JT TAYLOR: CAPITAL BRIEF - JT   Potomac banner 2


  • 7 days - until Congress must address year-end expirations (tax extenders, Medicare extenders, FISA)
  • 7 days - until Republican leadership’s self-imposed tax timeline
  • 7 days - until the new CR to fund the government and NFIP expire
  • Looming: DACA, CHIP, and the debt ceiling (December 8 expiration, extended to March with extraordinary measures)

NOTHING TO SEE HERE FOLKS: As we await the tax Conference Committee Report expected to be released later today, conferees are making final changes to appease a handful of wavering Senators. To add to the drama, Senators John McCain (R-AZ) and Thad Cochran (R-MS) are both in the midst of battling health issues - McCain is in the hospital and Cochran is dealing with complications due to an outpatient procedure. With a razor-thin margin, Majority Leader Mitch McConnell can only afford to lose two votes. Senator Bob Corker (R-TN) did not originally vote for the bill over debt concerns and won’t budge, Senator Susan Collins (R-ME) says she’s undecided and continues to increase her demands, and now Senators Mike Lee (R-UT) and Marco Rubio (R-FL) are holding out unless the package includes an expansion of the child tax credit for middle-class families. In the meantime, VEEP Pence has canceled his trip to be available for a vote (potentially his sixth tiebreaker of the year). Bottom line: McConnell has come too far to see this effort go down, and will cede whatever ground Collins, Rubio, and Lee need.

To dig deeper and hear more of the details and other provisions expected in the report, catch the replay of our roundtable with David Hoppe, Jeff Shapiro, JT Taylor, and Emily Evans. LISTEN HERE.

MERRY CLIFFMAS: The House has released their legislation to prevent a shutdown just nine days before Christmas. As we expected, it extends spending measures to mid-January, but with a full year of Pentagon funding for defense hawks. Over in the Senate, Republicans will need the help of at least eight Democrats to pass any spending measure, and all but four of them have already expressed opposition to the measure. While the legislation contains five years of funding for the CHIP - it pays for it in ways Democrats oppose. The Senate is expected to work out their own version that will make CHIP bipartisan and potentially add supplemental funding for disaster relief in CA, FL, TX, and PR - with no DACA deal in sight. They just have to get through tax reform first. Stay tuned for a little game of ping pong...

IN TRUMP’S SHADOW: President Trump has been working to inhibit China’s unfair trade practices over U.S. intellectual property by unleashing stricter CFIUS regulations. However, the growing number of deals being evaluated are outgrowing the Treasury Department’s capabilities. Congress is stepping in, and both the House and Senate have proposed separate legislation to: 1. increase CFIUS resources, to 2. increase their role in regulation, and 3. increase the spectrum of deals they consider. Senator John Cornyn (R-TX) and Rep. Denny Heck (R-WA) want a joint committee between the chambers and Treasury to more efficiently handle the threats of theft. The CFIUS annual report shows the number of notifications growing exponentially in 2015 and 2016 and they are expecting that growth to continue especially with China.


THE NEED FOR SPEED: FCC Chairman Ajit Pai successfully slipped past the demonstrators ringing the FCC office building to delay their net neutrality announcement and led the Commission's 3-2 partisan line vote to terminate common carrier treatment of broadband access services. By abandoning public utility regulation under Title II of the Communications Act, the Commission is dropping the only legal basis that courts have thus far recognized for enforcing bans on paid prioritization or threatening broadband ISPs with rate regulation. This is a huge win for telecos and cable operators, but will be met with strong opposition from independent programmers and streaming interests and Democratic partisans will push back against the FCC order in federal court. President Trump held a deregulation rally on the heels of the announcement to tout the decision. Read more from our Senior Telecom Analyst Paul Glenchur here.

YOU CAN’T ALWAYS GET WHAT YOU WANT: House Republicans are turning up their nose to the modest Dodd-Frank regulations passed in Senate Committee. House Republicans have been working on their own sweeping Dodd-Frank reform including passing the CHOICE Act. They feel like the Senate bill does not go far enough to reduce the governmental overreach on financial institutions, especially because it does not address the CFPB. However, the Senate often needs bipartisan support to pass legislation so if the House wants any deregulation - they will take what they can get from the Senate and pass even modest measures to reduce burdens on small and community banks.

CALL TODAY | 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 today, Friday December 15, at 2:00 PM ET. Get the event details here.

GOVERNMENT REVIEW OF DISNEY-FOX DEAL (DIS, FOXA, NFLX, AMZN, GOOGL, T, TWX): Our Senior Telecom Analyst Paul Glenchur writes we expect ultimate approval by either the DOJ or FTC despite asset divestiture pressures. Read the full piece here.

ENERGY WINS BIG IN TAX REFORM BUT CHALLENGES REMAIN FOR CLEAN ENERGY: Our Senior Energy Analyst Joe McMonigle writes winners include oil & gas, utilities and MLPs. Potential losers are wind and solar on BEAT provision. 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.