Stimulus, Stimulus and More Stimulus

Hey Influence Traders,

Its the weekend, which means its time for the Weekly Roundup.

Except for a buddy giving my daughter and me food poisoning yesterday, it was a great week!

I look at it this way – it’s a way to shed a few unwanted COVID pounds.

The Highlights

  • Three more Biden appointees have been confirmed by the Senate.
  • Stocks traded flat and bonds were up.
  • The Senate passed a COVID relief bill that is larger than the GDP of Brazil.

DC Action

As I reported earlier in the week, a few confirmations came out of the Senate for Biden appointees, along with one withdrawal. There has been no additional movement since then.

All three confirmations control substantial budgets and can move ripples.

  • Secretary of Commerce: Senate confirmed Gina Raimondo by a vote of 84-15.

She is considered to have a sound business acumen,  having co-founded Point Judith Capital, an early-stage venture capital firm.

Raimondo will head a massive department that works to promote job creation and economic growth across the country.

She will certainly have influence over where money is spent, particularly when the administration puts forth its infrastructure spending bill.

  • Council of Economic Advisers Chair: The Senate confirmed Cecilia Rouse by a vote of 95-4.

Rouse, a labor economist and dean of the Princeton School of Public and International Affairs, previously served as a member of President Barack Obama's Council of Economic Advisers and worked for President Bill Clinton's National Economic Council.

She is expected to be a big advocate for unionizing the workforce.

  • Secretary of Education: The Senate confirmed Miguel Cardona by a vote of 64-33.

Cardona, a former public school teacher, will be tasked with squaring off with teachers’ unions to negotiate a return to in person instructions.

Schools will see a massive flow of money from the COVID bill, which Cardona will help direct.

Denied: Biden's cabinet was thrown a curveball when renowned Tweeter Neera Tanden, his nominee to lead the White House budget office, was forced to withdraw her name from consideration after her nomination faced opposition from both sides of the aisle.

Tanden's withdrawal raises questions about the Biden administration's budget process since the White House has yet to offer a timeline for releasing its budget.

But the big news out of DC this week was the COVID relief bill, which the Senate debated, modified and then passed. More on that in a minute … 

Power Mover of the Week

Nominees:

  • Joe Biden and the Democrats for pushing through Biden’s first big legislative win.
  • Almost everyone, as most Americans will see money from the COVID bill … but particularly state and local governments, which are getting a windfall.

But my Power Mover of the Week is the – THE STOCK MARKET!

Stocks will benefit from the COVID bill and the infrastructure bill that is already being discussed.

Power Loser of the Week

In the words of Nick “Goose” Bradshaw, this week’s list of losers is “long, but distinguished”:

  • Andrew Cuomo: The embattled NY Governor is fighting wars on two fronts: a nursing home scandal; and, at last count, three sexual harassment accusers. Those of you who are military historians or players of Stratego know fighting on two fronts never turns out well.
  • NY Real Estate and Jeffrey Epstein’s Estate: The infamous sex trafficker’s Manhattan townhouse is reportedly poised to sell for $50 million, down from an asking price of $88 million.
  • John McAfee: The Eccentric cyber software giant was indicted in Manhattan for a crypto pump-and-dump scheme and illegal initial coin offering promotion. He’s currently detained in Spain on separate U.S. tax evasion charges awaiting extradition to the U.S.

NBC: The network hosted the Golden Globes ceremony, which was a colossal flop … even by the standards of declining award-show ratings. The viewing audience shrank by 62 percent compared with last year’s show, making it the smallest Globes ceremony audience since NBC started broadcasting the event in 1996.

But my big loser of the week is … POLITICAL BI-PARTISANSHIP!

Republican’s went 2 for 286 in the House and 3 for 39 in the Senate on proposed COVID bill amendments.

Not a good sign for “functioning government” moving forward.

The COVID Bill – What Happened

After much partisan bickering and a lot of bragging about how hard they had to work for a couple of days, the Senate voted in favor of Biden’s signature $1.9 Trillion COVID relief bill, the “American Rescue Plan Act.”

Unlike the bi-partisan CARES Act from a year ago, this was a highly partisan affair with a vote of 50-49.

