Hey Influence Traders,
It’s the weekend, which means it’s time for the Weekly Roundup.
This week we are back to the normal format — we’ve got winners and losers!
The Highlights
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- Stanford knocked off Arizona in a 1-point thriller to win the Women’s NCAA basketball tournament.
- On the men’s side, Baylor thrashed Gonzaga to win the tournament and brutally end the Bulldog’s perfect season.
- A massive infrastructure plan was announced that actually includes some infrastructure spending.
- Taxes are going up.
- We’ve got Power Movers and Power Losers.
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DC Action
The dust is still settling on the $2.4-trillion infrastructure proposal — nothing is finalized.
Yet the Biden administration is already talking about another $1.52 trillion in spending on discretionary programs to boost education, health research and the fight against climate change.
The proposal aims to make climate programs part of every government agency, including the Agriculture and Labor departments.
This is in addition to the green spending in Biden’s proposed infrastructure legislation for electric vehicle production and building climate-resilient roads and bridges.
The funding for the Energy Department includes $1.7 billion to research and develop new nuclear power plants and hydrogen fuels and $1.9 billion to make homes more energy-efficient.
All that has to be paid for …
And a fight on the Hill is looming.
Some administration officials are saying that certain taxes are “off the table.”
Others are saying game on!
Power Mover of the Week
ME & YOU: You heard it here first … Option Pit Director of Education Andrew Giovinnazi, and I are preparing to launch a new trading product.
I love identifying themes and picking long plays …
Andrew is going to wrap some great trading ideas around those themes.
There is money to be made in #PowerMoves!
S&P 500: The index set a record this past week when it closed above 4,128.
Crypto: Coinbase is going public and China announced a new digital currency.
Coinbase, the popular trading app, is going public via a direct listing on Nasdaq. The crypto co. posted $1.2 billion in revenue in 2020 — and its first annual profit of $322 million.
Its Q1 2021, revenue has already surpassed all of 2020 ($1.8 billion), with $800 million in estimated profit.
Not too shabby.
This should help bring more attention to cryptocurrencies such as Bitcoin (Ticker: BTC).
Meanwhile, China has launched the first central-bank-controlled digital currency.
It will stray from the traditional notion of anonymous crypto and give China’s government yet another tool to monitor both its economy and its people.
Beijing already deploys hundreds of millions of facial-recognition cameras to track its population, sometimes using them to levy fines …
A digital currency would make it possible to both identify and collect fines as soon as an infraction occurs.
China is positioning the digital yuan for global use and intends to challenge the U.S. dollar’s dominance. The dollar makes up 88% of international foreign-exchange trades, while the yuan is used just 4%.
The U.S. has taken note. Both Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell say they are studying China and whether a digital dollar makes sense here.
Central America: As part of his $1.52 trillion discretionary spending proposal, Biden intends on “investing” $861 million in Central America.
It is part of a four-year, $4-billion package to improve the economy and quality of life in the region.
But my Power Mover of the week is, once again – Infrastructure
We are beginning to get details on the first part of Biden’s infrastructure plan.
It is massive and will create trading opportunities.
More on that in a minute.
Power Loser of the Week
Unions: Amazon workers in Alabama voted decisively against forming a union.
The Retail, Wholesale and Department Store Union, which led the drive, got less than 30% of the vote.
The union blamed its defeat on claims of anti-union tactics and pledged to challenge the result.
But employees said that the union failed to convince them it could improve their working conditions. Amazon provides good benefits, pay starts at $15 an hour, and employees are given opportunities to advance
Also, employees, a majority of whom are black, did not like that the union tried to cast the vote as a Black Lives Matter issue when they say they’ve never felt harassment.
Emergent BioSolutions: The government contractor had to dispose of 13-15 million doses of Johnson & Johnson’s Covid-19 vaccines because of contamination.
An official assessment determined that it was risky for the Biden administration to rely on Emergent to handle the production of vaccines developed by both J&J and AstraZeneca.
It was determined that Emergent lacked enough trained staff and had a record of problems with quality control.
The fate of another 62 million doses of the vaccine produced at the plant is unclear.
Unemployment: Applications for U.S. state unemployment insurance rose unexpectedly for a second week.
Claims increased by 16,000 to 744,000, which was higher than the 680,000 claims estimated.
California and New York saw the biggest increases. Meanwhile half of all states posted declines, led by Ohio and Alabama.
The overall increase shows that the labor market has a long way to go to recover the jobs lost during the pandemic.
But my Power Loser of the Week is Your Wallet, particularly if you’re a New Yorker.
Biden’s infrastructure plan needs to raise $2.5 trillion in revenue over 15 years.
Taxes are going up.
The corporate tax rate is going from 21% to 28%. And a de facto global minimum tax will be doubled to 21% percent with tougher enforcement mechanisms.
In a speech this week, Treasury Secretary Janet Yellen said that we need to “stop the race to the bottom” on corporate taxes and argued that a global minimum corporate tax will prevent companies from evading taxes.
The Biden administration has to raise revenue to pay for its multi-trillion-dollar infrastructure package …
But the administration has been emphatic that taxes would not impact the middle class.
Apparently Secretary of Energy Jennifer Granholm didn't get the memo, because she failed to deny claims during an interview that tax hikes associated with the infrastructure plan could economically devastate middle-class Americans.
New York taxes are going way up
Not to be outdone by the Feds, New York state leaders announced a $212 billion state budget that includes tax increases on the wealthy as well as substantial relief for renters, undocumented immigrants and business owners.
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- $2.3 billion in federal funds to help tenants late on rent
- $1 billion in grants and tax credits for small businesses that suffered from the economic downturn
- $2.1 billion fund to provide one-time payments for undocumented workers
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While Gov. Cuomo has long fought raises in taxes on individuals making over $1 million annually, he is in a weakened political position due to all his scandals and caved to demands.
The changes mean wealthy residents of New York City will be subject to the highest combined local and state personal income tax rates in the nation.
Expect to see more wealthy New Yorkers flee the city to sunnier, lower-tax states.
Infrastructure Plays
In a speech promoting his $2.25 trillion infrastructure plan, President Biden described the bill’s passage as urgent to keep the U.S. competitive with China.
He emphasized that the plan is “a once-in-a generation investment in America … the single largest investment in American jobs since World War II.”
We know we are getting infrastructure spending, and we can guess as to where the money is going … but it is still early to make definite picks.
There will be a long, drawn-out fight over this plan that could see it go through many iterations.
One way to place an early bet on infrastructure is through an infrastructure ETF.
The two largest are the iShares Global Infrastructure ETF (Ticker: IGF) and the Global X U.S. Infrastructure Development ETF (Ticker: PAVE).
But all infrastructure ETFs are not created equal, and I like PAVE.
PAVE is up 37% over the past six months and 5.7% this past month.
It has been down slightly since the infrastructure announcement while the market figures out where money is going, so it is still reasonably priced.
PAVE takes a broad-based approach to government infrastructure spending, recognizing the emphasis on clean energy, reducing carbon emissions and electrical grid modernization.
It also factors in the coming 5G network buildout.
IGF is the largest infrastructure ETF, but has a global focus (just 34% of assets are in U.S. companies), whereas PAVE holds only U.S.-listed companies.
That plays nicely into Biden’s Buy America executive order.
Cutting Through the Noise for You,
Frank
