Thursday, March 23, 2017

Thursday, March 23, Morning Global Market Roundup: Asia Stocks Rise, But Gains For Dollar, Oil Capped By Jitters

By Nichola Saminather 
March 23, 2017

Asian stocks, taking some cues from a steady Wall Street, edged up on Thursday while the path for the dollar, which crawled up from a four-month low, remained clouded by concerns about the prospects for U.S. President Donald Trump's pro-growth agenda.

Sterling GBP=D3 was steady at $1.2483 following a decline of as much as 0.4 percent on Wednesday, after an attack close to Britain's Parliament left five people dead, including the attacker and a police officer, and injured 40. Police said they believed the attacker was inspired by Islamist-related terrorism.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.2 percent.

Japan's Nikkei .N225 was flat despite a weaker yen, as a political scandal dented investor sentiment. The subject is the relationship of Prime Minister Shinzo Abe and his wife with a Japanese nationalist education group that bought state-owned land at a fraction of its appraised price to build an elementary school.

China's CSI 300 .CSI300 gained 0.4 percent, while Hong Kong's Hang Seng .HSI added 0.1 percent.

Overnight, the Nasdaq .IXIC jumped 0.5 percent and the S&P 500 .SPX closed 0.2 percent higher, while the Dow Jones Industrial Average .DJI was flat, after all three touched their lowest levels in about five weeks earlier in the session.

The dollar advanced 0.3 percent to 111.44 yen JPY=D4, after dropping to 110.75, its lowest since Nov. 22 overnight.

The dollar index .DXY, which tracks the greenback against a basket of six trade-weighted peers, recovered about 0.1 percent to 99.81, after touching a seven-week low overnight.

Trump has been trying to rally support for his plan to repeal the 2010 Affordable Care Act, Democratic former President Barack Obama's signature healthcare legislation.

On Wednesday, Trump and Republican leaders of the House of Representatives said they were making progress in their efforts to win over conservative Republicans who have demanded changes to the legislation. They plan a vote on the bill, Trump's first major legislation since he took office, later on Thursday.

"The vote on Obamacare is a litmus test for Trump," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo. "If he can't push through the bill, it would further damage stocks. It also raises the risk of his other policies, like tax cuts, being delayed."

Investors in Asia are awaiting a rate decision from Taiwan's central bank, which is expected to remain on hold.

Following a more than 6 percent jump in the Taiwanese dollar, the central bank is asking some custodian banks to advise their clients not to remit new funds, two people with direct knowledge of the matter told Reuters on Wednesday.

The central bank said the reported comments "do not match the facts" but did not elaborate. On Thursday morning, the U.S. dollar slipped about 0.1 percent to 30.477 Taiwan dollars TWD=TP.

The New Zealand dollar NZD= was 0.1 percent lower at $0.7036 after the central bank held interest rates at a record low 1.75 percent, and reiterated it would remain there for a "considerable" period of time, citing global volatility and U.S. protectionism.

In commodities markets, oil prices rebounded, after touching their lowest level since November overnight on data that showed U.S. inventories, already at a record high, grew by far more than forecast.

Analysts said oil had found technical support and was being pushed up as traders took new long positions after the overnight low, but supply concerns kept the gains in check.

U.S. crude CLc1 added 0.7 percent to $48.38 a barrel on Thursday.

Global benchmark Brent LCOc1 climbed 0.6 percent to $50.96.

The dollar's recovery weighed on gold XAU=, which retreated 0.3 percent to $1,245.59 after hitting a three-week high overnight.

Article Link To Reuters:

Oil Bounces Off November Lows, But Bloated U.S. Stockpiles Pressure Market

By Henning Gloystein 
March 23, 2017

Oil prices recovered on Thursday from losses chalked up the session before, but the market remained under pressure as bloated U.S. crude inventories and rising output dampen OPEC-led efforts to curb global production.

Brent crude futures, the international benchmark for oil, were at $50.95 per barrel, up 31 cents, or 0.6 percent, from their last close. That came after Brent briefly dipped below $50 a barrel on Wednesday for the first time since November.

U.S. West Texas Intermediate (WTI) crude futures were up 35 cents, or 0.7 percent, at $48.39 a barrel, after testing support at $47 overnight.

Analysts said Brent had found technical support around $50 a barrel and was being pushed up as traders took new long positions after crude hit multi-month lows overnight.

Despite the bounce, traders said the market remained under pressure, largely due to a big U.S. inventory and doubts that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output was reining in a global fuel supply overhang.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said OPEC was "underwriting the investment plans and returns of their competition in U.S. shale oil."

McKenna said there was a risk of oil prices dropping further due to U.S. output and a lack of compliance by some producers who said they would cut production.

The Energy Information Administration (EIA) said U.S. inventories climbed almost 5 million barrels to a record 533.1 million last week, far outpacing forecasts of a 2.8 million-barrel build.

The high inventories come as U.S. oil production has risen over 8 percent since mid-2016 to more than 9.13 million barrels per day (bpd) to levels comparable in late 2014, when the oil market slump started.

There were also signs of a bloated market in Asia, where China's gasoline imports slumped while its refiners sent huge volumes overseas as they refine more fuel than the domestic market can absorb.

China's gasoline exports in February hit the second highest on record, up 76.6 percent over a year earlier at 1.06 million tonnes, data from the Chinese customs showed on Thursday. Diesel exports last month surged 66.7 percent on year at 1.32 million tonnes.

China imported just 7,245 tonnes of gasoline in February, tumbling 94 percent from the same period last year. Diesel imports dropped 52 percent from a year ago to 50,000 tonnes.

Article Link To Reuters:

Westinghouse's Clients Gear Up For Bankruptcy Fight

By Jessica DiNapoli
March 23, 2017

The U.S. utilities that are clients of Toshiba Corp's nuclear power plant construction subsidiary, Westinghouse Electric Co LLC, have hired advisers to prepare for its potential bankruptcy, according to people familiar with the matter.

The move comes as Toshiba sees Westinghouse's bankruptcy as increasingly likely. The Japanese conglomerate has hired restructuring consulting firm Berkeley Research Group LLC and law firm Skadden, Arps, Slate, Meagher & Flom LLP to help defend it against bankruptcy claims, the people said on Wednesday.

Scana Corp and Southern Co, the power utilities which hired Westinghouse to build the first nuclear power plants in the United States in more than 30 years, have also hired restructuring advisers, the people said.

