIVA 128’s sales fueled Nvidia’s fortunes enough for it to go public in 1999.
Nvidia soon after released its first Graphics Processing Unit, the GeForce 256, which was crucial for accelerating 3D consumer hardware for video content, leading to landmark graphics hardware design contracts for Microsoft XBOX and Sony (NYSE: SONY) PlayStation 3's RSX graphics processor. By 2012, the company’s GPUs would be crucial to powering the AlexNet neural network, which set the stage for commercialized Artificial Intelligence (AI).
As Nvidia continued to grow, it expanded its product line, including their RTX series GPUs in 2018, which pioneered real-time ray tracing, This graphic rendering method mimics the actual physical behavior of light, which creates the hyper-realism key to the success of virtual reality in video graphics for video gaming and AI.
High profile deals with Toyota (NYSE: TM), Baidu (NASDAQ: BIDU), and Alphabet (still Google in 2018) would follow.
Nvidia's Cambridge-1 is the largest supercomputer in the UK and uses AI for healthcare research.
Unlike thousands of other companies that were negatively impacted by the local government mandated lockdowns during the Covid-19 outbreak, Nvidia was not one of them.
AI would prove to be the winning horse in Nvidia’s race to the top. Nvidia continued to improve its GPU offerings and created new partnerships for expanding the applications for AI. In October 2020, Nvidia announced the plans to design the Cambridge-1 supercomputer. In collaboration with AstraZeneca, GlaxoSmithKline, King’s College London, the Guy’s and St. Thomas NHS Foundation, and other organizations, the Nvidia Cambridge-1 is the UK’s largest supercomputer, and was specifically created for British healthcare research since its launch in 2021.
