January 17, 2017 The Honorable Mitch McConnell Majority Leader United States Senate Washington, DC 20510 Dear Mr. Leader: As the 115th Congress begins, we write to underscore the need for additional legislation early in this session to address the economic and fiscal crisis in Puerto Rico. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) provided Puerto Rico with important fiscal oversight and debt restructuring tools, and now the Oversight Board and Puerto Rico’s new Governor must take the critical next steps required by this federal legislation. Working with the new Governor, the Oversight Board now must certify a Fiscal Plan and set a path to comprehensively restructure the debt before the expiration of PROMESA’s automatic stay. Treasury has continued to provide both the Oversight Board and the new Governor with technical assistance as requested, and will remain able to do so after the transition to the next Administration. Despite the important progress achieved to date with bipartisan support, the work is not done. As Puerto Rico moves forward on these next steps, Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico’s inequitable health care financing structure and promote sustained economic growth. Without congressional action to address these issues, Puerto Rico’s return to growth and opportunity will be a significant challenge. Most urgently, Congress should address Puerto Rico’s “Medicaid cliff” funding issue before April as recommended last month by the Congressional Task Force on Economic Growth in Puerto Rico. Failure to do so would jeopardize health care for up to 900,000 poor U.S. citizens living in Puerto Rico. CONGRESSIONAL TASK FORCE REPORT On December 20, the Congressional Task Force on Economic Growth in Puerto Rico, established by PROMESA, released its Final Report. The bipartisan report provides an overview of the economic challenges facing Puerto Rico and a series of potential solutions that, if crafted well and enacted quickly, are necessary for a sustainable economic recovery. It is important that Congress not only turn ideas into action, but in doing so, address Puerto Rico’s significant remaining economic and social challenges in meaningful ways to help put Puerto Rico on a path of sustained economic growth. As the report acknowledges, Puerto Rico faces an imminent shortfall in health care funding that could leave up to 900,000 Americans without coverage if Congress does not act in the near future. Puerto Rico’s already vulnerable health care system is stretched further by a Zika outbreak that, as of January 4, has resulted in over 34,000 cases, and will affect numerous women, children, and families for years to come. It is time to provide a long-term solution to Puerto Rico’s historically inadequate federal Medicaid financing, which threatens the viability of Puerto Rico’s Medicaid program and worsens Puerto Rico’s fiscal crisis. If Congress fails to craft a long-term solution, immediate action is still needed to ensure full fiscal year 2018 financing to avoid the “Medicaid cliff” identified in the report. Without action before April, Puerto Rico’s ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico. Additionally, Puerto Rico continues to suffer from double digit unemployment and a labor force participation rate that is only two-thirds that of the U.S. average. A federally-financed, locally-administered Earned Income Tax Credit (EITC) in Puerto Rico would create incentives for work and increase participation in the formal economy – just as it has done for decades in the 50 states and the District of Columbia. Instead of recommending the immediate enactment of an EITC, the Task Force only suggested Congress further explore the proposal. We strongly encourage Congress to enact this powerful economic driver to bolster Puerto Rico’s future. Our analysis of the situation over the last several years demonstrates that an EITC would be the most effective and powerful tool to address these structural challenges to economic growth. Beyond those two major issues, the Task Force recommended a number of other policies that we agree should be enacted. First, we appreciate the bipartisan recommendation for Congress to continue authorizing Treasury to provide technical assistance to Puerto Rico. Furthermore, while we recommend a different approach to expand the Child Tax Credit to more Puerto Rican families, one that is locally administered, we welcome the Task Force recommendation for Congress to expand the Child Tax Credit in Puerto Rico, to the extent it is well-designed and supplements an EITC program for Puerto Rico. We support the Task Force’s acknowledgment of the importance of data in benchmarking economic growth and fiscal developments in Puerto Rico and the recommendations to improve data quality and timeliness. Finally, we are pleased with the recommendations on small business incentives, and the need to include Puerto Rico in funding and training programs that address Puerto Rico’s differential treatment in some Federal programs. It is time for Congress to move quickly to put these recommendations into law. Last summer, Republicans and Democrats in Congress took decisive action in PROMESA to help improve Puerto Rico’s fiscal position by establishing an independent oversight board and providing it with comprehensive debt restructuring tools. As you know, these tools were provided to Puerto Rico as an alternative to a federal bailout and provide Puerto Rico’s government and the Oversight Board with comprehensive authorities to address the debt crisis. Members of Congress now must work together quickly to enact well-crafted legislation to encourage growth and opportunity for our fellow citizens in Puerto Rico. The Treasury Department and the Department of Health and Human Services stand committed to working with you to achieving those goals throughout the remainder of the transition to the next Administration. Sincerely, Jacob J. Lew Sylvia M. Burwell Secretary Secretary Department of the Treasury Department of Health and Human Services Identical letter sent to: The Honorable Charles E. Schumer The Honorable Paul D. Ryan The Honorable Nancy Pelosi
Today, Treasury released the 2016 US Financial Report, which can be found here: https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/fr_index.htm Please see the Secretary's letter below: January 12, 2017 A Message from the Secretary The annual Financial Report of the U.S. Government provides to the public a comprehensive overview of the Government’s current financial position, as well as critical insight into our long term fiscal outlook. The Fiscal Year 2016 Financial Report, the final U.S. Financial Report of the Obama Administration, reflects an economy that has come a long way since 2008, with sustained private sector job growth and increasing vitality. Under President Obama’s leadership, there has been substantial economic and fiscal progress, showing what is possible when strategic investment is paired with smart reforms. Labor market conditions continue to improve, we have added millions of jobs to the economy and GDP has grown steadily. Globally, the United States remains a driver of steady economic growth. In Fiscal Year 2016, the Nation’s economic gains contributed to increased revenues and sustainable deficit financing for the next decade. The Government’s estimated long-term fiscal gap continues to be reduced by the provisions of the Affordable Care Act of 2010, Budget Control Act of 2011, and the American Taxpayer Relief Act of 2013. These and other measures support our economy, allow our government to operate more efficiently, and support long term fiscal health. This Administration’s policies have created the space to address our country’s long term fiscal challenges; however, near term policies that reduce revenues or increase spending, such as through changes to our tax code or the Affordable Care Act, could increase the size of the fiscal gap and force more dramatic adjustments in later years. We must ensure that our prosperity is shared by all Americans, not just those at the top. I am proud of the work we have done as a country over the past eight years to address our economic challenges and am pleased to share this strong report. Jacob J. Lew Margaret Mulkerrin is the Press Assistant at the U.S. Department of Treasury.