This is because, in a potential Westinghouse bankruptcy, Scana and Southern Co would be among Westinghouse's largest creditors, owed the cost overruns on the projects, which tally in the billions of dollars, one of the people added. The utilities are hoping to recover these costs in a bankruptcy process for Westinghouse, according to the sources.

Scana has hired restructuring experts from advisory firm Ducera Partners LLC, while Southern Co is working with investment bank Rothschild & Co, the people said. Scana owns the South Carolina plant under construction, while Georgia Power, a subsidiary of Southern Co, will own plants in Georgia.

"Whether or not Westinghouse files for Chapter 11 (bankruptcy) is ultimately a decision for its board, and must take into account the various interests of all of its stakeholders, including Toshiba and its creditors," Toshiba said in a prepared statement. "It is not appropriate for Toshiba to comment prematurely."

The conglomerate has also said bankruptcy is one of several options for Westinghouse, which it acquired for $5.4 billion about 10 years ago.

The sources asked not to be identified because preparations for a potential Westinghouse bankruptcy are confidential.

"We're continuing to monitor the situation with Westinghouse and are prepared for any potential outcome," Georgia Power said in a prepared statement.

Spokespeople for Berkeley Research Group, Scana and Skadden did not immediately respond to requests for comment. Ducera and Rothschild declined to comment.

Toshiba has said it would take a $6.3 billion writedown related to Westinghouse, and gained an extension from Japanese regulators until April 11 to submit its latest quarterly financial results or face having its public shares delisted from the Tokyo Stock Exchange.

Reuters reported earlier this week that Westinghouse was reviewing proposals for a debtor-in-possession loan exceeding $500 million to help finance its potential bankruptcy. Westinghouse has already hired restructuring counsel, Reuters reported earlier this month.

Article Link To Reuters:

Wells Fargo Introduces Cardless ATMs Across U.S. In Digital Push

By Tina Bellon 
March 15, 2017

Starting on Monday, Wells Fargo & Co depositors can withdraw money using a smartphone at any branded ATM, the latest sign of U.S. lenders moving away from traditional brick-and-mortar banking.

Jonathan Velline, Wells Fargo's head of ATM and branch banking, said that the San Francisco-based bank decided to apply the smartphone technology to all of its 13,000 cash machines after piloting the idea in select locations across the country.

Bank of America Corp and JPMorgan Chase & Co are among the big banks that have announced digital upgrades to their ATM infrastructure, but Wells Fargo is the first U.S. bank to roll out cardless machines across its entire network.

The 20 million customers on Wells Fargo's mobile banking app will be able to request an eight-digit code to enter along with their personal identification code at an ATM to retrieve cash.

"The new feature allows customers to withdraw cash at any time, even when they don't have their cards on them," Velline said.

The new option will also improve protections against data theft, Velline said.

"Security certainly was a big aspect of the cardless feature and the two-step identification helps reduce the risk of fraud," Velline said, adding that the elimination of cards prevented so-called skimming techniques that criminals employ to read and store data of cards inserted into ATMs.

Wells Fargo, the third-largest U.S. bank, was once the envy of Wall Street, able to seemingly sell its customers a range of different products and highly regarded for its stock price which had once made it the world's most valuable bank.

But last year's revelations over a sales scandal that involved the creation of as many as 2.1 million fraudulent accounts in customers' names without their permission took a toll on the company.

The lender has since seen a sharp drop in the number of consumers opening checking and credit card accounts.

As have many other U.S. lenders over the last years, Wells Fargo has invested in the development of digital tools to attract customers and slash costs at its retail branches.

"Digitalizing services is unquestionably the way to the future and the arguments are very powerful, but U.S. banks are still far behind," said Gerard du Toit, a partner at consulting firm Bain & Company.

Accessible, well-designed digital offers not only provide a massive cost advantage, but also significantly improve customer loyalty, du Toit said.

Article Link To Reuters:

Why Cut An Agency That Makes Money?

By Daniel Mintz
The Bloomberg View
March 23, 2017

Caught in the crosswinds of President Donald Trump's aggressive budget-cutting is one program that Democrats and Republicans should both support. The Overseas Private Investment Corporation, the government's development-finance institution, is one of numerous agencies and programs set to be eliminated if Trump's proposed budget is enacted. But OPIC is a rare example of a profitable and lean federal agency -- one that actually reduces the budget deficit.

OPIC mobilizes private capital for emerging markets by providing debt financing, political risk insurance and support for investment funds. This boosts revenue and jobs at home, while encouraging development in poorer and potentially unstable countries. It also helps U.S. businesses mitigate risk by providing capital in areas where conventional financial institutions often are reluctant or unable to lend.

As part of our private-equity program, my investment firm, Olympus Capital Asia, has worked with OPIC for the past 20 years, under Democratic and Republican administrations, and I can testify that it is the opposite of "corporate welfare." In fact, the U.S. taxpayer has made about $20 million just from our business. This revenue comes from the fees we pay OPIC, which allow us to issue low-cost, long-term financing on qualifying investments.

We've worked with OPIC on 18 investments in local industries, including microfinance, consumer goods, and environmental and health-care services. These businesses have benefited emerging economies such as India, Thailand, Indonesia and the Philippines without replacing American jobs or disadvantaging U.S. companies, consistent with OPIC's strict requirements. With the agency's support, funds like ours have invested more than $5 billion in over 570 privately owned and managed companies in some 65 countries.

All this is done at no net cost to U.S. taxpayers. By charging market-based rates and premiums for its loans and insurance, OPIC has generated a $5.7 billion surplus since it was created in 1971 by President Richard Nixon. Last year, it brought in $263 million in revenue with a budget of only $63 million -- and with fewer than 300 employees.

So why involve the government in commercial activities such as investment, lending and insurance? Simple: Even though OPIC charges market rates and profits on its activities, its very presence in a transaction as a U.S. government-owned corporation helps to reduce risk, because companies in emerging markets know that their own governments will not want high-profile defaults on OPIC-linked projects.

Emerging markets can present unique challenges to businesses, so if an investment runs into trouble, OPIC can help find a solution, with its credibility and influence enhanced by the government's imprimatur. More than once, when we faced stressful circumstances in developing markets, we've benefitted from OPIC's help. The agency's historically low credit losses and insurance claims are testimony to its ability to reduce risk.

Olympus Capital's most recent OPIC investment is in a company that controls fast-growing microfinance businesses in India, Indonesia and the Philippines. Globally, 2 billion people lack access to formal financial services, and most of them live in emerging markets where banks generally don't make loans of less than $500. Micro loans -- primarily for income-producing assets such as livestock -- can help lift these people into the middle class. OPIC has profitably backed such programs throughout emerging markets.

