Coal Powered Cars

Hey Influence Traders,

It was a wild week in DC and the Nation.

Congress actually got some work done!

Other parts of the world had wild weeks too, but perhaps none more peculiar than Egypt.

In something right out of the mind of Steven King, a heavy rainstorm in Aswan led to … scorpions.

And not just any scorpion, but one affectionately known as the “deathstalker.”

Thousands of them washed into the town stinging over 500 people and causing a few deaths.

I’ll take the insanity on the Hill any day – so let’s get back to it.

Infrastructure Bill

The $1.2 trillion infrastructure bill was signed into law on Monday.

      • $110 billion for road and bridge repair, replacement, and rehabilitation.
      • $66 billion for Amtrak and improving the safety of freight lines.
      • $65 billion to improve high-speed internet access for rural areas across the country. 
      • $65 billion for upgrades in power grids, including paying for thousands of miles of “resilient transmission lines" for the expansion of renewable energy.
      • $55 billion to improve the nation’s water system, specifically the replacement of lead pipes and the removal of toxic plastic substances that contaminate water supplies.
      • $39 billion to modernize public transit systems, including improvements to buses, rail cars, tracks and stations.
      • $25 billion to reduce congestion at airports and upgrade air traffic control systems and terminals.
      • $21 billion to clean up Superfund and Brownfield sites.
      • $17 billion for improving port infrastructure to ease congestion, including expanding inland waterway routes to accommodate larger vessels.
      • $11 billion for transportation safety programs designed to reduce road accidents and fatalities, especially for bicyclists and pedestrians.
      • $7.5 billion to build a network of charging stations for electric vehicles across the U.S., with a focus on rural and hard-to-reach areas.
      • $7.5 billion on bus and ferry transportation, with $5 billion going toward zero-emission buses and $2.5 billion for ferries.
      • $1 billion to reconnect neighborhoods that were broken up by the construction of highways, roads and other transportation systems.

We will dive more into the sectors that will benefit and the stocks in those sectors in the coming weeks.

Crypto

The infrastructure bill includes a controversial cryptocurrency tax reporting requirement.

The tax reporting requirement expands the scope of a broker for the IRS and makes all brokers report transactions under the current tax code.

Another provision will amend tax code section 60501 and apply to in-person cash transactions over $10,000.

The provision essentially requires a recipient of $10,000 or more to: verify a sender’s personal information; record their social security number; indicate why the transaction was done; and report it to the IRS within 15 days of the transaction.

Crypto enthusiasts ignored the downside and declared a win of recognition of the asset class by the government.

Build Back Better Boondoggle Bill

We have a marathon winner in the House!

House Minority Leader Kevin McCarthy single handedly forced a delay in the vote on the Build Back Better boondoggle bill from Thursday to Friday with a record setting floor speech.

McCarthy’s 8 hours and 32 minutes speech, which started at 9pm and finished around 5am, bested the previous floor speech record set by Nancy Pelosi in 2018.

He fought through heckling from the other side to address COVID-19, inflation, immigration, the Gettysburg Address, Elon Musk, George Washington crossing the Delaware River, and U.S. policy toward China and hypersonic weapons.

He was trying to sway members of Congress and voters to side with Republicans, which led Dem Rep. Brendan Boyle to comment that “He’s trying to whittle down our three-vote majority by getting some of us to jump off a roof just so we don’t have to listen to his droning on anymore.”

But the House took the bill back up again Friday morning and, to no surprise, passed the roughly $2 trillion spending plan on a 220-213 party-line vote, with one Dem voting against it, Rep. Jared Golden (D-Maine).

Biden will declare a win, but the bill still must go through the Senate where it will see delays, revisions, and Joe Manchin, who could hold it up indefinitely, if not outright cause its demise.

One thing that Manchin will be keeping an eye on is a recent poll of West VA voters in which 74% of respondents indicated that they oppose President Biden’s reconciliation spending bill in favor of legislation that would control spending more.

Manchin will also likely consider a new national poll that found 62% of registered voters believe that Biden’s policies are at least somewhat responsible for inflation, compared to just 11% who believe the president isn’t responsible at all.

Critical to that poll were Democrat respondents, with 46% saying the president is at least somewhat responsible and only 16% believing he holds no responsibility.

Senators will attack partisan provisions that benefit only certain states.

For example, the SALT deduction was put back into the House bill in a huge way, which will further impact the CBO’s concerns. 

Democrats from high-tax states like New York, New Jersey and California have spent years promising to repeal the cap, and the House bill lifts it from $10,000 to $80,000 through 2030, before reducing it back to $10,000 in 2031. 

A gift like that to just a few states, which will not help the economics of the bill, will sit poorly with Manchin and lead to a Senate fight.

The House passed the bill despite a finding by the nonpartisan Congressional Budget Office (CBO) that the massive bill would increase the deficit by $367 billion over 10 years.

The White House and Dem leadership were quick to downplay the CBO’s findings and point out that the final score did not account for $207 billion in revenue that CBO estimates would be raised by providing the IRS more money for enforcement.

