SHUTDOWN SHOWDOWN (CONTINUED)...: As we laid out in our note yesterday, the House moved forward and passed a CR (230 yeas/197 nays) last night to keep the government operating until February 16. Included in the bill is funding for six years for the Children’s Health Insurance Program (CHIP) and it delays or suspends of a handful of Obamacare taxes – including the Cadillac tax and the medical device tax.
In a last-minute move last night, the Senate took up the House CR and advanced the legislation (97 yeas/2 nays) on procedural vote called a ‘motion to proceed’ requiring 50 votes. Knowing that he doesn’t have the votes to further advance the CR, Majority Leader Mitch McConnell did not agree to hold a cloture vote on the legislation and the Senate is scheduled to convene at 11am. The cloture vote following the ‘motion to proceed’ will require 60 votes meaning that, with Senator John McCain absent, McConnell will now need 10-12 Democrat votes instead of nine and that number increases with every Republican defection. We currently know that Republican Senators Lindsey Graham (SC), Mike Rounds (SD), Rand Paul (KY) and Jeff Flake (AZ) are opposed at varying degrees with Democrat Senator Joe Manchin (WVA) in favor of the bill. The sentiment we’re hearing is that Democrat opposition in the Senate has grown throughout the past 24 hours. We also understand from a number of sources that some Senate Democrats are not opposed to a CR extension of a few days to allow negotiators more time to strike a deal and we currently think that’s the strategy that may play out over the course of the next few days. But to what end?
In preparation for a number of scenarios playing out today and over the weekend, the House readied a number of procedural options allowing them to vote on any bill over the next 48 hours – and that simply means that should they need to amend the just-passed CR or take a completely new version from the Senate, they can do it without jumping through time-consuming procedural hoops. Please email or call us with questions and dial into our conference call at 8:30 am ET for the latest developments.
Length of government shutdowns per CRS:
PAYDAY FOR PAYDAY, BUT NO $$$ FOR CFPB? Just hours after an Obama/Cordray era-priority took effect at the CFPB, the agency reversed course and is now reconsidering the Payday Rule. Challenges to the rule were already stacking up with a time horizon of August 2019 to comply with the measure. A bipartisan team of six members of the House were simultaneously planning to advance a resolution introduced back in December to overturn the rule through CRA, but that effort faced an uphill battle both legislatively and politically. The resolution would also limit the bureau in future rulemaking on payday and other high-interest-rate loans. Not even a day later, the CFPB then launched an agency-wide review of a variety of topics including "rulemaking, enforcement actions, supervision, market monitoring and education activities" sending a clear signal that additional changes were afoot. And no one saw this one coming – Acting CFPB Director Mick Mulvaney requested the big g00se egg for the agencies quarterly budget request for Q2 from the Federal Reserve. Mulvaney will instead bank on $145 million of $177 million in cash “reserves” for emergency purposes to get the agency through the quarter.
(STILL) BULLISH: Our house view on the U.S. economy is no secret. We remain bullish on U.S. growth. There was more corroborating evidence this week with Industrial Production notching a 37-month high and up 3.56% year-over-year. We also continue to see follow through on the corporate level with SP500 earnings up +13% so far this earnings season, according to Hedgeye Director of Research Daryl Jones. Meanwhile, the nine companies of the Nasdaq 100 that have reported have shown aggregate EPS growth of a mind-boggling +84% y-o-y. The derivative of being U.S. growth bulls is to be bullish of U.S. equities, at a price of course. No surprise that with such a strong equity year in the rearview mirror and 2018 off to a great start, the masses are also starting to get bullish. More to be revealed.
NET NEUTRALITY ACTIVITY IN CONGRESS AND THE COURTS (T, VZ, CMCSA): The latest from our Senior Telecom Analyst Paul Glenchur as he writes on the FCC's December order repealing common carrier net neutrality rules potentially surviving upcoming attacks in Congress and the courts. Read his note here.
LONG TERM PENTAGON BUDGET GROWTH TO BE STUNTED; 2018 WILL BE HIGH WATER MARK FOR DEFENSE SPENDING: Our Senior Defense Analyst Emo Gardner writes Pentagon spending will end up at ~$665B in FY18, +9% year/year and FY19 will be flat but we see real trouble beginning in FY20. Read his note here.
UKRAINE: DEFENSE TO OFFENSE: Our Senior Geopolitical advisor General Dan Christman writes on recent strategic moves by the U.S. in the Ukraine. Read his piece here.
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