Expanding financial access is a critical component of economic stability and growth, and thus strongly in the interests of U.S. foreign policy and national security. OPIC also requires that clients like us, and the companies we invest in, adhere to high environmental, social, legal and governance standards. For many companies receiving investment from OPIC-affiliated funds, these standards provide a roadmap for the best practices and responsible corporate behavior that the U.S. government has long sought to promote overseas.

I recognize the imperative to cut government waste and overreach. But this administration, packed with successful business leaders, should appreciate a public-private partnership that leverages the business sector to boost overseas development and achieve significant foreign-policy goals -- all while earning high returns for taxpayers.

Americans are divided at home, and the image and influence of their government faces challenges abroad. We have enough real problems without creating new ones for the sake of symbolic budget cuts. OPIC doesn't just benefit taxpayers. It projects core American values to the developing world. And that's something that can't be measured in dollars alone.

Article Link To The Bloomberg View:

Two Important Things To Remember As The Stock Market Starts To Stumble

‘No surprise the mood has gone more than a little bit risk off’

By Shawn Langlois
March 23, 2017

The stock market on Tuesday endured its biggest decline since October, and plucky dip-buyers didn’t exactly trip over themselves to partake in any sort of rebound on the Dow DJIA, -0.03% in Wednesday’s limp session. So, is this it? Are we finally witnessing the dying of the bull and the breakdown of the “Trump trade?”

To those prone to fits of jitters, it’s starting to feel that way.

“Markets are waking up to the reality of the Trump hangover, which is going to mean a renewed focus on all the complacencies we’ve let build up in recent months,” writes Mint Partners strategist Bill Blain in his “Morning Porridge” note. “No surprise the mood has gone more than a little bit risk off.”

What’s an investor to do? Blain offered up two simple but important (and, really, often overlooked) rules to keep in mind as nerves begin to fray.

1) “It’s better to miss the last 5% of a rally than catch the first 20% of a market crash.”
This is the investing version of “it’s better to be safe than sorry.” Of course, timing the market is a bit of a fool’s errand so while this rule, in theory, is spot on, trying to execute it properly can be a bruising endeavor.

2) “Markets always overreact.” This is the mantra that’s been so successfully executed by dip-buyers during the course of this bull market. In other words, the silver lining in any correction is the froth it takes out of the market and the buying opportunities it delivers. Just keep some powder dry.

Looking ahead, the key to this market surviving any sizable dips, Blain says, lies in the corridors of power. “It strikes me a renewed rally in stocks also needs to be underlaid by deliverables from Trump,” he said. “Keep a close eye on Washington to see what we actually get approved and done in coming weeks.”

Of course, it’s not all about Trump.

Blain also went into a breathless list of things the market has been ignoring during its record-breaking stretch, including, but not limited to: “Expectations and sentiment wibbles, overbought stocks, the long term consequences of QE, the rise of protectionism, dollar wobbles, credit bubbles, and rising inflation vs. bond markets. Overlay that with the political issues: Europe (in all its multihued wonder), the U.K. and Brexit, China and Russia.”

No wonder there’s so much pessimism wafting over stocks this morning.

Article Link To MarketWatch:

Fed Research Signals Inflation Overshoot Possible, But Is It Tolerable?

By Howard Schneider
March 23, 2017

The Federal Reserve has begun preparing the public and markets for higher inflation, but has left unanswered the question of how high inflation might go and for how long?

A new research paper from economists at the Fed's Washington-based Board of Governors suggests that policymakers should allow prices to rise by around 3.0 percent annually during periods of high economic growth, so that the long-run average annual target of 2.0 percent inflation is achieved after several years of lower inflation.

"Achieving an inflation target of 2.0 percent hinges on policymakers pursuing inflation levels that are notably above 2.0 percent," when the economy is recovering, board economists Michael Kiley and John Roberts wrote in a paper presented Thursday at the Brookings Institution.

Keeping interest rates low while inflation spikes, presumably with output and wages also rising above potential, would "make up" for the accumulated effects of the long downturn in growth and inflation in the past decade.

Fed staff research does not necessarily reflect the views of board members or directly impact policy, but in this case it is relevant to an ongoing debate over how the Fed should react as inflation nears the central bank's target.

The personal consumption expenditure index, the Fed's preferred inflation measure, has averaged just 1.6 percent over the last decade, prompting some support for a period of higher inflation in hopes that wages and interest rates may rise as well.

Fed Chair Janet Yellen last week, and a group of regional reserve bank presidents this week, signaled the Fed would not try to halt inflation at 2.0 percent, but only shift gears if above-target prices rises appear "persistent."

"Two percent is not a ceiling," Chicago Federal Reserve bank president Charles Evans said in New York this week. "If you always worry about spending time above 2.0 percent, that’s smelling and tasting and looking like a ceiling – and I think that’s something you have to actively fight.”

The papers on inflation and other topics, prepared by top Fed and other economists for an annual Brookings research conference, showed that even as economic conditions become more normal the Fed is continuing with a deep re-evaluation of economic conditions following the 2007-2009 financial crisis.

The papers outlined the likely persistence of slow economic growth in an aging society, countering the notion that a faster economy is just a tax cut away, and the likelihood that global interest rates will remain lower than usual for a long time to come.

In the current Fed debate, acceptance of 3.0 percent inflation is unlikely. The 2.0 percent goal is a global norm for central banks, a recognition that a modest but steady rise in prices is actually healthy for the economy overall.

Prices that rise too fast can trigger a public outcry, and may risk changing household and business psychology in a way that fuels even faster price increases and which can be hard to tame.

However the Fed did change its policy language slightly, but significantly, last week when it said that the 2.0 percent annual inflation target was "symmetric." After years of low inflation, officials said, an overshoot will not lead them to change course and raise interest rates faster than the "gradual" path they currently intend.

Under current Fed forecasts, that means interest rates will remain low enough to encourage borrowing and spending for perhaps three more years as the Fed slowly climbs back to a "neutral" interest rate estimated at around 3.0 percent.

In an economy that is near or below full employment, wages should rise as firms compete for workers, one of the possible benefits of a "hot" economy that Yellen last fall suggested researchers should try to analyze.

Policymakers have not set a path for how "hot" the economy might be allowed to run, but Minneapolis Fed President Neel Kashkari, in a public Twitter conversation this week, said an extended inflation overshoot of 2.3 percent would be tolerable "if we really believe 2 percent is a target."