For more than 200 years, Treasury has been managing the resources of the Federal government and embracing advancements and cutting-edge practices. Today we have an opportunity to create a more data-driven government that empowers our leaders to make more strategic decisions and provide the public with greater access and insight on how taxpayer money is spent. The ongoing Digital Accountability and Transparency Act (DATA Act) implementation, in which Treasury is playing a leading role, is providing that opportunity as agencies work to meet new standards that could enable the use of data and analytics. In 1990, the Chief Financial Officers Act of 1990 (CFO Act) established a vision for federal financial management to “provide for the production of complete, reliable, timely, and consistent financial information for use by the executive branch of the Government and the Congress in the financing, management, and evaluation of Federal programs.” Significant achievements have been made to maintain and report high-quality financial data — but the full vision of the CFO Act is still a work in progress. The 24 CFO Act agencies have been successful at promoting new accounting and reporting standards, generating auditable financial statements, strengthening internal controls, improving financial management systems and enhancing performance information. However, there is room for growth in the way financial reporting adapts to the evolving information technology landscape. Through the DATA Act implementation process Treasury has developed a DATA Act Information Model Schema (DAIMS) that links the financial data produced by agency CFOs with other spending data on Federal awards — including grants, loans and procurement data (as well as other related attributes). This new data set includes more than 400 data elements and significantly expands the data available to agency CFOs and other agency leadership. The DAIMS can also be extended to link to other administrative and program data to support data-driven decision-making. A New Vision for Federal Financial Management Treasury’s vision for a 21st century Federal Finance Organization includes five key levels based on leading private sector benchmarks for finance organizations. The first level covers the basics for any finance organization — budget formulation and transaction processing. The second level includes fundamental financial policies and regulatory controls to ensure appropriate accountability. Most agencies have achieved levels one and two. Levels three and above are where agencies can begin to see the added value in the investment of high-quality data and internal controls. This data can now be managed and used to support decision-making and to improve operations and outcomes. In addition to leading the government-wide implementation of the DATA Act, Treasury is also required to implement the law as an individual agency. As an implementing agency, Treasury is taking a data management and service delivery perspective, satisfying both internal and external customers who are demanding dynamic visualizations of data, meaningful reports and management dashboards. The DATA Act provides a unique opportunity to provide authoritative and standardized data across the enterprise to meet various needs, which fits into the new vision for Federal Financial Management above. At Treasury, we are expanding our data analytics and reporting efforts to gain more value from our data. The Department has been working internally to link existing enterprise data management activities to a financial data governance program working across the C suite and internal organizations. Treasury is also envisioning a new financial data service portal that will serve as the central repository for all Treasury financial data where agency leadership will have access to data, tools and resources to conduct program research and visualize the data in new ways, starting with DATA Act related insights. This data infrastructure will allow us to provide greater transparency and also create a more modern 21st century Federal Finance Organization that is a better steward of public resources. We believe that better data leads to better decisions and ultimately a better government. Christina Ho is the Deputy Assistant Secretary for Accounting Policy and Financial Transparency and Dorrice Roth is the Deputy Chief Financial Officer at the Department of the Treasury.
Treasury Secretary Lew's Exit Memo: Eight Years of Progress at Treasury and a Look to the Future of American Financial Prosperity
WASHINGTON –U.S. Treasury Secretary Jacob J. Lew has authored a departure memorandum that recounts the progress and work of the U.S. Department of the Treasury over the last eight years. The memo then outlines Secretary Lew’s visions and goals for the future of the Treasury Department. The Secretary closes his departure memorandum with personal reflections on the importance of bipartisan cooperation, his optimism about America’s future, and his hope that future policymakers will take careful stock of the successes of this Administration as they consider the next steps forward. Please see the memo attached. Treasury Exit Memo.pdf The full text of the memo is below: Department of the Treasury Exit Memo Secretary Jacob J. Lew Cabinet Exit Memo │January 5, 2017 Introduction The Department of the Treasury (Treasury) is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. This role encompasses a broad range of activities, such as advising the President on economic and financial issues, encouraging sustainable economic growth, and fostering improved governance in financial institutions. Treasury’s mission was challenged like few times before in our nation’s history during the 2008 financial crisis. As few of us can forget, signs of trouble first emerged in the housing market, which set off a cascade of shocks in 2007 and 2008, including the collapse of Bear Stearns and Lehman Brothers, the freezing of credit markets, and the loss of trillions of dollars of wealth held by Americans in their homes, other assets, and businesses. By the time President Obama took office, the United States was in the midst of the worst recession since the Great Depression. The economy was shrinking at its fastest rate in 50 years and shedding more than 800,000 private-sector jobs per month. Unemployment peaked at 10 percent in 2009, a level not seen in over 25 years. The auto industry, an embodiment of American ingenuity and economic strength, was teetering on the edge of collapse; the deficit had hit a post-World War II high; and homes in neighborhoods across the United States faced foreclosure. Though the financial crisis was perhaps the most pressing challenge the country faced in 2008, it was far from the only one. Health care spending was on an unsustainable path, and millions of Americans lived in fear of facing a significant medical problem without insurance. Middle-class and working family incomes had stagnated for much of the previous three decades. Wealth disparities had grown to levels not seen since the 1920s. And after two major wars in the Middle East and strained relationships in many parts of the world, the standing of the United States around the world was in need of significant repair. We have come a long way as a country since 2008. In the following pages, I will recount the Administration’s record of progress, with a specific focus on the role Treasury has played. I will also articulate a vision for the future, and recommend steps to be taken in the coming years to make progress towards that vision. Finally, I will end with some personal reflections. Eight Years of Progress Economic Recovery Over the eight years since President Obama took office amidst the worst financial crisis of our lifetimes, we have seen a sustained economic recovery and a significant decline in the federal budget deficit. We have cut the unemployment rate in half. Our economy is more than 10 percent larger than its pre-recession peak. U.S. businesses have added a total of 15.6 million jobs since private-sector job growth turned positive in early 2010. Household incomes are rising, with 2015 seeing the fastest one-year growth since the Census Bureau began reporting on household income in 1967. And our financial system is more stable, safe, and resilient, providing the critical underpinnings for broad-based, inclusive, long-term growth. There are many factors that explain why the United States was able to bounce back so strongly from the recession. First and foremost, I credit the resilience of the American people. In addition, our policy response to the crisis was immediate and robust. Led by my predecessor, Treasury Secretary Tim Geithner, policymakers put in place a wide-ranging strategy to restore economic growth, unlock credit, and return private capital to the financial system, thereby providing broad and vital support to the economy. In February 2009, just 28 days after taking office, President Obama signed the American Recovery and Reinvestment Act, which provided powerful fiscal stimulus that resulted in a less severe recession and stronger recovery than we otherwise would have seen. Investments made through our Troubled Asset Relief Program (TARP) provided stability to our financial system, and the Automotive Industry Financing Program helped prevent the collapse of the U.S. auto industry. TARP also included housing initiatives that helped millions of struggling homeowners avoid foreclosure and lower their monthly payments. These efforts bolstered the housing market and strengthened consumer finances more broadly. And funds expended under TARP have been repaid in full, at a profit to taxpayers: in total, TARP invested $412 billion in financial institutions, large and small, during the financial crisis, and as of October 2016, these investments have returned $442 billion total cash back to taxpayers. Critically, we also acted quickly to reform our financial system, working with Congress to enact the most far-reaching and comprehensive set of financial reforms since the Great Depression: the Dodd-Frank Wall Street Reform and Consumer Protection Act. Wall Street Reform transformed the way the financial system operates, and Treasury and the financial regulators have continued to work together