The Obama Administration continues to march on American businesses,
and in the process all Americans, like Hannibal's single-minded determination when he crossed the Alps with elephants and unconventional warfare. The latest blow really hurt so much as to bring tears to one's eyes. The Environmental Protection Agency (EPA) declared yesterday that greenhouse gases are a threat to the public health and welfare of the American people. They further added "GHG emissions from on-road vehicles contribute to that threat." This is a serious shot across the bow of business and not just those big smokestack industries. Moreover, this now allows the Administration to circumvent Congress. Initial comments from the White House is that they would still prefer legislative action on the issue but it's clear they are wielding an axe and will probably use it with or without passage of cap and trade in the Senate.
Plants as small as 100,000 square feet and any kind of motor come under the new rules, and may have to be retrofitted. Although not official, the number being thrown around is it will cost $60.0 billion to be compliant with new rules for the road (and lawns as lawnmowers are also in the mix) and that money will come from you and me and anyone else that drives. Proponents say that the ultimate savings will be $250.0 billion, and I suspect they will get the CBO to corroborate that figure. The biggest financial burden will be on businesses that will be forced to fix plants or scrap them altogether and build new plants. It's going to be an all-out assault on businesses, which must feel like those lonely garrisons in northern Italy quaking in their boots as those elephants let out booming shrieks as they descended from the mountains.
Unleashing the EPA on the American public with a mandate to mow down anything and anyone is powerful stuff. It's so sinister, in fact that a leading climate change champion in the Democratic Party recoiled upon hearing the news. Congressman John Dingell (D-MI) is an architect of the 1970 revision of the Clean Air Act, but even he bristled at the news yesterday. He stated "the language contained in the American Clean Energy and Security Act of 2009 would better address this critical matter than the actions discussed by the EPA."
"I continue to make the case that the Supreme Court, in Massachusetts v. EPA, erroneously found that greenhouse gases are pollutants covered by the Clean Air Act. The Clean Air Act was not designed to regulate greenhouse gases, as the then-Chairman of the House Energy and Commerce Committee I know what was intended when we wrote the legislation. I have said from the beginning that such regulation will result in a glorious mess and regulation of greenhouse gas emissions should be left to Congress."
Of course, it's beginning to smell like good cop-bad cop (guess who the bad cop is) as Representative Dingell went on to state "I urge the Senate to set a rigorous schedule for their companion legislation." I think that Dingell and others understand the economic impact, especially in the part of the country known as the Rust Belt.
The news, like almost everything that comes out of the White House these days, was more to impress people outside the United States. The timing was perfectly placed ahead of the trip to Copenhagen, where something akin to letters of intent is the goal. But is it realistic that India and China are willing to live by a rigid timeline that would derail their economies? The longer this plays out the more likely it will be American businesses simply can't compete with foreign rivals. (Imagine if the wish list of mandatory union participation and higher corporate taxes are added to cap and trade...businesses would have to raise the white flag.) The EPA, created on May 2, 1971 to implement the Act, is going to be merciless. These acts are federal legislation designed to control air pollution, but now they are going to be used for a different kind of control.
Today, the President will outline his strategy for creating jobs. There is scuttlebutt that part of the plan will include using TARP funds. Many are already saying that it would be illegal, but law hasn't been as much as speed bump, so more than likely taxpayers will have to wait to get paid back and watch the redistribution of their earnings, again.
President Obama will give a speech outlining three initiatives to spark job creation but his team cautions it's not a "silver bullet." They're right; it's gimmicks, income redistribution, and deficit spending. The government doesn't know how to create jobs, and of course, they shouldn't be playing that game. Instead, they should establish a business-friendly environment that results in banks feeling emboldened to make loans and businesses feeling emboldened to hire employees. The President is focused on:
- Weatherization of homes
- Encouraging small businesses
- Transportation investments
I bet that there will be income restrictions on the weatherization program, and it's a farce. It's the kind of program only a community organizer would think was a smart job creator. The fact is if the President wanted to be radical he could say I'm wasting $150,000 on jobs supposedly created or saved and it would be smarter to send families $20,000 and retrain people to have new careers not just hammer in some insulation. Of course, the real way to create jobs is to get the hell out of the way.
Down for the ninth straight month, the consumer credit data from the Federal Reserve was actually better than expected. The Street was looking for a decrease of $9.4 billion but instead the total decline was $3.51 billion. September was also revised lower to $8.77 billion.
- Revolving (credit cards): -$6.95 billion
- Non-Revolving (autos): +$3.44 billion
Don't Forget to Vote Who Benefits Most From Being Americans
What do you think on the question of who enjoys the freedoms of America the most? Drop me a line (I've gotten great responses thus far many of which are posted on our website) or just cast your vote at wstreet.com.
A. Bum on park bench
C. The same
After the close of trading, FedEx (NYSE:FDX) issued upside guidance for the quarter as management now sees $1.10 per share, well above the range of $0.65 to $0.85 per share previously offered.
The Lull in the News is On
By: Brian Sozzi, Research Analyst
Every year the news flow surrounding holiday shopping seems to die a sick death between the time the season kicks off, Black Friday, and when it ultimately concludes, at the end of December (though the quarter for retailers ends in January, so in my world the season does not wrap up in December). As reporters shift focus to more intriguing stories, the fact is that consumers are out in the malls and outlets continuing to conduct commerce, or at the very least browse the racks and tables. And, then, when the final holiday season numbers are reported, by a seemingly endless array of independent research firms, there is usually shock and awe. In an attempt to keep the shopping season relevant, I used a rare day away from the office to conduct intelligence gathering at major malls and outlets in the NY area. There are a few major themes intact:
* If the deal is not there, the consumer is not buying. In line at a Macy's (NYSE:M) store, I proceeded to watch five customers take their six shirts apiece, ask the associate to scan the price (Macy's always give deals at the register), and then simply put the clothes back on the racks as there was only 25.0% off on each article. So, Macy's lost out on sales of 30 pieces of clothing, perhaps bringing in $1,200.
* Investment pieces in high-end luxury, such as handbags and watches, are selling at a brisk pace
Specific company observations
* Got to talk with some Macy's, Lord & Taylor, and Bloomingdale associates at the malls. Common theme is that they can't keep Coach (NYSE:COH) bags in stock, that along with Michael Kors (which came out of nowhere this season). I have seen very little discounting on Coach products at department stores as well, some stores none at all. The full price stores seem to be driving nice traffic.
* Common theme in the stores has been a strong build in winter coats, including those by Columbia Sportswear (NASDAQ:COLM). Markdowns have been pretty strong on most brands, ranging from 25.0% to 70% off.
We are spying the UUP as a play/hedge on the dollar and a temporary rebound. There is still time to watch before pulling the trigger as I think the dollar will resume lower especially if president uses TARP money as personal slush fund.