Article Link To Reuters:

How Sears CEO Lampert Cashes In As Stores Cash Out

By Nathan Bomey
March 23, 2017

Eddie Lampert, the press-shy CEO, chairman and largest shareholder of Sears Holdings, may be all that's standing between the beleaguered department store chain and bankruptcy.

The conventional wisdom is that Lampert will suffer massive losses if Sears perishes, since he has pumped hundreds of millions from his personal fortune into the company. And while there's no question he has a lot at stake, a closer look suggests that the billionaire investor has shielded some of his investment from annihilation in the event of Sears' demise.

Through a series of transactions over the last several years, Lampert has extracted significant value from Sears and may secure additional assets if the company goes belly up, according to public filings and interviews.

Sears, which operates both the Sears and Kmart chains, is teetering, having failed to reinvent itself under Lampert's leadership in the digital age. After a recent $900 million sale of its Craftsman brand, store closures and other cost cuts, Sears warned late Tuesday that there's "substantial doubt" that it will survive.

Lampert owns about 48% of Sears stock, according to the company's annual report, including holdings through his hedge fund, ESL Investments. Besides his stock, Lampert holds about $381 million in unsecured notes issued to Sears. Those holdings could be obliterated in bankruptcy.

USA TODAY estimates that the value of Lampert's Sears stock has declined by roughly $519 million since the end of 2014. That estimate was derived by calculating the value of his Sear's holdings at the end of each year since 2010, using Sears closing stock price for the year and the number of shares Lampert owned at the time, culled from S&P Global Market Intelligence data. Using that methodology, the highest year-end value of Lampert's Sears holdings was $760.3 million.

But Lampert won't lose it all.

"If they go bankrupt, he remains in control of the company because, though he loses his equity stake, he's their principal creditor," former Sears Canada CEO and Columbia Business School Professor Mark Cohen said an interview. But Lampert has cordoned "off an enormous amount of assets through the loans he's made, which have essentially protected him from what is eventually (going to) occur."

He has spun off divisions, provided secured financing in exchange for real estate collateral and transferring valuable properties to an investment trust, all while retaining ownership stakes in those assets.

Here's how Lampert has retained assets even as Sears has shriveled:

•Lands' End: Sears spun off retailer Lands' End in 2014, but Lampert's hedge fund owns 59% of the company. That stake was worth nearly $360 million as of Wednesday morning.

•Real estate:
Sears sold 235 store properties and its interest in another 31 properties to a newly formed real estate investment trust (REIT) called Seritage Growth Properties for $2.7 billion in 2015. The deal gave Seritage control of some of Sears' best properties in a sale-leaseback transaction. Lampert's ESL owns 43.5% of the limited partnership units of Seritage and 7.9% of the REIT's voting power.

The move was similar to transactions favored by investors in legacy retailers whose real estate is considered more valuable than their actual business.

The problem is that "then you end up signing leases" and saddling the company with lease liabilities, said Neil Stern, senior partner at retail consulting firm McMillanDoolittle.

Sears agreed to pay Seritage $134 million in annual base rent for the first year, with 2% annually increases beginning in the second year.

•Real estate collateral:
Entities affiliated with Lampert's hedge fund extended $500 million in credit to Sears in January, secured by at least 46 Sears properties and possibly more. That means that in the event of bankruptcy, the lender may be awarded the property rights, giving Lampert control of those store sites.

•Additional secured financing:
ESL lenders provided Sears up to $500 million through a secured letter of credit facility in December, from which Sears has already drawn $200 million. ESL lenders also hold $336 million in secured debt issued to Sears in April through a separate facility and term loan, as well as $300 million in a second lien term loan issued in September. Secured lenders are paid first in bankruptcy.

•Sears Canada:
Sears partially spun off its Canadian division in 2012, but Lampert's ESL owns about 45% of the company. That stake was worth nearly $80 million as of Wednesday morning.

•Sears Hometown and Outlet Stores:
Sears spun off the franchise in 2012, but ESL retains 57% ownership of the company. That stake was worth about $45 million as of Wednesday morning.

Also, Sears Hometown and Outlet Stores still acquires "a significant amount of its merchandise" from its former parent company "at cost," according to a filing.

Sears Holdings also provides certain logistics, warehousing, human resources, information technology and transportation costs to Sears Hometown and Outlet Stores, which is invoiced weekly and also pays its former parent royalties on sales of certain brands.

•Paid-off financing: Affiliates of ESL and another Sears investor, Fairholme, made a $400 million short-term loan to Sears in 2014 that has already been paid back in full.

Corporate filings reveal that Lampert, who disclosed in a corporate filng that he owns all of ESL and makes all of its investment decisions, has made moves to protect his position.

"Financially he's moved a lot of levers that have kept this company going longer than some of us thought it could," Stern said. But with "some of those levers you're setting the furniture on fire to keep the house alive."

Sears did not respond to a request for an interview with Lampert, who rarely speaks to the press.

Lampert has insisted that Sears has a path to viability, despite analysts predicting the company's demise. He has steered the company into a new loyalty program called Shop Your Way, approved store closures, authorized a supply chain overhaul and announced cost cuts.

"I firmly believe we will succeed in becoming a new kind of retailer as we provide real value to members with value offerings, personalized services and easy access to the brands, convenience and value they want, whenever and wherever they want," Lampert said March 9 in a letter.

The company, however, hasn't been shy about noting that Lampert's financial prospects may be different than those of the average investor.

"Affiliates of our Chairman and Chief Executive Officer, whose interests may be different than your interests, exert substantial influence over our Company," Sears told investors Tuesday in the public filing.

Article Link To CNBC:

Trump Tantrum Looms On Wall Street If Healthcare Effort Stalls

By Megan Davies and Rodrigo Campos
March 23, 2017

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration's healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.

Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell.

"If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades," said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.

U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump's healthcare proposal scheduled in the House of Representatives.

On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill.

Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it.

Any hint of further trouble for Trump's agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners.

“The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP," Wien said. "Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable."

Strategists have been cautioning for weeks that markets are pricing in a scenario where nothing goes wrong with Trump's agenda. Investors are paying $18.10 for every dollar in earnings expected on the S&P 500 over the next 12 months, near the most expensive U.S. stocks have been since 2004.

"This is really about the fact that the market is pricing in too much certainty on a number of accounts," said Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS Securities. "Even if you got the positive vote, there's still the residual knowledge that the agenda will be difficult to get through the Senate."