since its passage to implement important reforms such as the Volcker Rule, risk retention, and resolution planning for large, complex financial institutions. Because of these efforts, our system today is more stable, more transparent, and more consumer-focused. Wall Street Reform also created the Financial Stability Oversight Council, a body that looks across the entire financial system to identify future threats to financial stability, and the Consumer Financial Protection Bureau, a watchdog agency that is working hard to protect Americans from unfair, deceptive, or abusive financial practices. The progress we have made on implementing reform has resulted in a safer, stronger, and more stable American financial system—one better positioned to support growth rather than work against it, more likely for consumers to get fair treatment in their interactions with financial institutions, and less prone to major failures of financial firms that can harm Americans on Main Street. This progress must be sustained through continued follow-through, to avoid allowing a return to the recklessness and abuse that predated the worst global financial crisis of the last 80 years. A More Inclusive Economy Beyond working to bring our economy back from the brink and to spur growth, we also undertook efforts to ensure that more citizens have a fair shot at sharing in our nation’s prosperity. One of the Administration’s most significant achievements was the 2010 passage of the Affordable Care Act (ACA), which extended health insurance to millions of Americans who had not previously had it, allowed young adults to stay on the health plans of their parents, barred insurance companies from denying coverage to people with preexisting conditions, and strengthened Medicare’s solvency. Once the legislation was signed into law, Treasury implemented the law’s many new tax provisions. Beyond the ACA, the Administration made a number of other key changes to the tax code that has made our tax system significantly fairer and more equitable. Through programs like the Community Development Financial Institution Fund and myRA, and through extensive stakeholder engagement, Treasury has worked to promote access to the financial system for underserved and vulnerable populations. We also successfully worked with Congress to pass bipartisan legislation to enable Puerto Rico to undergo a financial restructuring. With continued commitment from policymakers in both the Commonwealth and the United States, this legislation will begin to put Puerto Rico on a fiscally sustainable path so that the 3.5 million Americans living there are not denied essential services and economic opportunity. Leading in the Global Economy As we put into place the financial regulatory framework to prevent future crises in the United States, we also led the international response to the crisis. We worked through the G-20 to help mobilize $5 trillion in fiscal stimulus, expand the resources of the international financial institutions by $1 trillion, and establish new institutions like the Financial Stability Board to prevent future crises. Our approach elevated the G-20 as the premier platform for international economic cooperation and put in place a demonstrated mechanism for international response. Following the financial crisis, many countries turned to policies of fiscal austerity, and Treasury vigorously advocated for a more balanced use of policy levers. Over the next several years, Treasury engaged closely with our partners and through the G-20 and other multilateral bodies to emphasize the need for short-term growth and longer-term structural reforms to put the global economy on stronger footing. Through our sustained engagement, we achieved a number of commitments from the G-20, including moving away from austerity-only fiscal policy and avoiding competitive currency devaluation. We have used the G-20 to advance a global growth agenda, and the U.S.-China Strategic & Economic Dialogue to foster increased bilateral economic coordination and engagement with China. Our sustained engagement with China has allowed us to exert positive pressure on Chinese exchange rate policy—whereas China once intervened in foreign exchange markets to drive down the value of its currency, in the past year, we have seen China intervene to prevent a rapid depreciation in the renminbi, which would have had negative consequences for the Chinese and global economies. Treasury also worked to solidify U.S. leadership by modernizing the international economic architecture to ensure that it would remain relevant in a changing world. In particular, securing the passage of International Monetary Fund (IMF) quota reform sustained U.S. leadership on the global stage. Our leadership in the IMF in turn enabled us to work through it to promote policies that supported U.S. economic and security objectives, such as economic stability in Ukraine and Greece. Promoting a Safer World Treasury has also continued to use its unique financial capabilities to address a variety of national security and foreign policy threats posed by terrorists, criminals and other bad actors. To address the changing threat posed by terrorism, including the threat posed by ISIL, we have worked with our international partners to deny terrorist financiers, fundraisers, and facilitators access to the international financial system with financial measures and targeted actions. Treasury’s sanctions against Iran played a critical role in forcing Iran to the table to negotiate a deal that cuts off the country’s pathways to a nuclear weapon. To hold Russia accountable for its aggression in eastern Ukraine and its occupation and attempted annexation of Crimea, we imposed sanctions that led to tighter financial conditions, weaker confidence, and lower investment in Russia. We also secured new domestic and multilateral sanctions measures against North Korea in the face of Pyongyang’s continued provocative behavior with regard to nuclear weapons and weapons of mass destruction. All the while, we have worked to craft a cohesive vision for the use of sanctions, in which sanctions are informed by financial intelligence, strategically designed, and implemented with our public and private partners to focus pressure on bad actors and create clear incentives to end malign behavior, while limiting collateral impact. In the face of emerging cyber threats, we have also made significant progress in coordinating cybersecurity efforts among financial regulators and the private sector, both domestically and internationally, to improve the financial sector’s resilience and to establish best practices for industry and government. A Vision for the Future Looking across the next five years, 10 years, and beyond, I see four major goals that mirror the progress above. Treasury should focus on: (i) continuing to promote more inclusive growth; (ii) moving from recovery to long-term fiscal health, (iii) remaining a leader in the global economy; and (iv) adjusting to the new threats in our world. Each of these goals brings with it major challenges that we must collectively overcome in order to reach them. Continuing to Promote Inclusive Growth Through the work of this Administration, the U.S. economy is growing again. But working families have not shared fully in the benefits of economic growth over the past decade, and there is evidence that our society has undergone structural changes that have fundamentally altered the basic social compact. It is crucial that the next Administration builds on the work already done to ensure that our prosperity is broadly shared. There are many aspects to inclusive growth, including: investing in infrastructure to create good middle-class jobs and lay the foundation for future growth, giving workers a stronger voice, enacting progressive tax policies, making quality education more available and affordable, and investing in retraining programs for those who have lost their jobs. One component most directly within Treasury’s purview is increasing access to the financial system; currently, many low-income and minority families are effectively locked out, operating without a credit card or banking history. Finding creative ways to increase access to the financial system—such as fostering new technologies—will help individuals and families transfer money and make payments safely and affordably. Financial inclusion allows people to manage life’s unexpected financial shocks, build long-term financial security, and take advantage of economic opportunities, like starting a business. Our inclusive growth agenda should not, however, be limited to domestic issues: more than 2.6 billion people live in poverty around the world, and more than two billion people rely solely on cash transactions. Moving underserved populations from a cash economy to formal banking not only increases their economic opportunity but also strengthens our ability to combat illicit and dangerous finance. Moving from Recovery to Long Term Fiscal Health The actions of this Administration, and the economic recovery those actions helped support, have sharply reduced deficits since 2009. However, both the Administration and the Congressional Budget Office project that, absent any changes in policy, the deficit will rise steadily over the next decade and beyond. Thus, while the actions of this Administration have put the country on a solid fiscal footing today, we must also focus on the long-term fiscal health of our nation. In recent years, the Administration has proposed a combination of smart investments and policy reforms that would keep the deficit under three percent of GDP for the next 10 years and nearly eliminate the fiscal gap over the next 25 years. Tax reform to curb inefficient tax breaks for the wealthy, close loopholes, and reform the taxation of capital income and financial institutions would make the tax system fairer and lower the deficit. Comprehensive immigration reform would boost labor force participation, productivity, and ultimately growth, directly addressing key fiscal challenges. Continued focus on health policy to further improve health care quality and control cost growth remains critical. This policy vision shows that investments in growth and opportunity are fully compatible with putting the