THE STAY AT HOME TRADE RETURNED WITH A VENGEANCE

The proverbial stay at home companies advanced Friday as did the bond market as fears about another COVID lockdown again became front and center.   Conversely the “re opening” trade floundered.  Oil declined about 3% for similar reasons.

Is this just a one-off event—a throwback to yesterday as memories die hard—or something of significance?  I think the former as I believe society will not again tolerate yesterday’s draconian actions.

The House passed the “Build Back Better” legislation.  The fate of the legislation in the Senate is unknown.  As widely reported, the CBO states that it adds to the deficit by a “nominal” $240 billion after taking in account additional tax collections ($367 billion deficit before increased collection) while the White House states it is net positive of $127 billion, the result of increased tax collections of $400 billion.

The legislation includes a provision to add 87,000 additional IRS agents for enforcement.  To place this into perspective the IRS employs today about 74,400 people.  Also included in the legislation.

Is the requirement that banks or businesses that “receive” over $10,000 annually (including cash and/or other untraceable instruments like cashiers’ checks and money orders) to file a Form 8300 with the IRS, which includes the name, address, and taxpayer identification number, among other information, of both the payer and the beneficiary (usually the recipient) of the transaction.

Wow!  This is a massive regulatory burden placed on all banks, a proposal fought by all except the largest money center banks given the potential complexity and expense of such a reporting requirement.

Changing topics, will the upcoming debt ceiling take priority in the Senate thus delaying a possible vote on the Build Back Better legislation?  I am certain there will be some that will threaten a possible default, the result of such would be cataclysmic and apocalyptic at best.

I think most will agree the vitriol and animosity in Washington is perhaps at the greatest level in at least two generations.  Today too shall pass and the country will recover.

What will happen this holiday shortened week?

The economic calendar is comprised several housing statistics and manufacturing surveys as well as another estimate of third quarter growth.

Last night the foreign markets were mixed.  London was up 0.12%, Paris down 0.09% and Frankfurt down 0.01%.  China was up 0.61%, Japan up 0.09% and Hang Seng down 0.39%.

The Dow should open moderately higher on merger news and headlines suggesting Chinese stimulation measures. The 10-year is down 8/32 to yield 1.58%.

 

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