economy Markets stocks

Cast Members

Wherever they end up, negotiations around another virus relief package in the US haven’t gone anywhere in nearly two months.

This is a “don’t let the headlines fool you” situation. On Wednesday, The White House and Democrats were keen to say there’s been “progress” over the past couple of days. And that may well be true. Indeed, the market could be looking at a compromise bill by the end of the week. The House will vote on (and pass) a $2.2 trillion package if no such deal materializes.

The point, though, is that through Wednesday afternoon, any such progress hadn’t shown up in the headline numbers — in the price tags, so to speak. That makes it seem as though there hasn’t really been any “progress” or, if there has, and we end up with a deal that falls somewhere in that range, one wonders what point there was in all the posturing.

Consider that Democrats’ “new” proposal is $2.2 trillion. That might as well be the same as the old proposal. Sure, it’s a trillion less than the HEROES Act, but that was never going to become law and it’s irrelevant anyway, because it was superseded by a smaller Democratic proposal weeks ago. That proposal cost roughly what the “new” proposal costs — somewhere between $2.2 trillion and $2.4 trillion.

For his part, Steve Mnuchin indicated Wednesday that he was prepared to offer $1.5 trillion. If that sounds familiar, it should. It is exactly the same amount The White House has been offering all along. On Wednesday evening, in remarks to Fox Business, Mnuchin said he’s prepared to accept a “fair” compromise and that the talks are productive.

As for Mitch McConnell, he still sounds decidedly reluctant to countenance either figure, calling Democrats’ bill “too high” and full of “poison pills”. In floor comments, he accused Pelosi of conjuring “another far-left wish list”.

So, even if Mnuchin and Pelosi manage to find common ground, McConnell is having none of it. Of course, he contends he’s “made it clear” that Senate Republicans would like to see more stimulus. In reality, that is the furthest thing from “clear”. There is no sense in which Senate GOPers have made it obvious that they would like to spend more money on virus relief. In fact, the opposite is true. McConnell has had an extremely difficult time herding those cats around anything more than piecemeal legislation.

“McConnell acknowledged the two sides are ‘far apart’ on stimulus talks. We’re reluctant to assume this implies the prospects for fiscal bailout 2.0 are completely off the table; instead, as with last night’s debates, a somber shake of the head, palms turned to the sky, and a mumbled ‘business as unusual’ seem the most appropriate response”, BMO’s Ian Lyngen, Ben Jeffery, and Jon Hill wrote, in a Wednesday afternoon note.

Business as usual, indeed. Or, as Larry Kudlow would say, “for some reason, we just can’t get it done”.

With each passing day that stocks rise and the economic data improves, it becomes harder and harder to bring Republicans on board. Wednesday brought good news on the labor market and a big upside surprise on the Chicago PMI. Stocks rose into month-end, capping a stellar quarter, even as September’s performance left something to be desired.

Consumer sentiment has improved at the margins, but even after (for example) the biggest monthly gain in 17 years on the Conference Board’s gauge, the mood on Main Street is still detached from Wall Street, September’s equity slump notwithstanding.

If the September jobs report comes in solid, and there’s no stimulus deal by Friday afternoon, one imagines Republicans’ position with harden further, as Democrats pass their $2.2 trillion package in the House and then head out on the campaign trail. It sounds as though Mnuchin and Pelosi are angling to have something done by the weekend.

Assuming something does come together, it would be welcome news to many Americans. If you’re curious to know how tenuous the situation still is, just ask any of the 28,000 people that Disney is laying off as virus containment protocols continue to cripple the company’s resort business.

Josh D’Amaro, chairman of the parks division, essentially blamed California for keeping lockdown measures in place too long, but let’s face it: It’s not California’s fault. It’s not anybody’s fault. It’s a virus. Sure, California could take the same chances that Florida took over the summer, but the state is understandably reticent.

D’Amaro emphasized Disney’s existing cost cutting initiatives, including furloughing “cast members while still paying benefits”. I suppose that means Goofy kept his health insurance while he sat at home chuckling his way to the bottom of a Jack Daniel’s fifth.