While investors and strategists have said they do not see an immediate threat to the eight-year-old bull market, there is a risk of a 5-to-10 percent drop. Only a bear market -a 20 percent decline- would put an end to the bull.

"It looked like a mini tantrum," said David Kotok, chief investment officer of Cumberland Advisors. "Trump has made the House vote his own now so he has a lot at stake. My guess it will pass the House. If not, markets will be shocked and it won't be pleasant."

Michael Arone, chief investment strategist at the US SPDR Business at State Street Global Advisors in New York said that it the healthcare bill fails, "a correction of 5 percent is not unreasonable given how far we’ve come in such a short period of time."

Focus On Legislation

Investors are now more focused on the actual mechanics of the legislative process, said Brian Daingerfield, Macro Strategist at NatWest Markets.

"I noticed this was the first day (on Tuesday) I was getting inquiries about the healthcare law and the vote count," Daingerfield said. Wall Street views the healthcare vote "as a test of Trump's ability to unify the party," he said. "It has a symbolic significance."

After the healthcare bill, the market will look for movement on tax and infrastructure. The president has said he wants the health bill passed by the mid-April Easter holiday and a schedule from the administration aims for tax reform being passed by August. Only then will they begin to tackle infrastructure spending.

"U.S. equities have been priced for perfection since the start of 2017 and (Tuesday) was a rude reminder that the legislative process is imperfect on even its best days," said in a research note Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York.

Article Link To Reuters:

Trump’s Misplaced Priorities Imperil His Economic Agenda

By Barry Ritholtz
The Bloomberg View
March 23, 2017

Let’s begin by stating the obvious: My priorities are different than yours or Paul Ryan’s or the president’s. We all have a different agenda, motivated by different issues. Sometimes finance dominates our wish list; other times it’s family. We are motivated by self-interest, by philosophical or ideological goals, and a wealth of other factors.

Readers of this column are a self-selected group. If you are reading this, you very likely have capital at risk in a variety of investments. You are more likely to have higher-than-average levels of education, income and professional standing. Which leads me to this claim: President Donald Trump is on the verge of endangering what for readers is the most significant aspect of his entire agenda -- a once-in-a-generation opportunity to accomplish tax reform. It is an issue of great significance with lasting repercussions.

Full disclosure: I did not support candidate Trump, either during the Republican nomination process or the general election, due to his positions on social issues (hear my conversation with Mike Murphy, Right to Rise co-founder and Jeb Bush’s campaign adviser). I find myself in agreement, however, on a significant portion of Trump’s economic, tax and infrastructure positions. I suspect that many readers of these pages find themselves supporting those positions as well.

As we discussed last month, the Trump administration’s combination “of a corporate tax overhaul, repatriation of overseas profits and individual tax reform” is an economically powerful set of policy tools. Include a $1 trillion-plus infrastructure plan, and you have a path for future growth better than the 1 percent to 2 percent of the post-financial-crisis recovery period.

The White House has been bumbling and unfocused, filled with infighting and leaks, unable to manage even the most basic functions of governing. Perhaps the bigger concern is that its priorities are inverted. Getting tax reform done should have been job No. 1, and the failure to do that first could be problematic for Trump’s entire agenda.

Had you asked me Nov. 9 what the odds were of his economic agenda being accomplished, given the single-party control of the federal government, I would have laid odds at 96 percent. The ham-handed, poorly planned rollout of the travel ban lowered that to 88 percent. The latest incompetent action has been an attempt to replace the Affordable Care Act with something hated by both conservatives and liberals, sending that down to 75 percent. Perhaps the biggest self-inflicted wound has been the foolish tweet claiming former President Barack Obama “had my ‘wires tapped’ in Trump Tower.” It called into question the president’s seriousness about governing.

Or are the allegations of the Trump campaign’s ties to Russia bigger? No doubt it was a colossal miscalculation that Federal Bureau of Investigation Director James Comey’s congressional testimony would back up Trump’s claims that his campaign had no such ties and that no investigations were under way. Comey didn’t, and the list of the campaign’s alleged ties to Vladimir Putin’s Russia is growing longer. The appearance of this much smoke is leading many to accept there must be a fire. This -- plus Comey’s damning testimony -- has caused me to lower my odds of Trump’s full economic agenda being realized to barely over 50 percent. Effectively, it’s a coin toss.

It is a rare day indeed when both the Wall Street Journal and New York Times make an issue of the president’s credibility, and how his near-pathological lying is imperiling his agenda -- indeed, his entire presidency.

Thus, as we approach the 100-day mark, the promised pivot toward becoming “presidential” is nowhere to be found. Instead, we see the entire economic agenda -- much of which was supported by those on both sides of the aisle -- now in danger. The 2017 tax cuts are now being pushed out to 2018. Assume the same for corporate tax reform. What that means for overseas profits repatriation and an infrastructure buildout is similarly up in the air.

This no longer looks like a stumble out of the gate, but rather something more significant. The window for comprehensive tax reform is still open -- but it is slowly beginning to close.

Without a major win this week, the White House should go back to the drawing board and introduce legislation it can actually pass. The policy prescription of tax reform, overseas profit repatriation and infrastructure is what this president badly needs. Let’s hope he figures it out in time.

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Kim Jong Un May Be Behind Biggest Bank Heist In History

By Kevin Dugan
The New York Post
March 23, 2017

The man behind the biggest bank heist in history may have been Kim Jong-un.

Federal prosecutors are preparing to finger North Korea for orchestrating the theft of $81 million from the Bangladesh central bank’s account at the Federal Reserve Bank of New York last year, according to a report.

The Justice Department is zeroing in on Chinese thieves under the direction of North Korea, with charges that they hacked Bangladesh’s central bank and swiped millions from its account held at the New York Fed, according to the Wall Street Journal.

The money was then transferred to banks in the Philippines and laundered through casinos, according to the reported allegations. While some of it has been recovered, much of it is still lost to prosecutors.

The hackers reportedly pulled off the heist by exploiting shoddy controls at the Bangladesh bank, the New York Fed and SWIFT, a money-transferring system that has come under attack by hackers the world over.

It’s unclear whether the Justice Department will file charges against North Korean officials, according to the WSJ report.

Spokepersons for Justice and the New York Fed didn’t return requests for comment.

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The Real Lesson From The London Attack: Perfect Counterterrorism Is Impossible

No amount of resources can stop a single human being from doing something destructive to other human beings.