nation’s finances on a strong and sustainable path. It also shows that responsible deficit reduction can be achieved without endangering vital support to poor Americans or undermining commitments to seniors and workers. Under President Obama’s leadership, there has been substantial economic and fiscal progress, showing what is possible when strategic investment to grow the economy is paired with smart reforms that address the true drivers of long-term fiscal challenges. While there is some scope for additional borrowing to finance smart investments in the next few years, ever-increasing borrowing is not sustainable as a long-run strategy, particularly when used to finance spending that does not generate higher growth or improvements for the middle class and in the case of deficit-increasing tax cuts, which deepen income and wealth disparities that are already a serious concern. Instead, the long-term fiscal health of the nation depends on smart investments in the middle class, tax reforms that close loopholes for the wealthy and ensure that everyone plays by the same set of rules, comprehensive immigration reform, and health reforms that build on our progress to date without sacrificing coverage or quality. Remaining a Leader in the Global Economy The United States must continue its long history of international economic leadership. Such leadership benefits American workers and families and enables the United States to project its values abroad to achieve its larger foreign policy objectives. Of course, the world has changed since the creation of our international financial architecture after World War II, and we must change with it. Perhaps somewhat counterintuitively, our influence internationally will increase if we share the benefits, as well as the responsibilities, of managing the global economic and financial system with emerging economies, such as China. Our influence, however, cannot be sustained if we either back away or insist on protecting the status quo. But we face a host of challenges. Our relationship with China is one of the most important in the world. While we have made much progress over the past eight years, the degree to which China is willing to takes the steps necessary to follow through on commitments to reorient its economy toward more sustainable growth, open up to foreign businesses, and be a partner in global governance, remains to be seen. As we saw from the example of Chinese exchange rate policy, engagement between the United States and China is an important means of maintaining pressure for China to implement policies that are necessary for China’s own medium and long-term economic health and to create a level playing field for the world economy. The UK’s decision to leave the European Union sent shockwaves through Europe and the world, and we must closely monitor the situation and continue to argue for the benefits of continued integration post-Brexit. Japan’s economy faces the ongoing challenges of an aging population and high public debt hampering the government’s ability to foster growth. We must also keep a watchful eye on emerging economies and the unique challenges they face. In particular, in recent years, we have made progress in our relations with Latin America, particularly with Mexico and Argentina, and we should build on that progress. Adjusting to the New Threats in Our World With the rise of state-sponsored and lone wolf terrorism, rogue nations, and international strongmen, we must address the reality that we live in a dangerous world. Making it safer means using every tool available—including the financial tools available to Treasury—to defeat and degrade terrorist organizations like ISIL. We must continue to leverage our ability to impose crippling sanctions on states and individuals to change behavior. We must seek to eliminate the proliferation of nuclear weapons. Cyber attacks on our financial system represent a real threat to our economic and national security, and maintaining vigilant and coordinated efforts to keep pace with and respond to these threats has been and will remain a crucial piece of Treasury’s work. And we must recognize global climate change for the economic and existential threat that it is and band together with the rest of the world to avert catastrophe. How to Make Our Vision a Reality How do we accomplish the goals laid out above? To be sure, there are a host of paths policymakers might take to do so, but I believe the following steps, which range from specific policy prescriptions to more general advice, are the most immediate. Infrastructure Spending Moving forward, we must redouble our efforts to make investments in our country’s transportation infrastructure, which help create middle-class jobs in the short term and drive broad-based economic growth in the long term. Indeed, by fixing our aging roads, bridges, and ports, we will help lay a foundation for widely shared economic expansion. The President’s business tax reform framework, discussed in more detail below, would generate substantial one-time revenues to fund new infrastructure investments. Paying for these investments by taxing overseas business profits would both be fiscally responsible and would help fix the perception that our tax system is not a level playing field. Continuing to come up with fresh, new ways to deploy capital will help the country achieve these goals. Effective partnerships between government and the private sector can play an important role in developing innovative solutions that efficiently leverage resources. And taking advantage of historically low interest rates to fund high-return public investments is simply smart fiscal policy. This Administration has long advocated for the creation of a national infrastructure bank, which would provide critical financing and technical support to foster public-private partnerships in U.S. infrastructure and establish a predictable source of long-term financing that would allow U.S. infrastructure to be consistently improved. Business Tax Reform Over the last eight years, Congress and the Administration have taken important steps to make the tax code fairer, support working families, and roll back unnecessary and unaffordable tax cuts for high-income families. In addition, using its administrative tools, the Administration has made substantial progress over the past eight years in combatting abusive tax practices. However, our business tax system remains in need of reform. As I have emphasized repeatedly throughout my time as Treasury Secretary, only Congress can enact business tax reform, which is necessary to remove incentives for businesses to relocate overseas, raise one-time revenues to promote infrastructure spending, and simplify tax compliance for smaller businesses. President Obama’s proposed plan for business tax reform sets out a framework for modernizing our business tax system. Among other elements, it would prevent companies from using excessive leverage in the United States to reduce their tax burden, impose a minimum tax abroad to help fight the global race to the bottom, impose a one-time tax on unrepatriated foreign profits, and reform the taxation of financial and insurance industry products. It also would close loopholes and special credits and deductions to lower rates without shifting the tax burden to individuals. Enacting such a plan would enhance our competitiveness and create an environment in which business rather than tax considerations drive decision-making. The President’s framework is also fiscally responsible, ensuring that business tax reform does not add to deficits over the long-term. I am hopeful that this framework will help to equip the new Congress to take responsible action on business tax reform. Housing Finance Reform Fixing our housing finance system remains the major unfinished work of post-financial crisis reform. Though the housing market has made significant strides thanks to efforts on the part of the Administration to help struggling homeowners, stabilize the housing finance system, and restore broader economic growth, many homeowners and neighborhoods continue to struggle. Fannie Mae and Freddie Mac remain in conservatorship and continue to rely on taxpayer support. Only legislation can comprehensively address the ongoing shortcomings of the housing finance system. A starting point for such legislation should be the principles President Obama laid out in 2013, which stressed a clearly-defined role for the government to promote broad access to consumer-friendly mortgages in good times and bad. While private capital should bear the majority of the risks in mortgage lending, reform also must provide more American households with greater and more sustainable access to affordable homes to rent or own. Global Economic Integration Global economic integration, including high-standards trade, leads to better economic outcomes than isolation and protectionism. High-standard trade agreements such as the Trans-Pacific Partnership can expand U.S. economic growth, open markets for American exports, and strengthen labor and environmental safeguards so that American workers can compete on a level playing field. But economic uncertainty, both domestically and abroad, threatens this framework. Whether driven by trade, technological advances, or the changing structure of the markets for labor and capital, these anxieties are real and deeply felt. In order to continue to enjoy the benefits of an integrated world, we need to focus on policies that address the real issues of inequality, such as slowing wage growth and increasing disparities in pay, to ensure that the benefits of trade are broadly felt. Strengthening the rules, alone, is not enough. To preserve this important engine of economic growth and international integration the United States and other advanced economies must also design and implement policies—including fiscal and tax policies—that advance the cause of inclusive, sustainable, and broad-based growth. Not all countries have the fiscal space sufficient to meet these needs, but after years of urging by the United States, policies of austerity are one-by-one giving way to policies designed to grow demand and improve incomes. The United States must continue to be an active voice in the global discussion of these issues. The United States must also maintain its leadership in the international financial architecture and ensure that the U.S.