News: White House allies push back on inflation narrative — GOP eyes new infra approach

Tuesday, June 15, 2021

White House allies push back on inflation narrative — GOP eyes new infra approach — Musk boosts Bitcoin

Jun 15, 2021

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Quick fix

White House allies push back on inflation narrative — People close to the White House are pushing back pretty hard on the idea that rising prices across the economy are indicative of a longer-term trend that could upend President Biden's agenda and require quick action from the Fed.

An ally of the White House notes to MM that "[t]op Republicans like Minority Leader McCarthy and Senator Cruz have cited lumber prices to attack the Administration's economic policy – but since its pandemic-era high (attributable largely to mismatches between supply and demand as the economy recovers) lumber prices are now down 40%.

This person added: "Lumber prices fell by 18% last week – the largest decline since 1986.
Supply challenges are improving: Production has increased 5% from a year ago, and market indicators suggest additional significant declines in lumber prices by the first quarter of 2022. …

"The increased supply and corresponding price decrease reaffirms the assessment that the supply/demand mismatches are transitory. … One of the four WH Task Force areas of focus is homebuilding, with a particular focus on the lumber industry. The Administration knows that resilient supply chains are critical to national security, economic security, and technological competitiveness."

And some money managers are pointing to the lumber story as well as indicative that inflation freak outs are not really warranted.

Cumberland's David Kotok emails MM: "Lumber surged. Crowd shouted 'inflation'. Lumber plunged. Did you hear 'deflation'? Watch used car prices flatten and roll over. Watch oil/gasoline. Trimmed mean gap is key to observing 'transitory' or trajectory upward.

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Driving the Day

President Biden in Brussels meets with Belgian King Philippe and Belgian Prime Minister Alexander De Croo and participates in the U.S.-EU Summit before heading to Geneva ahead of his meeting with Russian President Vladimir Putin …

House Financial Services subcommittee has a hearing at 10:00 a.m on "Digitizing the Dollar: Investigating the Technological Infrastructure, Privacy, and Financial Inclusion Implications of Central Bank Digital Currencies" …

Senate Banking has a hearing at 10:00 a.m. on "21st Century Communities: Local Leaders on the Infrastructure Needs Facing America's States, Cities and Towns" … Retail sales at 8:30 a.m. expected to decline 0.6% and rise 0.4% ex-autos … Producer Prices at 8:30 a.m. expected to rise 0.5% headline and core

HEARING PREP — A loyal MM reader notes on the House Financial Services hearing on a central bank digital currency (CBDC) "None of the witnesses appearing before the Committee appears inclined or prepared to comment on the serious financial stability and other risks that come with a CBDC, and all but one are invested either financially or professionally in widespread adoption of CBDC. It's like inviting the Tesla sales team to a hearing on whether the government should subsidize electric cars."

PRIVATE EQUITY REACT — A little birdie emails on the NYT front-pager on private equity and taxes: "Blackstone's President Jon Gray addressed the firm's employees about the story on their regular Monday morning webcast called 'Blackstone TV' -- saying that Blackstone had not engaged in the tax reduction practice that was one of the main focuses of the article called 'fee waivers.'

"He also said that Blackstone's senior leaders pay average income tax rates of approximately 45 percent including federal, state, and local taxes since they live in the New York City-area and are among the largest individual taxpayers in the country."

DECODING THE NATO SUMMIT — Our By Ryan Heath: "Ukraine President Volodymyr Zelensky may need to get better at Twitter. Chiming into the NATO summit Twitter conversation, the Ukrainian leader tweeted this afternoon that Ukraine "will become a member of the Alliance" — a juicy-sounding claim some interpreted to mean Ukraine would be joining the alliance immediately.

"If true, that claim would upend Wednesday's Biden-Putin head-to-head summit. Instead, the alliance merely reiterated a 2008 commitment that Ukraine will one day become a member, and President Joe Biden later confirmed — at a press conference held two hours behind schedule — that Ukraine did not yet meet NATO membership criteria."

GOP EYES NEW INFRASTRUCTURE APPROACH — Our Marianne LeVine and Burgess Everett: "Senate Republicans are mulling support for a massive amount of new spending on infrastructure — in part because they think it'll help kill … Biden's liberal agenda.