By Daniel R. DePetris
The National Interest
March 23, 2017

The grounds surrounding the Palace of Westminster are some of the most iconic in all of London. Tourists from around the world flock to the area on a daily basis, knowing that deep inside Westminster, members of Parliament are duking it out and shouting at one another with their distinguished British accents.

That wasn’t the situation today. The streets and yards that are normally bustling with people were on complete lockdown by London’s Metropolitan Police. A car, zooming at high speed on Westminster Bridge, rammed into a crowd of pedestrians before the driver jumped out of the vehicle and started stabbing police officers near the parliamentary complex. Police eventually shot the assailant to death, but not before at least three people were killed and twenty others were injured. Convinced this was far more than a random rampage with no discernible motive, Scotland Yard decided to treat the incident as a terrorist attack.

There are still a lot of aspects to this story that we don’t know. Was the attacker directed by Islamic State operatives in Syria to carry out this attack? Is the suspect a returnee from Syria? Was this another case of a lone-wolf sympathizer urged on or inspired by the group’s propaganda to take matters into his own hands, but without any further guidance? Are there any accomplices in London that helped the attacker carry out his operation? Did UK intelligence officers have any inclination whatsoever that something like this was going to happen? We don't know the answers to any of these questions.

Yet we do know one thing, and it’s incredibly distressing from the standpoint of Western counterterrorism services and the people who live under their protection: terrorism like this is impossible to prevent.

No amount of resources, manpower, intellectual brilliance, intelligence relationships with foreign counterparts, or sophisticated technology can stop a single human being from doing something destructive to other human beings. The needle-in-the-haystack metaphor is one used all too often nowadays, but on this particular problem, it’s an apt metaphor to repeat: discovering and disrupting one evil individual from millions of law-abiding people before he or she decides to launch an attack is about as easy as interdicting every pound of cocaine coming across the U.S.-Mexico border. Even the most professional intelligence services and police departments in the world—and GCHQ and Scotland Yard are undoubtedly included in that club—can’t be right all of the time.

On this, President George W. Bush was absolutely correct: “Those who want to do harm only have to be right one time, and we have to be right 100 percent of the time.”

The problem is that the global counterterrorism community isn’t composed of a bunch of robots, but instead of imperfect human beings who do the best they can with the budgets and personnel they have. Clues get missed, and perpetrators who are planning attacks hide among their fellow citizens before striking at the last moment. And when an attack is successful, Western governments are quick to cast aspersions on the intelligence community for getting it wrong, labeling them incompetent or derelict in their duty to keep the country safe. We’re told that they failed to “connect the dots.”

The attack today in London shows quite vividly that this entire cycle is misguided. Whether we like it or not, terrorism is a part of national life. The fact that the Islamic State’s caliphate in Iraq and Syria is on its way to destruction means that we in the West are very likely to see more of the stabbings, shootings and vehicular attacks that France, Germany, Belgium, Britain and the United States have experienced over the last year. It’s up to the intelligence community and counterterrorism professionals to snuff out what they can. And it’s up to political leaders around the world to keep the terrorist threat in perspective.

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London Attack Reminds May That Security Ties Must Survive Brexit

U.K. shouldn’t lose intelligence sharing with EU, experts say; Germany and France among nations expressing solidarity.

By Jeremy Hodges
March 23, 2017

Prime Minister Theresa May was given a sharp reminder of the security threat she shares with the European allies she’s about to divorce.

The worst terror attack on British soil since 2005 took place a week before she triggers Brexit and a year after the deadly bombings on Brussels. It was a tragedy that was unleashed at the heart of Britain’s seat of power.

Expressions of solidarity and offers of help flooded in from the European Union governments May will be engaging in complex and probably acrimonious negotiations on how to decouple after more than 40 years together.

But for the woman who until eight months ago was in charge of keeping the country safe, the incident serves as a powerful argument to try and conserve a key aspect of EU cooperation in light of the interdependence of security services and terror plots across European capitals, from Paris to Berlin.

“In the year since the Brussels attacks, the threat level in the EU has only risen,” the Soufan Group said in a statement earlier Wednesday.

Many foreign fighters from the EU have traveled to Iraq and Syria and an unknown number have returned. That means “the challenge facing European security and intelligence services is enormous,” according to the private consultancy.

The U.K. gave an indication it knows that already. On Tuesday, it joined the U.S. in banning electronic devices on flights from six Middle Eastern countries. The reason given was that terror groups such as Islamic State and al-Qaeda could hide a bomb in things like a laptop.

Senior security officials and police have stressed to lawmakers that the U.K.’s ability to share intelligence must not be hampered by the Brexit process.

The U.K. does have intelligence sharing agreements with country’s outside of the EU including "Five Eyes" an alliance that comprises the U.S, Australia, Canada and New Zealand that could act as a template for any future agreements with European countries.

“Britain boasts an impressive security and intelligence apparatus and one that others actively want to share information with,” said Brian Painter, managing director of security and risk specialist Discreet Help. “I don’t think Brexit will have any effect on this.”

Across Borders

The U.K. is a member of Europol, which helps police crime across borders, and is a signatory to the European Arrest Warrant system in which EU members transfer people sought by another. EU countries also share data on air passengers and information on suspects.

Before the London attack, both the Center for European Reform and former Deputy Prime Minister Nick Clegg issued warnings.

The CER said Britain can’t be a member of the European Arrest Warrant if not a member of the EU while Clegg said the EU will only share data under certain safeguards. He said that failure to secure a transitional deal would see the U.K. tumble out of the existing justice and home-affairs measures in early 2019.

“The police would find their access to European databases cut off, and would no longer be able to use the Schengen Information System to quickly check the identity of suspects or their vehicles, or to pass on the details of missing persons,” Clegg said in December.

Home Secretary Amber Rudd said earlier this month that it was a “priority” for the U.K. to keep the warrant. The government’s white paper on Brexit said it plans to “continue our deep cooperation with the EU and its member states” on security and terrorism.

Walk Away?

Still, EU officials are urging the bloc to prepare for the U.K. to walk away from Brexit talks without a deal on any form of cooperation.

Six hours after the the first shots were reported at 14:40 p.m., May addressed the nation wearing black to say the terrorist threat would stay unchanged at its second highest level since August 2014. Until now, the country had managed to stave off the mass-casualty attacks seen in Germany, Brussels and Paris over the past two years.