-led international financial system is adapting to best preserve U.S. interest in a changing world. This includes continued governance reforms of the IMF and multilateral development banks to reflect a changing world. Clear global rules create opportunities and incentives for innovation, invest, and work, which are critical to the United States and drive economic progress in other regions of the world. Continued Engagement with Challenging Partners Just as global economic integration has fueled economic growth, that integration—and our economic strength—provides us with additional tools to advance our priorities on the international stage. We should continue to use these tools judiciously to maintain pressure on those countries that take aggressive and destabilizing actions, such as Russia and North Korea, and provide sanctions relief when the targeted malign behavior changes, as with Iran and Burma. And, as we chart new courses with other countries, such as Cuba, we should be mindful of how we can use our economic tools to create the conditions for a changed relationship. We must always take care to avoid the overuse of sanctions, particularly our most unilateral tools like secondary sanctions that extend to non-U.S. persons. If we overuse these powerful tools, we risk lessening their impact when they are most needed and ultimately threaten our central role in the global financial system. Looking Forward with Optimism We have learned the hard way that deadlock does not produce good results—government shutdowns and near default on our debt cost the United States both economically and in standing around the world. It did not work in the 1990s, and it did not work over these past eight years. What has worked is finding opportunities in the sometimes quiet periods when bipartisan cooperation can lead to honorable compromise. In recent years, we have seen that targeted budget agreements could pave the way for more orderly and economically beneficial outcomes. We have seen that, on issues like creating a path forward for Puerto Rico and multi-year funding for our surface transportation programs, bipartisan compromise is still possible. But there is much more that requires this kind of progress. Treasury plays a critical role in finding areas where bipartisan solutions are possible. In a period when many thought little could be accomplished legislatively, we reached agreement on IMF Quota Reform, an approach to deal with Puerto Rico, and a permanent extension of expansions to the earned income tax credit and child tax credits that will reduce the extent or severity of poverty for millions of families with children. We have also used our existing authorities to limit corporate tax inversions, shed greater light on beneficial ownership to limit tax avoidance, realize tax parity for same-sex spouses, and opened relations with Cuba. And we have used our sanctions authorities to bring Iran to the negotiating table and limit the resources available to terrorist regimes and groups. I am proud of the record we have built over the past eight years. But during calmer economic times, policy makers are often tempted to roll back regulations, weaken reforms, and reduce oversight. I hope that future policymakers will take careful stock of the successes of this Administration as they consider the next steps forward. I remain an optimist about America’s future and wish the next team entrusted with responsibility for governing much success as it tackles the many challenges that remain and the new challenges that will present themselves over the coming years. Margaret Mulkerrin is the Press Assistant at the U.S. Department of Treasury. ###
Authored by Fred Reed via Fred On Everything blog, I have followed China’s development, its stunning advance in forty years from impoverished Third World to a huge economy, its rapid scientific progress. Coming from nowhere it now runs neck and neck with the US in supercomputers, does world-class work in genetic engineering and genomics (the Beijing Genomics Institutes), quantum computing and quantum radar, in scientific publications. It lags in many things, but the speed of advance, the intense focus on progress, is remarkable. Recently, after twelve years away, I returned for a couple of weeks to Chungdu and Chong Quing, which I found amazing. American patriots of the lightly read but growly sort will bristle at the thought that the Chinese may have political and economic systems superior to ours, but, well, China rises while the US flounders. They must be doing something right. In terms of economic systems, the Chinese are clearly superior. China runs a large economic surplus, allowing it to invest heavily in infrastructure and in resources abroad. America runs a large deficit. China invests in China, America in the military. China’s infrastructure is new, of high quality, and growing. America’s slowly deteriorates. China has an adult government that gets things done. America has an essentially absentee Congress and a kaleidoscopically shifting cast of pathologically aggressive curiosities in the White House. America cannot compete with a country far more populous of more-intelligent people with competent leadership and the geographic advantage of being in Eurasia. Washington’s choices are either to start a major war while it can, perhaps force the world to submit through sanctions, or resign itself to America’s becoming just another country. Given the goiterous egos inside the Beltway Bubble, this is not encouraging. To compare the two countries, look at them as they are, not as we are told they are. We are told that dictatorships, which China is, are nightmarish, brutal, do not allow the practice of religion or freedom of expression and so on. The usual examples are Pol Pot, Stalin, Hitler, Mao, and North Korea, of whom the criticisms are true. By contrast, we are told, America is envied by the world for its democracy, freedom of speech, free press, high moral values, and freedom of religion. This is nonsense. In fact the two countries are more similar than we might like to believe, with America converging fast on the Chinese model. The US is at best barely democratic. Yes, every four years we have a hotly contested presidential election, full of sound and fury signifying nothing. The public has no influence over anything of importance: the wars, the military budget, immigration, offshoring of jobs, what our children are taught in school, or foreign or racial policy We do not really have freedom of speech. Say “nigger” once and you can lose a job of thirty years. Or criticize Jews, Isreal, blacks, homosexuals, Muslims, feminists, or transexuals. The media strictly prohibit any criticism of these groups, or anything against abortion or in favor of gun rights, or any coverage of highly profitable wars that might turn the public against them, or corruption in Congress or Wall Street, or research on the genetics of intelligence. Religion? Christianity is not illegal, but heavily repressed under the Constitutionally nonexistent doctrine of separation of church and state. Surveillance? Monitoring of the population is intense in China and getting worse. It is hard to say just how much NSA monitors us, but America is now a land of cameras, electronic readers of license plates, recording of emails and telephone conversations. The tech giants increasingly censor political sites, and surveillance in our homes appears about to get much worse. Here we might contemplate Lincoln’s famous dictum, “You can fool all of the people some of the time, and some of the people all of the time, but you can’t fool all of the people all of the time.” Being a politician, he did not add a final clause that is the bedrock of American government, “But you can fool enough of the people enough of the time.” You don’t have to keep websites of low circulation from being politically incorrect. You just have to tell the majority, via the mass media, over and over and over, what you wnat them to believe. The dictatorship in China is somewhat onerous, but has little in common with the sadistic lunacy of Pol Pot’s Cambodia. In China you do not buck the government, propaganda is heavy, and communications monitored. If people accept this, as most do, they are free to start businesses, bar hop, smoke dope (which a friend there tells me is common though illegal) engage in such consumerism as they increasingly can afford and lead what an American would call normal lives. A hellhole it is not. Socially China has a great advantage over America in that, except for the Muslims of Xinjiang, it is pretty much a Han monoculture. Lacking America’s racial diversity, its cities do not burn, no pressure exists to infantilize the schools for the benefit of incompetent minorities, racial mobs do not loot stores, and there is very little street crime. America’s huge urban pockets of illiteracy do not exist. There is not the virulent political division that has gangs of uncontrolled Antifa hoodlums stalking public officials. China takes education seriously, as America does not. Students study, behave as maturely as their age would suggest, and do not engage in middle-school politics. In short, China does not appear to be in irremediable decadence. America does. An intelligent dictatorship has crucial advantages over a chaotic pseudo-democracy. One is stability of policy. In America, we look to the next election in two, four, or six years. Businesses focus on the next quarter’s bottom line. Consequently policy flipflops. One administration has no interest in national health care, the next administration institutes it, and the third wants to eliminate it. Because policies are pulled and hauled in different directions by special interests–in this case Big Pharma, insurance companies, the American Medical Association, and so on–the result is an automobile with five wheels, an electric motor but no batteries, and a catalytic converter that doesn’t work. After twenty-four years, from Bush II until Trump leaves, we will neither have nor not have national health care. China’s approach to empire is primarily commercial, America’s military. The former turns a profit