"Minority Leader Mitch McConnell has yet to tip his hand on whether he supports the bipartisan negotiations on Biden's plan for roads and bridges that are being led by Sens. Kyrsten Sinema (D-Ariz.) and Rob Portman (R-Ohio). But a growing number of Senate Republicans are betting that if a deal is reached on that sort of physical infrastructure, Democrats won't have the votes needed to pass the rest of Biden's 'soft infrastructure' priorities, such as child care and clean energy."

BANK TRADE GROUP CALLS FOR STRICT EXAMS FOR FINTECHS — Our Victoria Guida: "A big bank trade group is making the case that financial technology firms that gain access to the Federal Reserve's payment rails should receive regulatory scrutiny similar to that faced by traditional banks.

"As the Fed considers providing accounts to companies that don't take government-insured deposits but obtain some type of bank charter, the Bank Policy Institute said in a new publication that many of the top priorities for bank examiners are still highly relevant for such firms."

Markets

GAINS FOR SOME TECH GIANTS NUDGE S&P TO ANOTHER RECORD HIGH — AP's Damian J. Troise and Alex Veiga: "Gains in several big-name tech companies including Apple helped nudge the S&P 500 to another record high Monday, even as other parts of the market faltered. The benchmark index was lower for most of the day, then turned higher in the last 10 minutes of trading, ending up 0.2 percent."

'AMERICA FIRST' FADING FAST WITH S&P 500'S RECORD RUN IN DANGER — Bloomberg's Lu Wang: "U.S. equities have been sitting on top of the world for years, first by surfing their technology companies' dominance into the pandemic, then by leading the way in distributing vaccines that allowed businesses to reopen. The "America-First trade" helped the S&P 500 Index notch a five-year winning streak against its European counterpart — the longest run in history. It looks like the streak is about to end."

BITCOIN TOPS $40K AFTER MUSK SAYS TESLA COULD USE IT AGAIN — Reuters' Tom Westbrook and Tom Wilson: "Bitcoin climbed above $40,000 on Monday, after yet another weekend of price swings following tweets from Tesla boss Elon Musk, who fended off criticism over his market influence and said Tesla sold bitcoin but may resume transactions using it."

Fly Around

FED OFFICIALS COULD PENCIL IN EARLIER RATE INCREASE AT MEETING — WSJ's Paul Kiernan: "Federal Reserve officials could signal this week that they anticipate raising interest rates sooner than previously expected following a spate of high inflation readings. In March, the last time they released quarterly economic forecasts, most officials expected to keep the Fed's benchmark interest rate near zero through 2023 to encourage the economy's recovery from the pandemic."

INFLATION EXPECTATIONS JUMP — NYT's Jeanna Smialek: "Consumers expect higher inflation in the near term and over the course of several years, a Federal Reserve Bank of New York survey found, a small but potentially important signal at a time when economic policymakers are betting that expectations will remain in check as demand and prices rebound from depressed pandemic levels."

DIMON SAYS JPMORGAN IS HOARDING CASH ON INFLATION HOPES — CNBC's Hugh Son: "Jamie Dimon believes cash is king — at least for the time being. JPMorgan Chase has been 'effectively stockpiling' cash rather than using it to buy Treasuries or other investments because of the possibility higher inflation will force the Federal Reserve to boost interest rates, Dimon said Monday during a conference.

"The biggest U.S. bank by assets has positioned itself to benefit from rising interest rates, which will let it buy higher-yielding assets, he said."

TREASURY TAPS FORMER GATES FOUNDATION OFFICIAL FOR COMMUNITY OUTREACH — Bloomberg's Saleha Mohsin: "The U.S. Treasury Department has picked Antonio White, who previously worked at the Bill and Melinda Gates Foundation, to head a revamped business liaison office that will focus on marginalized communities, according to people familiar with the matter."

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For Your Radar

TED PICK VS GOLDMAN — Bloomberg's Sridhar Natarajan and Amanda L Gordon:
"The story at Morgan Stanley goes like this: Gary Cohn, then president of arch-rival Goldman Sachs, boasted he wanted to crush Morgan Stanley like a cockroach. When Ted Pick heard that, he erupted. In one of his signature blue-streaked tirades, he ordered troops on his Morgan Stanley trading floor to stick it to Goldman.

"That episode might seem like a footnote in the long rivalry between those two storied firms, but for Pick, it now looks like something more. At 52, he's in the running for the top job at Morgan Stanley, while Cohn, 60, has receded into the business background after his stint in the Trump White House."

TRANSITIONS – Sarah Bartnicka is now an account manager for corporate and financial communications at Edelman. She previously was marketing and communications writer for Stikeman Elliott.

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