“However, we simply cannot responsibly stay fully staffed while operating at such limited capacity”, D’Amaro went on to say Tuesday.

This is why Democrats are pushing for more stimulus and relief. You can’t have 28,000 unemployed Mickeys, Minnies, and Goofys wandering around with no safety net while Donald (the president, not the newly-jobless duck) threatens to tip the country into chaos come November.

That could be the script for some kind of dystopian Hollywood horror-drama — gangs of armed, furloughed Disney “cast members” taking to the streets, in their costumes, to join the battle between ANTIFA and the “Proud Boys”, who Trump told to “stand by” during Tuesday’s debate.

Clouding the outlook further was Moderna CEO Stéphane Bancel, who told an FT conference the earliest the company could apply for FDA emergency use authorization for a vaccine is November 25. That, he said, is when “we will have enough safety data to be able to put into an EUA file that we would send to the FDA”.

FT described the remarks as “a blow to Trump’s hopes of having a jab ready before the US election”. In addition, Bancel said full approval to distribute a shot widely isn’t expected until spring, which FT gingerly notes “undermines Trump’s claim at Tuesday’s debate that a shot would be available ‘a lot sooner'”.

Late in the cash session Wednesday, Mnuchin spoke to reporters after another meeting with Pelosi. “We still don’t have an agreement”, he said. “We still have more work to do and we’re going to see where we end up”.

There it is again: “We’ll see what happens”. It’s the same line the public hears from the administration over and over again on issues ranging from the trivial to the existential. Mnuchin reportedly spoke to Pelosi again on Thursday night in an effort to move closer to an agreement.

For her part, Pelosi characterized her Thursday afternoon discussion with Mnuchin as “extensive”. “We found areas where we are seeking further clarification”, she added. The House had planned to go ahead with a vote on the slimmed down version of the HEROES Act. That was delayed, pending further talks with The White House.

According to Roll Call, Mnuchin offered additional state and local government funding, as well as $400 per week in federal unemployment assistance as part of a $1.62 trillion package. Last time I checked, $1.62 trillion is not halfway between $1.5 trillion and $2.2 trillion.

American Airlines is poised to start laying off some 19,000 people on Thursday, sticking with its original schedule, despite Mnuchin’s “appeals”. The airline will apparently reverse the furloughs if a deal is struck that includes relief for struggling carriers.

“I am extremely sorry we have reached this outcome”, CEO Doug Parker told employees in a letter. “It is not what you all deserve”.


5 comments on “Cast Members

  1. derek says:

    Good news there about Goofy.

  2. runamok says:

    They can Mickey Mouse around all they want. Some mediocre PMIs and retail sales are no reason to believe we’re out of the woods yet. What could possibly happen in the next six months to set back the reflation trade and turn to some risk-off for the market? Oh, I get it, Tinker Bell is going to wave a wand make unemployment 3.2$ and real GDP growth 2.1%.

    A chart of the trend for GDP shows that there could be a gap of about $10T over the next seven years compared to the trend in GDP prior to COVID. Same sawtooth like we saw out of GFC.

    We’re talking $10T of GDP that is lost, gone, never going to happen. That’s a lot of economic activity. It’s no time to for Munchin to be Goofy. Spend big like the Magic Castle’s life depended on it…because, in many ways, it does.

    • mfn says:

      Not gonna happen. McConnell, Thune, Barrasso, Blunt, Ernst, Young, and _______ [fill in the blank: Graham, Cornyn, Cruz, Tillis, Crapo, Rubio, Collins, Gardner, etc.] are the Seven Dwarfs.

  3. Vlad is Mad says:

    The probability of stimulus seems indistinguishable from zero. Add stimulus to the list of things markets don’t care about, including the path of Covid and possible second wave. The obsession is about the momentum of the recovery which looks fairly impressive, certainly stronger than anyone was forecasting a few months ago with most were fretting the expiration of benefits at the end of July. Folks, its now October. Move on,

Leave a Reply to Vlad is Mad Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.