without firing a shot, and the latter generates a huge loss as the US tries to garrison the world. Always favoring coercion, Washington now tries to batter the planet into submission via tariffs, sanctions, embargoes, and so on. Whether it will work, or force the rest of the world to band together against America, remains to be seen. Meanwhile the Chinese economy grows. America builds aircraft carriers. China builds railroads, this one in Laos. A dictatorship can simply do things. It can plan twenty, or fifty, years down the road. If some massive engineering project will produce great advantages in thirty years, but be a dead loss until then, China can just do it. And often has. When I was in Chengdu, Beijing opened the Hongkong–Zhuhai-Macau oceanic bridge, thirty-our miles long. The bridge. The US would take longer to decide to build it than the Chinese took actually to build it. In the US? California wants high-speed rail from LA to San Fran. It has talked and wrangled for years without issue. The price keeps rising. The state can’t get rights of way because too many private owners have title to the land. Eminent domain? Conservatives would scream about sacred rights to property, liberals that Hispanic families were in the path, and airlines would bribe Congress to block it. America does not know how to build high-speed rail and hiring China would arouse howling about national security, balance of payments, and the danger to motherhood and virginity. There will be no high speed rail, there or, probably, anywhere else. Wreckage from the 8.0 earthquake. This is not un-repaired devastation but, weirdly, is kept as a tourist attraction and actually propped up so it won’t collapse further. Phredfoto. China has a government that can do things: In 2008 an 8.0 quake devastated the region near the Tibetan border, killing, according to the Chinese government, some 100,000 people. Buildings put up long before simply collapsed. Some years ago everything–the town, the local dam, and roads and houses–had been completely rebuilt, with structural steel so as, says the government, to withstand another such quake. Compare this with the unremedied wreckage in New Orleans due to Katrina. Here we come to an important cultural or philosophical difference between the two countries. Many Orientals, to include the Chinese, view society as a collective instead of as a Wild West of individuals. In the East, one hears sayings like, “The nail that stands up is hammered down,” or “The high-standing flower is cut.” Americans who teach school in China report that students will not question a professor, even if he spouts arrant nonsense to see how they will react. They are not stupid. They know that the Neanderthals did not build a moon base in the early Triassic. But they say nothing. This collectivism, highly disagreeable to Westerners (me, for example) has pros and cons. It makes for domestic tranquility and ability to work together, and probably accounts in large part for China’s stunning advances. On the other hand, it is said to reduce inventiveness. There may be something to this. If you look at centuries of Chinese painting, you will see that each generation largely made copies of earlier masters. As nearly as I, a non-expert, can tell, there is more variety and imagination in the Corcoran Gallery’s annual exhibition of high-school artists than in all of of Chinese paining. People alarmed at China’s growth point out hopefully that the Chinese in America have not founded Googles or Microsofts. No, though certainly have founded huge companies: Alibaba, Baidu, Tencent, for example. However, the distinction between inventiveness and really good engineering is not always clear, and the Chinese are fine engineers. With American education crashing under the attacks of Social Justice Warriors, basing the future on a lack of Chinese imagination seems maybe a bit too adventurous.
Stability in Saudi Arabia is the cornerstone of prosperity and progress in the Gulf, and China firmly supports Riyadh in its drive for economic diversification and social reform, President Xi Jinping told Saudi Crown Prince Mohammed bin Salman.
Rep. Barbara Lee will be joining the House Democratic leadership team, filling a key void for the caucus after its elections earlier this week left the group without a woman of color in the top ranks. Lee is expected to fill a new position being created by Minority Leader Nancy Pelosi to oversee the Steering and Policy Committee, the panel that determines committee assignments for Democrats. Pelosi’s decision expands leadership of the panel from two co-chairs to three. The decision to elevate Lee comes as a group of House Democrats, disappointed by both Lee’s narrow loss in the race for caucus chair earlier this week and that lack of a woman of color in leadership, was planning to ask Pelosi to do just that. Pelosi is recommending Lee, a liberal stalwart from California’s East Bay, to serve alongside Reps. Rosa DeLauro (D-Conn.) and Eric Swalwell (D-Calif.), the panel’s two current leaders. Lee is currently a vice-chair of the committee. The committee has to officially vote to approve Pelosi’s recommendations, but it is expected to do so soon. “The leaders and members of the Steering and Policy Committee reflect the diversity, dynamism and integrity of our historic new House Democratic Majority,” Pelosi said in a statement obtained by POLITICO Friday evening. “As a leading African American woman with a place at the decision table, the appointment of Congresswoman Lee is even more meaningful as we mark the birthday of her friend: the trailblazing Congresswoman Shirley Chisholm.”Pelosi’s recommendations cap a whirlwind week for Democrats as current and incoming members met to select the leadership team that will take them into the majority next year. Pelosi overwhelming won the Democratic nomination for speaker on Wednesday and must win 218 votes on the House floor Jan. 3. The caucus also picked a slew of other leaders as Democrats prepare to welcome their most diverse freshmen class in history. But as the week came to a close there was one glaring oversight to its members — not one woman of color would be representing Democrats in leadership.“A number of us as women of color are saying there needs to be a leadership role created for Barbara Lee and we need to have a woman of color in a role in leadership,” Rep. Pramila Jayapal (D-Wash.) said in an interview Thursday. “I really believe that’s critical and I think it’s a problem that we don’t.”The Democrats were planning to ask Pelosi to find a home for Lee on the leadership team, including the possibility of creating a new Steering co-chair in the coming days. But Pelosi beat them to the punch, offering Lee the position during a one-on-one meeting in her office Friday. Before Pelosi’s announcement, several members said it was the right thing to do, noting Pelosi created a new job for Rep. David Cicilline (D-R.I.). The move allowed Cicilline to find a landing spot in leadership while dropping his bid against Rep. Ben Ray Lujan (D-N.M.) for assistant Democratic leader. Cicilline was unanimously elected chairman to oversee a policy committee that already has three co-chairs. This Congress, Cicilline served as one of the three co-chairs on that panel, the Democratic Policy and Communications Committee. Lee backers also said her appointment would help with the optics of a caucus that boasts about its diversity — there will be two African-American men, several women, a Latino, an LGBT member and an Asian-American man on next year’s team — yet wasn’t going to have one African-American, Latina or Asian woman in their top ranks. “The women of this country, anchored by the black women of this country, put Democrats in office,” said Rep. Lois Frankel (D-Fla.), a Lee backer. “I feel like our top leadership should reflect the diversity of these people.” Even with the decision to appoint Lee, her job as steering co-chair is much more behind the scenes compared to caucus chairman or some of the other positions on Democrats’ sprawling leadership team. Lee lost to Rep. Hakeem Jeffries (D-N.Y.) by 10 votes during the closely watched caucus chairman contest Wednesday, prompting outcry from her supporters who lobbed claims of ageism given the gulf between the two members. Lee is 72 while Jeffries is 48. Jeffries made a case for generational change in his pitch to fellow lawmakers. And with the top three leaders nearing 80, his supporters see Jeffries’ job as caucus chairman as the perfect launching pad to potentially becoming the first African-American speaker.Lee, meanwhile, made an appeal to unity before the vote, telling lawmakers that as a woman of color with unassailable progressive bonafides, she would help provide what was a critical missing link in the House Democratic leadership team. Had she been elected caucus chair, Lee would have been the first African-American woman to serve in House leadership. The current leadership team has one Latina — Rep. Linda Sanchez (D-Calif.) is the Democratic Caucus vice chair. But Sanchez dropped out of the race for caucus chair against Lee and Jeffries earlier this month after her husband was indicted on federal charges. Another woman of color, Rep. Terri Sewell (D-Ala.), lost her bid for caucus representative, a leadership post reserved for a member who has served five terms or less. She was defeated by Rep. Jamie Raskin (D-Md.), a liberal who was backed by the Congressional Progressive Caucus. Article originally published on POLITICO Magazine]]>
A non-stayer over four miles at the Cheltenham Festival, the selection can turn that form around with Ms Parfois over this shorter trip at NewburyColin Tizzard could be about to enjoy a second success in the Ladbrokes Trophy, or the Hennessy as many still know it, but not with the horse that most would pick as his first string. Elegant Escape has his chance, of course, but Sizing Tennessee (3.00) appeals even more at the 16-1 which is generally available.This solid-looking chaser joined Tizzard from Ireland a couple of years ago and has raced frequently while making steady progress. His jumping looked sharper, though still not fault-free, when he scored on his reappearance last month, beating a horse who has won twice since. Continue reading...
