This morning's "Morning Money" tipsheet from Politico featured comments from Thorn Run’s Jason Rosenstock on what sort of legislative activity we could see from Congress in 2018. Rosenstock astutely notes that while there is potential for “big swing” legislation such as infrastructure, the compressed 2018 legislative calendar and the upcoming mid-term elections make it more likely that Congressional Republicans will be looking to pass "small ball" bills that can generate broad bipartisan support. “This will be especially true in the House, where there is a palpable, growing fear that there could be a flip in November," said Rosenstock. "Possible agenda items for this strategy could include other areas of financial services regulatory relief, as well as a data breach bill, CFIUS reform and possible housing reform and flood insurance.”
The post in its entirety cvan be read below.
OPRAH FOR PRESIDENT? — Oprah Winfrey generated a lot of “Oprah 2020!” buzz for her “a new day is dawning” Golden Globes speech Sunday night. If, like us, you don’t really watch awards shows, the speech is here.
TRUMP’S MARKET PERFORMANCE, REVISITED — MM has used the benchmark of Inauguration Day to compare Presidents Trump and Obama on market performance. But there are compelling arguments to use Election Day instead, given that’s when investors start reacting to a new president. And on that score, Trump does better.
Via David Bahnsen: “Those saying Obama’s first year did better conveniently start with his INAUGURATION DAY, instead of his ELECTION DAY. This is irrational, convenient, and highly misleading. The Dow was 9,625 at the open the day after Obama’s election. It was 18,333 at the end of Election Day 2016. That is a 90 percent gain in eight years, or an 8.39 percent annual growth rate. Not great, but not bad. …
“President Obama saw the DJIA close at 10,227 on the one year anniversary of his election (+6.25 percent) President Trump saw the DJIA close at 23,563 on the one year anniversary of his election (+28.5 percent) And of course the market is up another 1,500 points (+6 percent more) just in the last two months!!”
WHITE HOUSE LOOKS TO GET TOUGH ON TRADE — As foreshadowed by MM last week, the beginning of 2018 is going to be focused on trade inside the White House with Trump eager to take aggressive, protectionist action after a year of restraint. The internal debate is now just how hard to go with people like NEC Director Gary Cohn and Treasury Secretary Steven Mnuchin arguing for a measured approach. More via POLITICO’s Andrew Restuccia and Doug Palmer:
“Trump’s administration is preparing to unveil an aggressive trade crackdown in the coming weeks that is likely to include new tariffs aimed at countering China’s and other economic competitors’ alleged unfair trade practices, according to three administration officials.
“Trump is tentatively scheduled to meet with Cabinet secretaries and senior advisers as soon as this week to begin finalizing decisions on a slew of pending trade fights involving everything from imports of steel and solar panels to Chinese policies regarding intellectual property …
“Senior aides are also laying plans to use Trump’s State of the Union address at the end of the month to flesh out the president’s trade vision and potentially preview a more aggressive posture toward China” Read more.
TRUMP’S LIGHT SKED — Remarkable detail via Axios’ Jonathan swan: “Trump is starting his official day much later than he did in the early days of his presidency, often around 11am, and holding far fewer meetings, according to copies of his private schedule shown to Axios.
“This is largely to meet Trump’s demands for more “Executive Time,” which almost always means TV and Twitter time alone in the residence, officials tell us. … The schedule says Trump has ‘Executive Time’ in the Oval Office every day from 8am to 11am, but the reality is he spends that time in his residence, watching TV, making phone calls and tweeting. Trump comes down for his first meeting of the day, which is often an intelligence briefing, at 11am.”
DON’T SWEAT THE JOBS REPORT — Pantheon’s Ian Shepherdson: “We aren't perturbed by the undershoot in December payrolls, relative both to the October and November numbers and all the leading indicators. The margin of error in December payrolls was 120K …
“Measures of the trend in payroll growth in recent months are distorted by the hurricanes, but we are happy to argue that the underlying rate of growth of payrolls is close to, or perhaps above, 200K per month.”
DID BANNON’S BANISHMENT BOOST STOCKS? — Via Larry Kudlow on Townhall: “There were two big money-and-politics stories in the first week of the new year: The Dow Jones soared 577 points and Steve Bannon ended his political career. Are these two events related? Perhaps more than you might think.
