Lingering Roadblocks

Lip service to bipartisanship aside, the White House is not enamored with the notion of watering down Joe Biden’s stimulus plan.

While words like “cordial” and “productive” were bandied about Tuesday to describe exchanges between the administration and Senate Republicans, Jen Psaki made it clear that the president has “bottom lines” for stimulus talks. The GOP may be keen on “targeted” relief, but according to Psaki, Biden’s “target” is still $1.9 trillion.

So, no, there wasn’t any actual movement on stimulus, although, again, the mood and general tenor of the rhetoric is a far cry from the kind of vitriolic, policy-by-tweet regime America became accustomed to during the previous administration.

Susan Collins doesn’t support a minimum wage hike to $15 and, notably, neither does Democrat Joe Manchin, who doesn’t think that’s a “reasonable” amount to pay people. “No I’m not [in favor],” he told The Hill. “I’m supportive of basically having something that’s responsible and reasonable.”

We want to get Americans back to work, but we still want them poor, apparently. As a reminder, the disparity between wages in the manufacturing sector and pay in the services sector is vast (figure below).

Even if vaccine rollout goes as planned, and leisure and hospitality jobs become plentiful, those jobs still pay meager wages. And while it’s nice to have goals, the idea that American manufacturing will be swiftly resurrected and retooled for renewable energy and infrastructure is a pipe dream.

For his part, Chuck Schumer said Democrats won’t make the mistake of going small when it comes to stimulus. And according to Chuck, Biden called the GOP proposal “way too small.”

You can see where this is going. Either the GOP will get onboard with some manner of acceptably large compromise or they’ll face Democrats going it alone. That won’t be without consequences for Democrats, but everyday people aren’t exactly going to be angry with Biden for giving them free money and boosting their wages.

On the vaccine front, the administration will start handing out shots to directly to pharmacies. “Many pharmacies are already administering vaccine doses that have been allocated to states [but] under the new program, the federal government would ship doses directly to pharmacies,” Politico wrote. “The new pharmacy initiative — which is aimed at broadening access to vaccines generally — is separate from an ongoing federal program to have Walgreens and CVS vaccinate residents of long-term care facilities.”

Across the pond, Angela Merkel said every German should be able to get a vaccine by the end of September.

US equities advanced sharply Tuesday, extending this week’s gain to more than 3%. In other words, US stocks recouped their worst weekly loss since October in just two sessions.

Things are far from “normal,” though. As discussed at length (here) on Monday, there’s still evidence of lingering anxiety.

The Reddit trade is in flames. Soon, it will just be a smoldering ash heap. GameStop fell nearly 60% on Tuesday. The loss, in market cap terms, totals more than $25 billion measuring from last week’s peak. Koss is down nearly 70% this week. AMC fell almost 40% Tuesday. It’s over, folks.

Treasurys continue to be a side show. Yields were cheaper, but 10s are stuck to 1.10% like a retail trader to a Reddit board. “We take solace in the struggling bear, if for no other reason than it fits well with our broader read on the how difficult it will ultimately prove for the Treasury market to divert from ingrained range-trading tendencies,” BMO’s Ian Lyngen and Ben Jeffery said Tuesday, adding that “the primary debate in the US rates market at the moment is whether Treasury yields are in a modest upward-sloping channel or embarking on a step function higher over the course of the year.” If you ask them, it’s the former. “The magnetism of 1.08-1.09% in 10s could serve as a meaningful reference in the event a tamer refunding concession is in the offing,” they remarked.

Summing up a somewhat generic narrative was JPMorgan’s Mislav Matejka. “The recent retracement in broad stock indices, to a large extent driven by technical distortions, is making investors worry that there could be more sustained losses in store, and there is a healthy skepticism toward the chorus of pundits who immediately declared a buying opportunity,” Matejka said. “While there are likely fundamental, and not only technical, drivers behind the weakness, which could linger, we believe that these roadblocks might not be in position for long.”


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6 thoughts on “Lingering Roadblocks

  1. If we can afford to pay Marjorie Taylor Green $174,000 a year to spew wild-ass conspiracy theeories as a member of the U.S. House of Representatives, we certainly can afford to pay Jane and John Doe $15/hr to stand on their feet all day and do the kind of work Joe Manchin would never deign to do.

    1. Schools are the largest employer in rural Maine (Trump country) so probably above the minimum wage already for many jobs. Followed by other government and work in the steadily-shrinking rural healthcare sector. (Shrinking because of past cuts to Medicaid by a GOP Gov & reps.)

      So the minimum wage carrot is not as powerful a lure to these “we hate big government” patriots.

    2. My folks and many of my relatives have lived in Maine — on the coast, mind you — for many years. If you travel there take a look at the state 20 miles inland. Looks more like the backwoods of the deep south than a prosperous tourist state. I guess they like to keep their neighbors poor.

  2. and when Obama came into office in 2008 both Maine’s senators were Republicans Snowe and Collins so I suppose Angus King as independent who caucuses with Dems is some progress…

    1. Snowe was always a moderate, rational Republican. Could not be more different then the Trumpy Birchers who masquerade as Republicans these days.

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