The Weekly Crib Sheet: What Wall St. Should Look for In State of the Union Coverage [Updated 1/27].
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The week of January 25th: The State of the Union is finally here – so this week we’re going to detail what to look for, and what will be overshadowed by its coverage.
MBA readers here’s WHY YOU CARE: Given that we’ve hammered away at the high stakes game of what the Democrats can/can’t pass on Capitol Hill for Pres. Obama to list during the State of the Union, you might simply ask given the state of health care and financial reform – now what? Here’s the “what”…
1) Pictures are Worth a Thousand Votes: Without health care and finance reform crossing his desk, Pres. Obama and his White House advisors held a number of emergency meetings after the much reported on Massachusetts special election and emerged with a press conference proposing to limit proprietary trading – aka “Glass-Steagall-lite.” Capitol Hill and K Street were both stunned by the move that was made without much notice (we acknowledge that this grates against some of the reporting you read last week but we stand by our info). On the surface this seems like more banker bashing in the wake of reading polls following the Massachusetts election. That may be true, but it is also about a picture during the State of the Union. Here it is – Scenario 1: Pres. Obama announces his desire to pass legislation clipping banks’ wings on proprietary trading, Democrats jump to their feet and applaud and Republicans sit on their duffs. That’s a powerful populist image to run in commercials during tough elections in the Fall. Scenario 2: Pres. Obama makes the same call for legislation and both Democrats and Republicans jump to their feet, now Pres. Obama gets the legislation he wants and Democrats can say they got something accomplished come the Fall elections. This political calculation can be applied to how he will present health care, the so called “bank tax” and on and on. AND, this is why we were not shocked at all when a POLITICO breaking news alert landed in our blackberries on January 23 informing everyone that Pres. Obama would show a “feisty” side during the State of the Union. Translation: Pres. Obama showing impatient energy with Congress plus the proper camera framing and the midterm election commercial films itself.
2) Health Care is Linked to Financial Overhaul: If health care truly can’t get done in some form by the midterm elections, look for the White House to keep going back to those post Massachusetts election polls that show the economy and jobs to be voters’ paramount concerns with health care a distant third. That means the spotlight keeps on Senate Banking Cmte. Chmn. Dodd (by the way those “working groups” are very active this week doing meetings on the next draft of the Dodd finance reform bill). The irony is that the two populist proposals pushed by the White House are not at the crux of the current legislation. The question Wall Street should be asking itself is – in some ways does this help us? Does the administration focus their two populist issues and relax on others? Or is this a harbinger of the overall push for Democrats (and thus extra White House pressure on Chmn. Dodd who is in a personal position to compromise with Republicans given that he no longer faces re-election). We suspect that the White House is realistic enough to understand Chmn. Dodd has to compromise with Republicans in order to get finance reform done. Thus, we wouldn’t not be shocked to see a very modified Consumer Financial Protection Agency and curtailing of the Federal Reserve’s scope (but not without some internecine Democratic fighting). And speaking of Fed. Chmn. Ben Bernanke and the Fed…
3) Bernanke: We’ve been pointing out for a long time that his re-confirmation hearings were held late and his term is up come January 31st. The latest statements from the White House and Capitol Hill indicate he will likely be reappointed (although nothing is for sure given that Sen. John McCain (R-AZ) has come out against him (1/25), and in some ways he is a beneficiary of the State of the Union sucking up the coverage oxygen this week by not making him a bigger story. Same goes for those testifying before Congress on AIG this week (noted below), and you could even say that for the budget numbers that will come from the Congressional Budget Office (CBO) this week (noted below). Speaking of those budget numbers…
4) Budget Numbers: The CBO numbers may get little play on the nightly news and newspaper front pages because of the State of the Union, but you bet Republicans will be scrutinizing them. And, if you check out our look ahead section you’ll note that Pres. Obama has to release his budget numbers very soon as well. That’s why we think Friday afternoon is an excellent candidate to drop the White House budget numbers amidst the follow up to the State of the Union. However, if they do come out Friday – it would likely be AFTER Pres. Obama addresses the House Republicans on their retreat. That’s our reading of the tea leaves.
MBA wannabes here’s WHY YOU CARE: We suggest the following strategy to cut through the clutter of news coverage: 1) Keep your focus on the second point we made above for the MBA readers – Capitol Hill reporters should have in the next week a sense of where health care is going, and thus the timing of finance reform, and 2) substantively look in the business pages for leaks as to the direction of the Senate Banking Cmte. “working groups” and where they are going on the next draft of the finance reform bill (although we bet you don’t see leaks on this before next week).