But privately, security officials have said for some time that it was matter of when, not if, a terrorist attack would happen on British soil. British authorities have thwarted 13 attacks over the past four years, police said. Over an 18-month period in 2015-16 they were also arresting people on suspected terror charges at an average rate of one a day.

Merkel’s Solidarity

Tensions over Brexit negotiations were put to one side in the aftermath of the attack as European leaders made statements of solidarity and condolences.

Chancellor Angela Merkel said that while the causes of the London incident remained unclear, “for Germany and its citizens, in the fight against terrorism in all its forms, we stand solidly and resolutely by Great Britain’s side.”

And as news emerged that three French students were among those injured, Interior Minister Matthias Fekl said that France too stood ready to help “a beacon of democracy.”

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Whatever Replaces Obamacare Will Look A Lot Like Obamacare

The legislation that replaces the ACA’s tapestry of subsidies, regulations, and mandates will probably be a tapestry of subsidies, regulations, and mandates.

By George Will 
The National Review
March 23, 2017

‘Mend it, don’t end it” was Bill Clinton’s rhetorical straddle regarding affirmative action. Republican efforts to “repeal and replace” the Affordable Care Act (Obamacare) look increasingly like “mend it, don’t end it.”

The problem is not that, as is frequently said, no entitlement can be ended. The most consequential legislation of the 1990s, the 1996 welfare reform, repealed a portion of the 1935 Social Security Act, which, through Aid to Families with Dependent Children, conferred a lifetime entitlement to welfare. Perhaps entitlements for the middle class are immortal. We shall see, as Social Security and Medicare as currently configured approach insolvency.

Meanwhile, Republicans who repeatedly voted to repeal the ACA — before voters gave them congressional majorities and a president who would sign a repeal — now must replace it. They must do so in conditions that have changed since, and partly because of, the ACA.

It is unknowable whether Barack Obama produced an American consensus in favor of a government obligation to guarantee universal access to health insurance, or whether the debate surrounding the ACA merely catalyzed a gradually forming consensus. In any case, today’s debate about replacing the ACA is occurring in the context of that consensus. And in the context of several other new beliefs: Health insurance should not be denied because of an applicant’s pre-existing medical conditions. And federal law should provide a refundable tax-credit entitlement, and require that children up to age 26 be eligible for coverage under their parents’ insurance.

Furthermore, Republicans are insufficiently radical as they largely accept this third-party-payer system that distorts decisions about recourse to the health-care system: Upward of 180 million Americans are covered by employer-provided insurance, which is not taxed as what it obviously is — compensation. Republicans have abandoned a measure to treat as taxable income a small portion of the most generous employer-provided insurance plans, and have postponed for nearly a decade — meaning, probably, forever — the “Cadillac tax” on such plans.

Given all this, it is probable that whatever replaces the ACA’s tapestry of subsidies, regulations, and mandates will be a tapestry of subsidies, regulations, and mandates. The differences probably will constitute substantial improvements but will hardly constitute a revolution in the relation of the citizen, or the health-care sector, to the government.

Today, this sector is one-sixth of the American economy and larger than all but four national economies. It has been observed that if in 1900 America had had sophisticated national income statistics, the health-care sector would have been too negligible to notice: Most Americans then were born and died at home and rudimentary medicine was mostly for making sick persons as comfortable as possible while nature healed or killed them.

As a subject of political contention, medicine’s importance has risen rapidly with its competence. In 1900, 37 percent of American deaths were from infectious diseases; today 2 percent are. Medicine has advanced from the conquest of infectious diseases to the management of chronic ailments. And to the center of American politics.

Legislative bargaining often is additive: Supporters of legislation A endorse legislation B so that its advocates will reciprocate by supporting A. By this process a coalition (and government) grows. However, congressional bargaining about replacing/mending the ACA might become an exercise in subtraction. The debate is making clear that the expansion of a 52-year-old program, Medicaid, is the most important aspect of the seven-year-old ACA. Twenty Republican senators represent states that expanded Medicaid and face budget agonies if the expansion is abruptly reversed. But many Republican representatives and senators believe it should be. Perhaps this is a difference that can be split. If not, adding the support of some legislators will subtract that of others.

A religious skeptic in 19th-century England proposed carving three words over the portals of all the nation’s churches: “Important if true.” These words should be affixed to the Congressional Budget Office’s projections about how many more people will be uninsured in 2026 under Speaker Paul Ryan’s replacement proposal (24 million) and the effect of it on the deficit (a $337 billion reduction over ten years).

Conservatives warn against the fatal conceit of thinking that one can predict the consequences of comprehensive government interventions in complex systems. Now many Republicans say they know the CBO is wrong, and that they can structure incentives to accomplish more skillfully, and with less-comprehensive health-care planning, what the ACA attempted. This confidence is important, whether or not it is true.

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GOP Health-Care Plan Hangs In Balance As Conservatives Demand Changes

By Mike DeBonis, Juliet Eilperin and David Weigel
The Washington Post
March 23, 2017

The Republican health-care overhaul spearheaded by House Speaker Paul D. Ryan (Wis.) and backed by President Trump hung in the balance Wednesday, as the White House signaled at the 11th hour a willingness to rework the measure to mollify conservatives.

After insisting for weeks that the changes sought by hard-right members would render the bill unable to pass the Senate, White House officials and GOP House leaders appeared to shift their thinking — and opponents agreed to keep working on a deal with the goal of holding a floor vote in the House by Thursday night.

Rep. Mark Meadows (R-N.C.), chairman of the conservative House Freedom Caucus, said he had taken personal calls Wednesday from Trump seeking a resolution, though he said no formal offer had been extended by the White House.

“We are working very diligently tonight to try and get there,” Meadows said Wednesday.

“The president has been profoundly engaged,” said Rep. Trent Franks (R-Ariz.). “I think things are going in a very good direction right now.”

Two weeks after introducing their bill to overhaul the Affordable Care Act to heated criticism, House Republicans unveiled amendments to the plan. Here’s what you need to know about the legislation and its changes. (Bastien Inzaurralde, Sarah Parnass, Jenny Starrs/The Washington Post)

More than two dozen House conservatives remained opposed or leaning against the effort to revise the Affordable Care Act, even as a handful of moderates decried the current proposal as harming the elderly and poor. Both the president and vice president made personal appeals throughout the day to secure the votes needed to pass the House.

Pence huddled with members of the Freedom Caucus in his Eisenhower Executive Office Building office early in the day, while Trump met with 18 House Republicans at the White House, but these efforts appeared to produce just one definitive aye vote from the conservative camp: Rep. Steve King (R-Iowa).

