Hey Influence Traders,
It was a tough economic week for the Biden administration.
Not just in terms of raw numbers, but in reputation.
There is a growing consensus that the administration does not have a good handle on the economy … from both sides of the aisle.
Jobs Report
We received a not-so-rosy jobs report.
The impact of the report was felt in Biden’s declining approval rating.
There are 10.4 million job openings in the US.
Yet, in September, a record 4.4 million people quit their jobs.
That churn is making it very difficult for employers to fill vacancies.
The Biden administration continues to assert that it’s spending programs, if passed, will fix supply chains, ease inflation, and create employment.
The NY Times declared that there was no doubt those fixes would work, it was just a matter of when.
I think the real question is … How, not when?
PPI & Inflation
The Producer Price Index hit 8.6% – it’s highest level since 2010.
With the cost of goods rising, it’s no wonder we also saw 30-year high inflation numbers.
The U.S.’s inflation is being viewed by economists as increasingly more permanent than “transitory.”
One bruise to the administration came from Larry Summers, the former top economic adviser to President Obama.
In response to the inflation report, Summers stated that the Biden White House has been “behind the curve” in their predictions about rising prices during the pandemic.
He told CNN that “I think that the policymakers in Washington unfortunately have almost every month been behind the curve … [t]hey said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors. They said when September came and people went back to school, that the labor force would grow, and it didn’t happen.”
Despite the growing consensus that it is moving in the wrong direction, the White House has continued to argue that passing all its domestic policy agenda items will ease inflation and end supply chain disruptions.
Social Spending Bill
Even if the White House were to somehow be correct, passage of the social spending bill is looking less and less likely.
The Congressional Budget Office (CBO) is scoring the budgetary impact of the legislation.
That score will be pivotal to garner votes in the House and Senate.
If the score is above $1.75 trillion, Joe Manchin and other centrists will have a sound reason to oppose the measure and/or push for additional cuts.
That will not sit well with progressives who are already ticked that their $3.5 trillion measure has been halved.
Manchin has already indicated that he is concerned about the rise in inflation and does not see a need to vote on the boondoggle bill until potentially 2022.
Even if passed in the House, the delay in the House vote on the bill will further hurt its chances of being taken up in the Senate anytime soon.
Senate Majority Leader Schumer wanted to start debate on the boondoggle bill this week.
But the delay has caused him to turn to other legislation.
Schumer announced this week that the Senate is “likely” to take up the National Defense Authorization Act (NDAA), a massive defense policy bill, this coming week.
That puts any vote on the boondoggle bill in perpetual limbo.
Global Build Back Better?
Since more spending always seems to be the answer, the Biden administration looks to launch a global infrastructure financing program.
The program is intended to counter China’s Belt and Road initiative and could be announced as soon as January.
It will fund between five and 10 flagship projects.
The administration intends the “Build Back Better World” program to counter Chinese influence by offering funding for projects with higher labor standards, a focus on climate considerations and helping disadvantaged groups like female entrepreneurs.
The administration is identifying high-profile projects to receive early funding.
In response, a Chinese spokesman stated that China believes there’s “enormous space” for cooperation on infrastructure around the world.
He emphasized that “Different initiatives don’t offset or replace each other … [and that the] world needs efforts to build bridges, not blow up bridges.”
The White House hopes the initiative can help democratic nations counter Beijing’s massive trillion-dollar project to finance infrastructure projects across the developing world.
The administration has not yet stated how much money it will devote to the plan.
Climate News
The big agreement to come out of the climate summit in Glasgow was … an agreement for governments to come back next year with stronger plans to curb emissions.
The group wants nations to slash their carbon dioxide emissions in half in the coming decade.
They also want wealthy nations to “at least double” funding by 2025 to protect the most vulnerable nations from the hazards of climate change and curb fossil fuels.
That will promote further green energy initiatives.
Breakups
One of the biggest producers of windmills is General Electric (Ticker: GE).
And that division might go it alone.
GE was formed in 1892 and has sold everything from aircraft engines to lightbulbs to washing machines to medical equipment.
But like many behemoths, it became too big for itself, particularly with its foray into capital financing.
GE announced this week that it will be breaking itself into three businesses.
It will keep its aviation business but spin off its health care division in 2023 and its energy businesses in 2024.
The new energy and power company will include wind turbines and gas-fueled power generators that produce about one-third of the world’s electricity.
Its success will be determined, in part, by the ability of the power business to shift to alternative energy sources.
And there is plenty of demand for alt energy to power EV cars and trucks.
Just look at the appetite for the IPO of Rivian (Ticker: RIVN) that occurred this week.
The company, which has made under 160 trucks so far and sold even fewer (most of those made went to employees), saw its stock price go up 50% in its first two trading days.
It raised nearly $12 billion through the IPO and now has a market cap equal to Ford (Ticker: F) and General Motors (Ticker: GM), companies that sell millions of cars a year.
But the EV market is hot and will continue to get hotter, so it could be a fun EV ride.
Cutting Through the Noise for You.
Frank