Nord Stream II is proving to be one of the most politically contentious pipelines of all time. The project is making gradual progress, but remains vulnerable to the fragile state of the EU-Russian energy relationship. This took another body blow November 25 with the Russian seizure of two Ukrainian gunboats and a tug boat by force in the Kerch Strait, which links the Black and Azov Seas. The significance of Nord Stream II goes far beyond the volumes of gas it will carry. By forming a critical element of Russia’s ambitious plans to bypass…
New York billionaire and rumored presidential contender Michael Bloomberg announced Friday a $50 million donation to the opioid crisis amid a progressive decline in U.S. life expectancy. A…
Finisar (FNSR) is likely to see a drop in second-quarter revenues on a year-over-year basis due to lower sales associated with 10-gig and Ethernet transceivers.
Defending champion South Africa lost to Argentina 17-12 in a thriller and still progressed to the Dubai Sevens rugby quarterfinals on Friday. South Africa blew a 12-0 lead,…
Atmos Energy (ATO) is poised to gain from its ongoing capital expenditure and customer additions. However, dependence on a single state for significant contributions is a headwind.
Wall Street rose on Friday as investors hoped for progress on trade in a critical U.S.-China meeting over the weekend, and the S&P 500 and the Nasdaq posted their biggest weekly percentage gains in nearly seven years.
Authored by Lance Roberts via RealInvestmentAdvice.com, All it took was two 10% stock market corrections in a single year and some heavy “browbeating” from President Trump to reverse Jerome Powell’s hawkish stance on hiking interest rates. On Wednesday, Powell took to the microphone to give the markets what they have been longing for – the “Powell Put.” During his speech, Powell took to a different tone than seen previously and specifically when he stated that current rates are “just below” the range of estimates for a “neutral rate.” This is a sharply different tone than seen previously when he suggested that a “neutral rate” was still a long way off. Importantly, while the market surged higher after the comments on the suggestion the Fed was close to “being done” hiking rates, it also suggests the outlook for inflation and economic growth has fallen. With the Fed Funds rate running at near 2%, if the Fed now believes such is close to a “neutral rate,” it would suggest that expectations of economic growth will slow in the quarters ahead from nearly 6.0% in Q2 of 2018 to roughly 2.5% in 2019. Such will also correspond with a drop in inflationary pressures, as we noted previously, which is already occurring with the drop in energy prices. “More importantly, falling oil prices are going to put the Fed in a very tough position in the next couple of months as the expected surge in inflationary pressures, in order to justify higher rates, once again fails to appear. The chart below shows breakeven 5-year and 10-year inflation rates versus oil prices.” But here was the key comment that suggests the recent blasting by President Trump hit home: “Powell says moving too fast would risk shortening U.S. expansion, moving too slow could risk higher inflation and destabilizing financial imbalances.” President Trump has been adamant that Powell’s aggressiveness was jeopardizing the economic recovery. More interesting was when Powell reiterated they see “no major asset class, however, where valuations appear far in excess of standard benchmarks” I am not sure which benchmarks the Fed looks at exactly. The real risk to the market is not valuations at historically high levels by virtually every measure, but rather the risk of a credit related event due to the impact of higher rates on an abundance of lower-rated corporate debt. Nonetheless, in the short-term, the “bulls” got their Christmas wish as noted by Bloomberg economists “Tim Mahedy and Yelena Shulyatyeva: ‘Powell’s comment that rates are just below neutral is a step back from his comments earlier in the fall implying the FOMC still has a ways to go. This could be the first sign that the pace of rate hikes is set to slow next year.’ However, not all economists got the same dovish message as noted by Greg Robb via Marketwatch. “I really don’t think he was dovish, not really. He didn’t say inflation was weaker or the economy was weaker than we thought. It is a bit of a market overreaction.” -Paul Ashworth, chief U.S. economist at Capital Economics. “The Fed has said they wanted to go above neutral. If they wanted to be neutral, they could have walked that back. He gave no hint of a pause in December.” – Avery Shenfeld, chief economist at CIBC All the “bulls” need now is for President Trump to “cave in” on his demands on China, a problem he created in the first place, at this weekends G-20 summit. I would expect a deal that is well short of any original objective as China agrees to issues which are economically unimportant to them. However, such will “look like a win” for the Trump administration and should clear the way for “Santa to visit Broad and Wall.” After that, it’s anyone’s guess, but the real issues plaguing the economy and the markets have not been resolved. Just something to think about as you catch up on your weekend reading list. Economy & Fed US Economy Is Strong – 3 Signs It Won’t Last by Lydia Depillis via CNN Business Why US-China Ceasefire Is Coming Soon by Anatole Kaletsky via Project Syndicate Levered Companies Layer Loans Over Loans by Sally Bakewell & Kelsey Butler via Bloomberg Is The US Economy TOO Strong? by Joe Calhoun via MyPersonalCFO The Fed’s Cheat Sheet by Eric Cinnamond Why Economists Insist Powell Wasn’t That Dovish by Greg Robb via MarketWatch Fed Warns Of “Large Plunge” In Markets If Risks Materialize by Jeff Cox via CNBC The Scariest Economic Chart Is Coming From China by Pedro de Costa via Forbes Fed’s Speech Sends Stocks Soaring, But Should It? by Mike Shedlock via Mishtalk Jerome Powell Sends Markets Soaring by Binyamin Appelbaum via NYT GM & Trump Go To Blows by Bruce Yandle via Washington Examiner GE’s $15 Billion Money Pit by Katherine Chiglinsky via Bloomberg The Smashing Effects Of A Trade War by Seth Levine via The Integrating Investor 10-Years Later – Did Bailouts Work by Kevin Williamson via National Review The Fed Finally Blinks by Kevin Muir via The Macro Tourist Markets Was Yesterday The “All Clear” Or “More Noise by Bryce Coward via Zerohedge Don’t Blame The Strong Dollar by Mark Hulbert via MarketWatch Bull Market Is More Fragile Than It Looks by Stephen Gandel via Fortune History Says FANG Feast Is Finished by Dana Lyons via The Lyons Share Blue Chip Companies Are Piling On Debt by William Cohan via NYT October Sucked, What Now? by Cliff Asness via AQR Capital Management Did Powell Just Push Investors Into A “Bear Trap” by Barbara Kollmeyer via MarketWatch The Uphill Struggle For Equities by Louis-Vincent Gave via Evergreen Gavekal Hope, Fear & Reality by Jamie Powell via FT Alphaville What You Need To Know To Sell Before It’s Too Late by Jared Dillian via MarketWatch Most Read On RIA Rising Rates Are Killing The Housing Market by Lance Roberts Lessons From Thanksgiving Dinner by John Coumarianos Why We Sold AAPL Stock by Vitaliy Katsenelson