“Bannon’s peculiar notions of populism were essentially anti-growth. He believed higher taxes, ultra-protectionism, and a cheap dollar would help the middle class. Supply-siders like me know these policies only damage the economy, with the middle and lower classes suffering the most … Bannon went belly-up politically this week, and the stock market soared. And some are calling it the Bannon-is-gone rally.” Read more.
JACK LEW JOINS THE PODCAST— Sitting down on Monday to talk Trump, taxes, debt, entitlements, 2020 and who knows what else with former Treasury Secretary Jack Lew for this Wednesday’s POLITICO Money podcast. Have any questions for him? Shoot me an email.
DRIVING THE WEEK — President Trump speaks Monday afternoon at the American Farm Bureau Federation’s Annual Convention in Nashville and will then attends the college football championship game in Georgia … Trump meets with a bipartisan group of Senators on Tuesday to talk about immigration …
House Financial Services has a hearing at 10:00 a.m. on Tuesday on CFIUS … Senate Banking has a money laundering hearing at 10:00 a.m. Tuesday … House Financial Services has a hearing at 2:00 p.m. on Tuesday on federal financial regulations …
SMALL BALL AHEAD? — Thorn Run Partners’ Jason Rosenstock in his morning note out this a.m.: “While there are a few potential areas for “big swing” legislation, such as infrastructure, we think that the compressed legislative calendar and the upcoming mid-term election in 2018 makes it more likely that Congressional Republican will be looking for so-called "small ball" bills that can generate broad bipartisan support.
“This will be especially true in the House, where there is a palpable, growing fear that there could be a flip in November. … Possible agenda items for this strategy could include other areas of financial services regulatory relief, as well as a data breach bill, CFIUS reform and possible housing reform and flood insurance.”
SPEAKING OF THE FIN REG BILL— CapAlpha’s Ian Katz: “The feeling on Capitol Hill is that the SIFI relief bill the Senate Banking Committee approved in December could get a vote in the full Senate within a month. Because the bill has the support of moderate Democrats, many congressional Republicans are eager to push it through to show a bipartisan legislative achievement.
“The bill will get pushback in the House, which wants farther-reaching deregulation. But we believe that after considerable grousing, the House will eventually decide to support the bill. They will see some deregulation as better than the alternative, which would be no legislation at all. We see a two-thirds probability that the bill will be approved by the full Congress by or in the summer”
TRUMP SPEECH PREP — POLITICO’s Catherine Boudreau in Nashville: “Trump will face a mostly loyal audience with big concerns about his trade and immigration policies when he addresses thousands of farmers and ranchers … Trump remains popular in rural America where his deregulatory offensive and tax cuts have won strong support.
“But many farmers attending the federation’s annual convention say they’ll be looking for more specific commitments: They want assurances he won’t withdraw from the North American Free Trade Agreement, or adopt immigration policies that make it harder to hire workers to harvest their crops.” Read more.
WALL STREET LIKED THE JOBS NUMBER — AP’s Christopher Rugaber: “The Dow jumped an additional 220 points Friday after the government reported that employers added 148,000 jobs last month and that the unemployment rate remained a low 4.1 percent. Investors celebrated the modest job gains because they made it less likely that the Federal Reserve will step up its pace of interest rate increases.” Read more.
WH DOESN’T SEE NEED FOR FASTER FED HIKES — Bloomberg’s Rich Miller: “The Federal Reserve won’t need to pick up the pace of its planned interest-rate increases in response to the recently-passed tax overhaul package, White House chief economist Kevin Hassett said. The administration’s computer modeling of the economic effects of the tax plan result in interest rates that ‘aren’t inconsistent with the Fed’s current guidance,’’ he said during a Jan. 6 session at the annual meeting of the American Economic Association in Philadelphia.
“U.S. central bankers in December penciled in three interest-rate increases for this year, the same pace they foresaw in September, even as they raised their forecast of 2018 economic growth to 2.5 percent from 2.1 percent in anticipation of the $1.5 trillion cut in business and household taxes, based on their median projections. President Donald Trump signed the tax bill into law on Dec. 22.” Read more.
RETAILERS SIGNAL THEY HAD A HAPPY CHRISTMAS — FT’s Anna Nicolaou: “Embattled U.S. retailers had their most cheerful holiday season in at least six years, according to new data and early trading updates. Boosted by bubbling consumer confidence and a healthy jobs market, US shoppers spent 4.9 per cent more during the holidays than they did a year ago” Read more.
