JT TAYLOR: CAPITAL BRIEF - JT   Potomac banner 2  1


  • Congress is expected to miss the deadline to take action on the Iran deal today
  • 9 days - until the new CR to fund the government and NFIP expire
  • 9 days - until Congress must address year-end expirations (tax extenders, Medicare extenders, FISA)
  • 9 days - until Republican leadership’s self-imposed tax timeline
  • Looming: DACA, CHIP, and the debt ceiling (December 8 expiration, extended to March with extraordinary measures)

CLOSER TO THE GOAL LINE: Today the tax Conference Committee is holding a public hearing at 2:00 PM to discuss the progress they’ve made on closing gaps between the bills. There is nothing to see here, it is simply a box that leadership needs to check off. Details of their work leaked last night - 21% corporate rate, 37% top individual rate, 20% rate for pass-throughs, 750,000K mortgage interest deduction. The increase in corporate rate will give them around $100B in wiggle room, but is being criticized by Senator Marco Rubio (R-FL) who wanted to expand the rate to pay for a middle-class credit expansion, not a tax cut for millionaires. The lower individual bracket could, however, help balance those in high-tax States losing SALT deductions and lower taxes for pass-through businesses. Rubio isn’t McConnell’s only concern - Senator Susan Collins (R-ME) is demanding a vote on a separate healthcare bill. 


NO MOORE ROY: Alabama Senator-elect Doug Jones upset the Republican candidate Roy Moore in what was one of the most contentious and bizarre races (guns and horses) in recent memory. It means Majority Leader Mitch McConnell can now only afford to lose one vote (51-49) when advancing agenda items along party lines, though he won’t let it affect tax reform promising the Senator-elect won’t be sworn in until next year. Thanks to the likes of Steve Bannon, the once dispirited Democratic party is now looking at a much more favorable environment nationwide (see Virginia, New Jersey trends) making the Senate map in 2018 more competitive. Expect McConnell and his establishment brethren to use this loss to rally support for traditional candidates and attempt to marginalize those on the fringe.

AROUND AND AROUND WE GO: Majority Leader Mitch McConnell insisted there will be no shutdown come December 22nd, yet there is no solution in sight. Senator Rand Paul (R-KY) said he would not vote for year-end spending measures unless they address the national debt. And House Speaker Paul Ryan has said he won't convolute his bill with mandatory spending cuts. He also promised that DACA would not be tied to spending, but Democrats are saying they won’t help with a spending bill without DACA legislation. While the threat level is raised, we still don’t see Republicans shutting down the government a few days before Christmas, but it’s worth noting that shutdowns cost the U.S. billions of dollars - estimated at $6.5B per week with huge political implications for the controlling party so expect an extension to mid-January if nothing else.


INVESTRUCTURE: The president is still pushing a $1T infrastructure bill for 2018. He plans to send Congress a primer of the legislation that will use $200B in Federal money to leverage the package by the end of the year with an eye on action when they return. The Administration has already started reforming the project application processes in the agencies and has set a goal of making the application process for infrastructure projects significantly shorter, more affordable, and with clearer criteria. Republicans will be hesitant to vote on any spending bill, but infrastructure tends to be an exception if crafted correctly. The U.S currently ranks ~15th in the developed world for infrastructure and that is simply not good enough for Trump.


CALL INVITE | TAX REFORM AND RETAIL: We're joining Hedgeye’s Retail team featuring Brian McGough and Jeremy McLean on tax reform and its impact on the retail ecosystem this Friday December 15, at 2:00 PM ET. Get the event details here.

NEW FERC CHIEF DELAYS CONSIDERATION OF DOE PROPOSAL TO AID COAL & NUCLEAR: Our Senior Energy Analyst Joe McMonigle writes that it is likely to take longer than a 30-day extension to get consensus among commissioners so we expect a final decision later next Spring. Read the full piece here.

HCA, HOLX, MD, AMN, ATHN | HEALTH CARE JOB OPENINGS -2.7% IN OCTOBER: Hedgeye’s Health team with Policy Analyst Emily Evans remain short a number of names in the Hedgeye Health Care Position Monitor related to their #ACATaper thesis. Read the full piece here.

JUDGE SETS THE DATE FOR AT&T/TIME WARNER SHOWDOWN (T, TWX): Our Senior Telecom Analyst Paul Glenchur wrote the judge emphasized he cannot wrap the case up by the April 22 expiration date and he urged the parties to extend the agreement. Read the full piece here.

REPLAY: SIZZLE, OR FIZZLE? FINANCIALS TAKEAWAYS FROM THE HOUSE AND SENATE TAX PLANS: Hedgeye’s Financial Services team featuring Josh Steiner and Jonathan Casteleyn hosted a presentation on the latest implications of the tax reform proposals on the Housing and Financials sectors. Get the replay here.

REPLAY: TAX REFORM FOR INDUSTRIALS & MATERIALS SECTOR (CAT, DE, TSLA, UAL, TXT, USG/VMC, APD, ETC): Hedgeye’s Industrials & Materials team with Jay Van Sciver hosted a black book presentation on tax reform. Get the replay here.