The Treasury Department has estimated that the IRS funding provision would raise significantly more revenue than the budget office estimated, and some moderates have expressed support for Treasury’s larger estimate.

Either way, the deficit will increase if this version of the bill goes through.

So let me summarize – “we are going to demand a CBO review prior to voting on the bill, but if we do not get the score we want we are going to ignore the CBO determination."

Translation – “Politics as Usual!"

Given the issues with the bill, there is little chance that the final version of the bill will look like what the House passed, if it passes at all.

We are going to touch on the contents over the coming weeks, but at this point it will be pure speculation as the final bill will morph.

And we have time because the bill is now second in line in the Senate for consideration behind a massive defense spending bill, which itself has grown contentious.

The Senate could not complete the Defense bill prior to their Thanksgiving break, so its consideration has been punted until after the holiday.

Energy

The boondoggle bill passed by the House contains the largest investment in climate issues in history.

But fuel prices continue to soar, which is creating competing pressures.

Despite the move to EV, we still need to produce the energy to charge the cars … and heat homes.

Demand for electricity is surging with winter approaching, driving natural gas prices to record highs.

That bodes well for coal.

Almost every lump of coal that U.S. miners will dig out of the ground next year has already been sold.

Surging natural gas prices are causing utilities to burn more coal, and power producers are signing multi-year contracts for every ton they can get.

Peabody Energy Corp. (Ticker: BTU), the top American supplier, has contracts for more than 90% of its coal from the Powder River Basin region and all of the power-plant fuel from its other U.S. mines.

BTU Chief Executive Officer Jim Grech said on a recent conference call that “We only have a small portion left to be sold for 2022 and for 2023.”

Arch Resources Inc. (Ticker: ARCH), the No. 2 producer, has deals with utilities for all of its 2022 output at an average price that’s 20% higher than current spot prices. 

The fossil fuel increase does not bode well on global leaders coming off their Glasgow climate meeting.

The transition to clean energy is going to take time and will be messy, and many leaders are sending mixed signals.

Jen Psaki made clear that the administration does not really care about rising prices at the pump because it is a good turn of events that will speed up the transition to clean energy transportation.

But facing mounting pressure on pump prices, President Biden asked the Federal Trade Commission to look into potential “illegal conduct” by oil and gas companies in the market as the cause of soaring prices.

At the same time, he asked Russia and OPEC to increase production to lower prices … to which they declined.

He also, to the chagrin of environmental activists, allowed the US Bureau of Ocean Energy Management (BOEM) to hold a lease sale in the Gulf of Mexico for oil and gas drilling rights.

His rationale was that, despite a moratorium on such sales issued by the administration, a federal judge put the executive order on hold, and that cleared the way for the sale.

(BTW, the sale generated $192 million in high bids from 33 companies, including ExxonMobil (Ticker: XOM), British Petroleum (Ticker: BP), Shell (Ticker: RDS.A), and Chevron (Ticker: CVX) for 308 tracts covering 1.7 million acres (2,700 square miles) in federal waters.)

If you can gel all those competing messages in your head, be my guest … they gave me a brain freeze.

EV Push

Biden touted green vehicles with another speech and EV test drive in Detroit this past week.

The $1.2 trillion infrastructure bill that designates $65 billion for upgrades of the nation’s electric grid and $7.5 billion for the nationwide deployment of EV charging stations. 

According to the U.S. Department of Energy there are currently about 122,000 charging ports at 48,000 station locations.

The administration aims to get that up to 500,000 charging stations by 2030.

That is in addition to private charger expansion.

TSLA has announced plans to triple its Supercharger network within two years and Electrify America, supported by Volkswagen as part of the diesel-scandal settlement, will spend $2 billion from 2017 until 2027. 

Tesla Inc. (Ticker: TSLA) saw a number of competitors come to market recently, including Ford (Ticker: F) backed Rivian (Ticker: RIVN). 

With all the new EVs coming to market, one thing is for sure – lithium.

We are keeping an eye on miners, but also solid-state battery developer QuantumScape Inc. (Ticker: QS).

Solid state batteries are higher capacity than lithium-ion and less prone to fires.

Andrew and I have made some great moves in Ford (Ticker: F) this past year.

We’ve maintained that F, although boring compared to some of the new EV arrivals, is in a competitive position in the marketplace and a darling of the administration.

F has world class cars with great sales track records, the ability to pivot and is a union shop, and F continues to make #powermoves.

F is an investor in RIVN and benefited handsomely from the RIVN IPO.

But F is so confident in its F-150 Lightning truck that it scrapped plans to jointly develop an EV with RIVN.

To combat the global chip shortage and to gain a competitive edge, F announced a deal with GlobalFoundries (Ticker: GFS) to develop chips for its cars and trucks.

Speaking of chips, Nvidia (Ticker: NVDA) set another quarterly sales record of $7.1B.

Demand for its gaming and server chips surged 50%, with NVDA continuing to power half the world’s servers.

Andrew and I are keeping an eye on both chip makers.

The live Power Moves Portfolio trade log is here.

Cutting Through the Noise for You.

Frank

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