  • Vice President Harris, who has already cast three tie-breaking votes in the Senate since taking office, was not needed as one Republican Senator was absent due to a family funeral and did not cast a vote. (To put that in perspective, former Vice President Mike Pence cast 13 tie-breaking votes in four years).
  • Republicans had a 1.5% success rate on making changes to this legislation – they went 2-for-286 in the House and 3-for-39 in the Senate on proposed COVID bill amendments.
  • After the vote, Senate Minority Leader Mitch McConnell stated “The Senate has never spent $2 trillion in a more haphazard way.”

Despite the partisan bickering on the Hill, polls show that 60% of Americans support the bill and 78% of Americans support receiving $1,400 stimulus checks.

The bill now goes back to the House for reconsideration.

The word on K Street is that the House will vote on the Senate version as is, although there is a chance that the AOC crowd might push to have the minimum wage provision reinserted (the firebrand provision was taken out of the original House version).

If it passes the House, it will go to the White House where Biden’s signature is all but ensured.

The COVID Bill – Highlights

  • $1,400 direct payments to Americans, although the phase out income thresholds were lowered to $75,000 for a single person and couples making more than $150,000.
  • No minimum wage increase.
  • Weekly unemployment benefits lowered to $300 from $400, but payments extended through Sept. 6th.
  • First $10,200 of the 2020 unemployment benefits will be nontaxable for households making less than $150,000. (This provision was immediately attacked by Republicans who claim it makes it “even more advantageous to be on unemployment.”)
  • Child tax credit that gives families $3,000 per child per year.
  • Federal employees are eligible to receive $280 per day, up to $21,000, for paid time off to sick time, emergencies or payment when an employee is exposed to Covid-19 and must quarantine.
  • $350 billion for state, local and tribal governments
  • $50 billion for contact tracing and vaccine distribution
  • $130 billion for K-12 education

One of the most controversial portions of the bill is the $350 billion in no-strings federal aid to state and local governments. Do they need it?

People have been receiving $600-a-week federal supplements that allowed them to keep spending — and states to keep collecting sales tax revenue — even when they were jobless, along with the usual state unemployment benefits.

Recent studies have shown that most states, after an early pandemic drop, ended up collecting nearly as much tax revenue in 2020 as they did in 2019.

  • My state, New Jersey, had a dire forecast when the pandemic started. But the Garden State had better-than-expected tax revenue from retail sales and high earners who lost fewer jobs and reaped the benefits of a bullish stock market.
  • In Illinois, per capita personal income actually rose as the pandemic kicked in.
  • 2020 revenue collections were so strong in Idaho that the state is sending $295 million back to the taxpayers (while still investing in better highways, bridges and broadband access).

The Stock Market

As I always say, there is no greater mover of money and assets than the U.S. federal government. 

It has the ability to move markets … and mountains.

And it has inserted a lot of money into the system in the last year, with more to come.

  • CARES Act: $2.4 trillion
  • Covid relief: $900 billion
  • Biden plan:  $1.9 trillion

And a $3-4 trillion infrastructure bill is already being discussed by the Biden team.

Let’s put all that in perspective:

  • The Biden bill, by itself, is larger than the 9th highest GDP in the World … Brazil, at $1.87 trillion.
  • Even without the infrastructure spending bill, the money that has been put into the system in the past year ($5.2 trillion) is larger than the GDPs of every other country in the world except China.
        • United States (GDP: 20.49 trillion)
        • China (GDP: 13.4 trillion)
        • Japan: (GDP: 4.97 trillion)
        • Germany: (GDP: 4.00 trillion)

As the famed economist Robert Schiller recently opined, the stock market is already quite expensive … but it is also true that stock prices are fairly reasonable given interest rates and inflation, which are both extremely low.

That conclusion is further enhanced when you compare stocks to bonds, which makes stock valuations look even more attractive.

And polls show that many people are going to use their stimulus payments to play in stocks – thanks Robinhood!

Moreover, even though this new stimulus bill has not yet landed on his desk, Biden has already started to push forward on passing another economic stimulus plan during phone calls and White House meetings with members of Congress and senior Capitol Hill aides.

He wants his infrastructure bill!

That will mean even more money flowing into the markets.

At least in the short term … the markets are winning!

Cutting Through the Noise for You.

Frank

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