KUSHNER’S FINANCIAL TIES TO ISRAEL DEEPEN — NYT’s Jesse Drucker: “Last May, Jared Kushner accompanied President Trump, his father-in-law, on the pair’s first diplomatic trip to Israel, part of Mr. Kushner’s White House assignment to achieve peace in the Middle East. Shortly before, his family real estate company received a roughly $30 million investment from Menora Mivtachim, an insurer that is one of Israel’s largest financial institutions, according to a Menora executive.
“The deal, which was not made public, pumped significant new equity into 10 Maryland apartment complexes controlled by Mr. Kushner’s firm. While Mr. Kushner has sold parts of his business since taking a White House job last year, he still has stakes in most of the family empire — including the apartment buildings in and around Baltimore.” Read more.
DID THE BEARS GIVE UP? — Via the FT: “Have equity bears capitulated? A well-worn financial cliché is that the time to worry in a bull market is when the last bears start to turn. Following the Trump’s administration’s tax reforms and a barnstorming performance for U.S. stocks over 2017, it is becoming increasingly hard to find investors who are vocally doubting shares will perform well over this year. Where once the post-crisis rally was ‘the most hated bull market of all time’ its continuation appears to have ground down many naysayers into grudging submission.”” Read more.
SWISS BANKER HELPED AMERICANS DODGE TAXES, BUT WAS IT A CRIME? — NYT’s David Enrich: “Diane Butrus, a business executive from St. Louis, wandered the streets of Zurich, looking for a bank that would help her keep $1.5 million hidden from America tax collectors. One bank after another turned her down on that afternoon in 2009. They were worried about a United States crackdown on tax evasion and were no longer willing to shelter American money. Finally, across the street from a city park, up a discreet elevator, seated in a luxurious conference room, Ms. Butrus found a banker ready to help. His name was Stefan Buck. …
“That put Mr. Buck in the government’s cross hairs. In 2013, a federal grand jury indicted him for conspiring to help Americans avoid taxes. It seemed like another blow against Swiss bank secrecy. But things didn’t go as prosecutors had planned — and the chain of events could have big consequences for America’s fight to keep people from evading taxes using offshore bank accounts.” Read more.
LARGE DEALS DOMINATE NEW YORK OFFICE MARKET AS FINANCAL FIRMS STAFF UP — WSJ’s Keiko Morris: “Fast growth at technology advertising and media companies made tenants in those industries the darling of Manhattan’s office market in recent years, but in 2017 the spotlight shifted back to tenants that traditionally have been the bread and butter of the city’s office landlords.
“Tenants in the financial-services, insurance and real-estate industries — a category known as FIRE among real-estate professionals — dominated the leasing scene with 13 relocation or expansion deals over 100,000 square feet in 2017, the most in a decade, according to real-estate services firm CBRE Group Inc. The sector notched a total of 3 million square feet of deals in excess of 100,000 square feet, almost three times the 1.1 million square feet recorded in 2016.” Read more.
HOW TO DO INFRASTRUCTURE — Mohamed A. El-Erian on Bloomberg View: “Long-term interest rates, including the 2.80 percent on the 30-year Treasury bond, remain unusually low in the context of ample appetite for government bonds. As such, infrastructure projects can be financed effectively. Their expected social returns would exceed the cost of financing” Read more.
… Republicans have a window to move ahead on an infrastructure program as part of a broad pro-growth policy agenda. With Democrats also involved in what is an inherently complex design process, such a program could even provide signal here and abroad that America's politicians are still able and willing to come together on what is a beneficial, sensible and needed economic initiative.
CFPB CONFLICT? — Via Allied Progress release going out Monday: “Just before the holiday break, Consumer Financial Protection Bureau (CFPB) “Acting Director” Mick Mulvaney announced that several of his senior staff from the Office of Management and Budget (OMB) would be taking on leadership roles at the CFPB. That list included his chief of staff Emma Doyle.
“What he failed to mention is that immediately before working for him at OMB, Doyle worked for Ford Motor Company where she lobbied on multiple bills, which would have nullified CFPB protections against discriminatory auto lending practices”
TAX REFUNDS DRIVE HEALTH CARE SPENDING — Via a new JPMorgan Chase Institute’s report out Monday: “In the week after a tax refund arrives, healthcare spending jumps 60 percent compared to the week before. Sixty-two percent of those payments are in person and debit card spending increases by 83 percent, meaning consumers are appear to be waiting for the day the tax refund arrives before they go out and get healthcare.” Read more.