GM Cuts Jobs As Auto Bubble Begins To Burst by Jesse Colombo 15-Surprises For 2019 by Doug Kass The Difference Between A Bull & Bear Market by Lance Roberts UTX Faces Reality – Will Other Companies Follow Suit by Michael Lebowitz The Fallacy Of The Positive Impact From Falling Oil Prices by Lance Roberts Watch Research / Interesting Reads Goldman Sachs 2019 Economic Outlook via Goldman Sachs What Will The Next Financial Crisis Look Like by Daniel LaCalle via The Epoch Times GM: A Case Study To End Share Buybacks by Patrick Hill via The Progressive Ensign 21-Quotes From Henry Hazlitt by Gary Galles via FEE Ray Dalio’s Principles For Dummies by Matthew Walther via American Affairs Why MSFT Is A Better Bet Than AAPL by Paul La Monica via CNN Money Overparenting In America Created Generation Of Snowflakes by Shawn Langlois via Marketwatch Paul Volcker’s Wisdom For America by John Cassidy via The New Yorker Why GM Killed Cars & Jobs by Nathan Bomey via USA Today US Corporations Are Winning Their War On Capitalism by Jonathan Tepper via Bloomberg When Next Recession Hits, Will Benefits Be Enough? by Gary Burtless via Real Clear Markets “There is nothing like price to change sentiment.“ – Helene Meisler
Wall Street rose on Friday with the S&P 500 and Nasdaq posting their biggest weekly percentage gains in nearly 7 years after the U.S. Federal Reserve hinted at a more dovish approach to future interest rate hikes on Wednesday and investors hoped for progress in the U.S.-China trade dispute at a G20 summit.
When it comes to her friends, Meghan Markle is lucky to have a close group of best friends to rely on — especially now that she’s a member of the royal family. And one friend in particular, Priyanka Chopra is especially supportive of Meghan’s new life. Take a closer look at Meghan Markle and Priyanka’s […]
Meghan Markle Won't Be Attending Nick Jonas and Priyanka Chopra's Wedding — Here's Why
Authored by Peter Tchir via Academy Securities, ...and the Mighty Trump at bat. The game is on the line. The entire world is watching. The count is 3 & 2. Xi just missed catching on the corner on those three pitches. The first strike? Well that will go do in the history of baseball. The pitch was so far outside, it was almost a wild pitch, but the Mighty Trump swung and missed. The ball was so far outside, no one could have hit it. Was a momentary lapse in judgement? Erratic behavior? Did the Mighty Trump want the glory of a hit rather than forcing the tying run with a walk? Or was it some brazen strategy to get the upper hand in the mental game with Xi? We may never know the truth. The second strike was equally memorable. A long, long, long, long, long foul ball. The Mighty Trump got a hold of Xi’s delivery and knocked it out of the park. Heads are still shaking at how far that ball went, but unfortunately for the Mudville 9, it was just foul. Xi checks the runners, goes into the wind up, and here’s the pitch… I have spent this week in constant dialogue with my best contacts on trade. Here is what I am hearing President Trump may have a plan, but few are privy to it and there is a lot of concern whether he will stick to a plan or wing it Many senior people in the Republican party blame weaker than expected showings in some regions as directly attributable to trade policy and tariffs, so there is a push to back away from that strategy. Allegedly the president’s reaction to GM closing plants was to express a desire to double down rather than back-off (which seems to be supported by @realDonaldTrump tweets. The Mueller investigation seems to be generating a lot of headlines again (and I’m hearing a lot more going on behind the scenes). In the past, there is some evidence, the president reacted to Mueller actions and leaks by lashing out with policy of his own. It does also set the stage for the President wanting a major victory heading into the new year as the Democrats take over the House and fears of a subpoena war take hold. The President is a firm believer that a good offence is a good defense (which is good for those hoping for a trade). Now, back to the pitch I see three basic scenarios playing out We walk in a run. The game goes on, possibly to extra innings. The real-world equivalent is some promise by China to reduce the trade deficit, us putting on hold any new or increased tariffs and both sides agreeing that Intellectual Property rights are important and that both sides agree to focus on a plan to protect intellectual property rights. and when coupled with a less dogmatically hawkish Fed, we can get the year-end risk on rally, though people will be looking to fade that rally well ahead of January 1st. This is my highest probability scenario. I think if we get to the dinner, there is a decent chance some formal progress announcement is made. How strong that announcement is will determine the strength of the market reaction. A wild swing and a miss. Game over – we lose. In the real-world, we don’t even get to the dinner. We’ve already cancelled on meeting with Putin (for good reason, but it does show, we aren’t afraid to cancel). We are supposedly bringing Navarro to the dinner, which doesn’t seem like the best idea for a cordial dinner. Chinese papers seem to be downplaying the G-20 as a whole, and the Trump dinner. Could something happen between the sides or to the President’s agenda between now and Saturday that derails the event? Certainly, if the President doesn’t feel we are getting treated as we should, it seems within his nature. It could even be a good negotiating ploy to show China that we are deadly serious. Markets will hate that. I view this as a low probability outcome, but certainly a non-zero probability. Boom! A Grand Slam! A walk-off for the Mighty Trump. China is being hurt more than we know. Xi needs to focus on domestic issues and this trade war with the U.S. isn’t helping him as it is hurting the economy and distracting his focus from urgent matters at home. Leader for life is a good thing until you consider what would end it. Okay, that was over the top, but he has domestic economy that is declining rapidly, possible credit bubbles and wealth inequality at an extreme scale. They need soybeans. They need LNG. Stop being stubborn and agree to buy what you need form us, your largest consumer. Intellectual Property protection might be easier to give up on than we believe, as it can be very difficult to prove and at this point China may believe they have enough IP of their won that they want to protect that too. I don’t think either side has done enough talking to get to this sort of a deal, so it is also a low probability event. Does it even matter... It wouldn’t be the first time that the market fixates on something only to decide that it doesn’t really matter in the end. Maybe a less hawkish Fed, one that is going to slow the pace of hikes and might leave the balance sheet larger (ending QT sooner than later) is all that matters near term for risk? A little bit depressing if nothing else matters, but making me less depressed about what the market reacts to seems low on the Fed’s or the markets’ list of priorities. Have a good month-end, many will be happy to see November done, and I look forward to chatting with many of you on Sunday night as futures open.