This Week In The Market - June 25
Updated: Jul 20, 2021
Welcome back to "This Week In The Market," where we break down all of the latest market news in easy to read, easy to understand ways. Let's go!
Houston, We Have A Deal
The BFD: President Biden's agenda got a boost this week when he announced "we have a deal" late Thursday to a gawking White House press corps. The markets bounced on the news that a compromise between Senate Republicans and Democrats had been reached, and no one got anything they wanted, so that's great. Biden's original plan was north of $2 trillion dollars, and was immediately balked at by Republicans and now-most-powerful-person-in-the-world Democrat Joe Manchin. Eventually, over a table full of pizza, a deal seems to be reached with a mere $1.2 trillion sticker cost.
In Plain Speak: Deals like this used to be few and far between, but the past 16 COVID-fueled months have shown that the U.S government is willing to print as much money as possible to achieve its goals. The framework of this agreements includes $579 billion in new spending, but no one is quite sure how it'll get paid. Republicans are refusing to budge on any amendments to the 2017 tax reform bill, and Biden is refusing to raise gas taxes or electric vehicle user fees, so the budget they're using is...a mystery? Either way, the proposal includes:
$312 billion for transportation improvements, including roads, bridges, passenger and freight rail and public transit
$15 billion to electric vehicle infrastructure
$266 billion in nontransportation infrastructure
$73 billion for power
$65 billion for broadband
$55 billion for water
And it appears we need the hell out of this. InfrastructureReportCard.org scores America's overall infrastructure at a "C-." And while C's get degrees, a C in infrastructure equates to at least one water main break every two minutes and levees of unknown condition. Couple that with the ongoing clean water crisis in Flint, MI (remember that?), and this bill needs to be passed sooner rather than later.
How Can This Make Me Rich?: No one really thinks too hard about a bill like this once it leaves the news cycle, but someone has to actually do all this work. Companies like AECOM ($ACM), Vulcan Materials ($VMC) and REIT-community favorite American Tower Corporation ($AMT) all stand to gain from the increased government expenditure. Unemployed? When the unemployment benefits end on June 30, you'll be in luck! This act will also create a shitload of jobs to handle the increased workload, so get applying!
Weird Story of the Week
Your Roth IRA will never look like star venture capitalist Peter Thiel's. On Thursday, ProPublica ran a story claiming that Thiel used a series of sweetheart private equity deals and shrewd reinvestment to turn an initial investment of $2,000 in 1999 into over $5 billion in 2021. I wrote about the inequity of the accredited investor in Thursday's piece. The best part? If he waits to withdraw until 2027, it's all TAX FREE BABY.
Stock of the Week
Nike is kicking ass and taking names this week.
Everyone's favorite LeBron-adjacent apparel company exploded more than 14% on Friday thanks to its Thursday earnings call, single-handedly dragging the Dow up over 100 points. It's North American business jumped back to pre-pandemic levels, and growth in China has improved, despite boycott threats over the issue of forced labor. Quarterly revenue doubled Year over Year ($12.34 billion v $6.31 billion) and beat Street estimates by over $1 billion, thanks in big part to the overall strength of the iconic Jordan brand. CNBC also cited at least 12 brokerages that have raised their price targets based on the results of the earnings release (Note: price targets are 12 month per-share price goals that brokerages think a company can achieve based on fundamentals. Improvements in price targets tend to boost a stock in turn.)
How Can This Make Me Rich?: This should be an easy one. The dominance of athleisure has owned the apparel landscape for several years, and was only accelerated by the COVID pandemic when you could roll out of bed and get to work in your Nike shorts and Lululemon printed top. Despite more employees returning to physical offices, the athleisure movement shows no signs of slowing down, and Nike is riding the wave. Occasionally left for dead by retail and institutional investors alike thanks to the meteoric rise of Lululemon, Nike appears to be back in a big way and expanding internationally, providing a myriad of growth vectors for the home of the Jumpman.