Hey Influence Traders,
It’s The Weekly Roundup … DC Edition!
The big news from K Street this week was the potential infrastructure deal struck between the White House and the Hill.
We’re going to take a deep dive look at the potential winners and losers from that agreement.
But, first …
The Weekly Highlights
- Congrats to the Tampa Bay Lightning and the Montreal Canadians for making it to Lord Stanley’s playoff finals.
- Both the Nasdaq and the S&P 500 set records this past week.
- A clash between traditional cryptos like Bitcoin and central bank digital currencies (CBDCs) is brewing.
- An infrastructure spending deal looks like it might be on the table.
- Infrastructure – roads and bridges look like they might get funding. Climate issues? Not so much.
There was a huge vol spike in Tesla (Ticker: TSLA) on Friday, and trading guru Andrew Giovinnazi made a #PowerMove on it.
He executed a two-hour trade by buying an upside call butterfly in the TSLA July 02 700/740/780 strikes and turned it around for a 25% profit.
He then used a TSLA July 02 600-strike put as a hedge, but it only dropped $.09 so he took that as a sign to take the money and run.
Power Mover of the Week
The nominees are …
- Digital Currencies – the Bank for International Settlements (BIS), which is the central bank to the world’s central banks, has endorsed the development of central bank digital currencies (CBDCs).
At least 56 central banks and monetary authorities are considering digital currencies, which the BIS argues are necessary to ensure that “Big Tech” does not take control of money. Governments do not want to lose control of sovereign money.
Last October, the Bahamas became the first country to launch a CBDC, known as the Sand Dollar.
China has indicated that it will launch the digital yuan and Switzerland and the Bank of France have announced Europe’s first cross-border CBDC experiment.
Meanwhile, Paraguay has become the second country after El Salvador to propose a bill to make Bitcoin (Ticker: BTC) legal tender.
This is setting up a clash for CBDCs or BTC to become the official digital currencies of countries.
The BTC push is being led by South American countries in a push to gain more financial leverage on the world stage. But those countries are facing an uphill battle. The International Monetary Fund (IMF) has voiced concerns over El Salvador’s plans and the World Bank said it would not provide any help to implement BTC in its monetary system.
- Coal – coal prices have climbed to their highest level in a decade, despite governments pledging reductions in carbon emissions.
Reductions in natural gas production combined with increasing demand for electricity usage have shot up the demand for thermal coal.
Supplies have been crimped by a closed mine in Colombia, flooding in Indonesia and Australia, and distorted trade flows caused by a Chinese ban on Australian coal.
But my Power Mover of the Week is – Bipartisanship
The apparent agreement on an infrastructure spending bill is a rare, and I do mean rare, show of what DC can accomplish when both sides work with each other.
Power Loser of the Week
The nominees are …
- Johnson & Johnson – Johnson & Johnson (Ticker: JNJ) settled an opioid lawsuit with the state of New York for $230 million to avoid a trial.
As part of the agreement, JNJ must leave the opioid business across the country and no longer manufacture or sell opioids in New York.
- Trusted News – according to a recent report, the US ranks last among 46 countries in trust in media.
Just 29% of people surveyed in the U.S. said they trust the news, compared to 45% in Canada and 54% in Brazil.
Finland has the most trusted media at 65%.
But my Power Loser of the week has to be Fringe Elements.
Not everyone was happy with the proposed infrastructure spending plan.
Despite last-minute backpedaling by the White House, it appears that an infrastructure bill will be struck between the Biden Administration and a bipartisan group of senators.
It looks like the deal will be focused on brick-and-mortar infrastructure, like roads and bridges, and will be done with fewer tax hikes than originally anticipated.
Because they’re rarely happy, progressives immediately voiced their discontent, particularly with much spending on the environment, childcare and elder care being taken off the table.
Progressives were also angry that the administration worked with Republicans and didn’t simply bypass them.
Roadwork will get the majority of the proposed $579 billion plan
Democrats are hopeful that spending related to the environment, childcare and elder care will be accomplished through the budget reconciliation process
Roads & Bridges
“Traditional infrastructure” – roads and bridges – was the big winner and amounts to $109 billion of the $579 billion. In addition:
- $49 billion for public transit
- $66 billion for Amtrak, as well as commuter and freight railways
- $25 billion for airports
- $55 billion for water infrastructure.
The deal is short on spending for climate-related issues. There is no mandate requiring utilities to produce power only from carbon-free sources, as the White House had hoped.
Also absent was the White House’s $174 billion electric vehicle initiative and a desired 10-year extension of tax credits for wind, solar and other renewable sources.
The deal does, however, include $7.5 billion for electric vehicle charging stations to advance President Biden’s goal of a national network of 500,000 charging stations, and $7.5 billion for electric buses and transit.
Biden claimed in a statement that the deal gets “two thirds of the resources that I proposed in my American Jobs Plan” for the following areas:
- Clean transportation
- Clean water
- Universal broadband
- Clean power infrastructure
- Environmental resilience
Environmentalists were not happy, but Democratic congressional leaders have voiced confidence that their remaining green priorities will be achieved through budget reconciliation.
Instead of derailing negotiations with tax increases, which Republicans vowed to fight, the plan repurposes other pandemic relief funds, invests in IRS tax collection, and sells oil from the Strategic Petroleum Reserve.
While the plan does not propose increases in the 18.4-cents-per-gallon federal gas tax, K Street insiders insist that Biden’s proposals to raise taxes on corporations and high-earning Americans remain.
Biden wanted his support for the package to be contingent on Congress funding other key priorities included in his American Jobs Plan and the $1.8 trillion American Families Plan:
- $400 billion for care for older people and people with disabilities
- $225 billion to help low-income families pay for childcare
- $225 billion for national paid family and medical leave programs
- Free universal pre-school for 3- and 4-year-olds
- Free tuition for community college
- Expansions or extensions of various tax credits for families and low-income households
Republicans called Biden’s bluff to link the proposal to a Democratic-only bill by threatening to drop their support, which caused the president to backpedal on prior comments.
Biden responded by reiterating “strong support for both the bipartisan infrastructure bill and a reconciliation bill containing the American Families Plan moving forward on a two-track system,” a mea culpa that Republican leadership accepted.
This is a clear win for political moderates, who have gotten little attention over the past years of contentious K Street politics.
This could be a signal that DC is moving away from in-fighting to get things done.
Of course, do you want the government here to help?
Next time, we’ll look at the bill’s impact on Wall Street — and your wallet.
Cutting Through the Noise for You