Here’s the week:
MONDAY 1/25
Economic Report: Natl. Assoc. of Realtors info on existing homes sales (for Dec.).
Earnings: Apple Inc. and Halliburton.
GM: GM to name permanent CEO.
Pres. Obama: Attends Middle Class Task Force meeting with VP Biden and Treas. Secy. Geithner. Also, hosts LA Lakers at the White House.
TUESDAY 1/26
Economic Reports: Case Shiller Home Price Index (for Nov.), Consumer Confidence (for Jan.), FHFA Home Price Index (for Nov.).
Earnings: DuPont, Johnson & Johnson, Verizon and Yahoo, Inc.
Pres. Obama: TBD.
Fed Watch: Federal Open Market Committee meeting (1/26-1/27).
Dem Leadership; House Maj. Leader Rep. Steny Hoyer (D-MD) at the National Press Club on Dem agenda.
IMF’s Econ. Outlook: The IMF holds a news conference on the global economic outlook (Washington, DC).
CBO Budget: The Congressional Budget Office releases a 2010 budget (followed by a press conference by CBO Dir. Douglas Elmendorf).
Senate Hearing: Senate Homeland Security and Governmental Affairs Cmte. on “Intelligence Reform: The Lessons and Implications of the Christmas Day Attack.”
WEDNESDAY 1/27
Economic Reports: Mortgage Bankers Assoc’s weekly mortgage application info and New Home Sales (for Dec.).
Earnings: BlackRock, Inc.; Caterpillar, Inc.; ConocoPhillips; E*TRADE Financial Corp.; The Boeing Company; and The McClatchy Company.
Pres. Obama: Pres. Obama’s State of the Union.
Fed Watch: Federal Open Market Committee meeting (1/26-1/27).
TARP Oversight Panel: TARP’s Congressional Oversight Panel holds a field hearing (Atlanta, GA) on commercial real estate. Witnesses include: Fed’s Assoc. Dir. of the Division of Banking Supervision.
House Hearing: House Oversight and Govt. Reform Cmte. holds a hearing on the NY Fed Reserve Bank and AIG. Witnesses include: Treas. Secy. Timothy Geithner and TARP Special Inspector General Nail Barofsky, NY Fed General Counsel Thomas Baxter and Fmr. AIG CFO Elias Habayeb.
House Hearing: House Budget Cmte. on economic outlook and the budget.
House Hearing: House Financial Services Cmte’s International Monetary Policy and Trade Panel on “The State of Global Microfinance: How Public and Private Funds Can Effectively Promote Financial Inclusion for All.”
House Hearing: House Homeland Security Cmte. on “Flight 253: Learning Lessons from an Averted Tragedy.”
SEC: Securities and Exchange Commission to meet on (among other items) money market funds.
World Economic Forum: Davos, Switzerland 1/27-1/31.
THURSDAY 1/28
Economic Report: Initial Unemployment Claims (for 1/23).
Earnings: 3M Company; Altria Group, Inc.; Amazon.com, Inc.; AT&T; Bristol-Myers Squibb; Colgate-Palmolive; Ford Motor Company; Invesco Ltd.; Janus Capital Group Inc.; Lockheed Martin; Microsoft; Nokia; Procter & Gamble Company; and Time Warner Cable, Inc.
Pres. Obama: Event with VP Biden in Tampa, FL.
Bernanke: Senate expected to vote on his reconfirmation (otherwise his term expires 1/31/10). [Updated: 1/27].
FDIC: Federal Deposit Insurance Corporation Advisory Cmte. on Community Banking meets on community banks and capital.
Senate Hearing: Senate Budget Cmte. on economic outlook and the budget.
World Economic Forum: Davos, Switzerland 1/27-1/31.
FRIDAY 1/29
Earnings: Chevron.
Economic Report: Adjusted Fourth Quarter GDP.
FDIC: The FDIC holds a symposium on Interest Rate Risk Management. Attendees include: Fed Vice Chmn. Donald Kohn (speech on Focusing on Bank Institution Interest Rate Exposure).
Pres. Obama: To address GOP House retreat.
World Economic Forum: Davos, Switzerland 1/27-1/31.
LOOK AHEAD:
February 1st: Pres. Obama to submit his budget.
February 1st: Economic Report: Construction Spending.
February 2nd: Senate Banking Cmte. hearing on risk and banks with the President’s Economic Recovery Advisory Board Chmn. Paul Volcker. [Updated: 1/27].