GOP leaders can afford only 22 defections, given that one Democrat is expected to be absent Thursday. A Freedom Caucus spokeswoman said that “more than 25” members of the group oppose the bill.

The day’s events laid bare party leaders’ struggle to muster enough votes for one of their defining goals: to roll back the 2010 health-care law that helped galvanize conservatives in the years since to wrest control of both the legislative and executive branches from Democrats.

If Republicans fail this initial test of their ability to govern, Trump and Capitol Hill Republicans may face a harder time advancing high-priority initiatives on infrastructure, tax reform and immigration. They might also find themselves navigating strained relationships among themselves.

For much of Wednesday, the Freedom Caucus’s message, spokeswoman Alyssa Farah tweeted, was: “start over.”

At the same time, four more Republican moderates — Reps. Charlie Dent (Pa.), Frank A. LoBiondo (N.J.), Daniel Donovan (N.Y.) and David Young (Iowa) — announced their opposition Wednesday, increasing pressure on leaders to win over the conservatives.

Ryan summoned more than a dozen members of the moderate Tuesday Group to his office late Wednesday evening in an apparent bid to curb further defections. One participant, who spoke on the condition of anonymity to describe the private meeting, said Ryan and other House leaders described the potential deal with the Freedom Caucus, which would strip essential health benefits but leave other ACA mandates, such as those dealing with pre-existing conditions and coverage of adult dependents, in place.

“People got to say their piece and react to the proposal. It’s safe to say people had concerns about stripping out essential health benefits, especially at this late hour,” the Tuesday Group member said. “I think they’re short [of votes], and I think they’re considerably short. . . . I’m not sure where all this goes tomorrow.”

Conservatives are seeking to eliminate more of the ACA’s insurance mandates, known as “essential benefits,” which require plans to cover specific medical benefits, such as mental health care, prescription drugs and preventive care. That, conservatives argue, is the only reliable way to force down premiums.

Ryan warned in an interview Wednesday with conservative radio host Hugh Hewitt that fulfilling those GOP demands would violate Senate budget rules and leave the bill vulnerable to a blockade by Democrats.

“Our whole thing is we don’t want to load up our bill in such a way that it doesn’t even get considered in the Senate,” the speaker said. “Then we’ve lost our one chance with this one tool we have.”

That stance appeared to shift late Wednesday, when separate aides in the White House and the House GOP leadership said a new interpretation of Senate rules had raised the possibility that acceding to the Freedom Caucus’s request might not threaten Senate consideration of the whole bill. But both aides said the provision could still be stripped out once the bill reaches the Senate.

Democratic Senate aides insisted that would be the case. “What the proponents aren’t telling conservative House Republicans is that the plan to repeal essential health benefits will almost certainly not be permissible under Senate reconciliation rules,” said Matt House, a spokesman for Senate Minority Leader Charles E. Schumer (D-N.Y.).

In fact, the new negotiations late Wednesday raised the possibility that the challenge would only grow at the other end of the Capitol. There are at least a dozen skeptics of the bill among Senate Republicans, who maintain a slim 52-to-48 advantage in the Senate, and many of them want to maintain some of the Affordable Care Act’s more generous spending components. Republicans can afford to lose the votes of only two senators, assuming Pence would step in to cast a vote for the health-care rewrite in the case of a tie.

In addition to conservatives, who do not think the proposal does nearly enough to undo the ACA, some moderates fear it will harm their constituents as well as their party’s prospects at the ballot box.

“We’re not there yet,” Meadows said Wednesday, “but we’re very optimistic that if we work around the clock between now and noon tomorrow that we’re going to be able to find some common ground. Tonight is an encouraging night, and yet I don’t want to be so optimistic to say that the deal is done, but I do think that there is a framework to work with our leadership and the leadership in the Senate and certainly the administration to find some common ground.”

He continued: “The overall impression of the Freedom Caucus is we’re willing to jump through unbelievable hurdles to hopefully get to a point where this bill is better for the American people.”

An additional potential hurdle facing the bill is the updated analysis still to come from the Congressional Budget Office, which will reflect changes to the measure that were issued on Monday. That analysis could be rendered inaccurate if further changes are made before the vote.

Earlier in the day, even as opposition appeared to persist, White House press secretary Sean Spicer told reporters that the measure would pass the House, adding that there is no Plan B if the proposal goes down.

“There is Plan A and Plan A,” said Spicer, who described Trump as “the closer” for the deal. “We’re going to get this done.”

Complications stemming from the bill’s last-minute tweaks appeared to add yet another political headache Wednesday, as veterans’ groups discovered that the latest draft might make them ineligible for a tax credit. A change made to ensure the measure would comply with Senate rules created a separate consequence — that individuals would qualify for the bill’s tax credits only if they “are not eligible” for other types of coverage, including those provided by Veterans Health Administration.

In an email, House Ways and Means Committee spokeswoman Lauren Aronson said the issue would be fixed in subsequent legislation. “This amendment makes no change to veterans’ health care. In working with the administration and the Veteran Affairs Committee, we will continue to ensure that America’s veterans have access to the best care available.”

Carlos Fuentes, legislative director for Veterans for Foreign Wars, said veterans want the issue resolved before any bill becomes law. “It would be a huge impact on veterans if this were not corrected,” he said.

In another example of last-minute changes, Illinois’ GOP delegation announced late Wednesday night that Centers for Medicare and Medicaid Services director Seema Verma had assured them that “Illinois will have the opportunity to accurately report its 2016 Medicaid payment information to CMS.” The state “has long been disadvantaged by below average Medicaid reimbursements,” the lawmakers said, and this adjustment will ensure that the state would receive more federal funds when the government shifts to allocating Medicaid dollars on a per-capita basis under the bill.

Elsewhere in the Capitol Wednesday, GOP leaders were working to clear the bill’s final procedural hurdle. House Rules Committee Chairman Pete Sessions (R-Tex.) said the measure would allow Americans “to make their own health-care decisions” and create the kind of competitive insurance market that will expand health-care coverage without excessive government mandates.

But Rep. Jim McGovern (D-Mass.) questioned why lawmakers would move it to the floor when the CBO had not yet issued a new analysis of the bill. Also unknown were the additional impacts on coverage and federal spending of the provisions still being negotiated on Wednesday.

“I don’t think we should be meeting on a bill when we don’t even know how many people it will hurt,” said McGovern, whose motion to adjourn was defeated by a vote of 7 to 2.

Trump made a public pitch for the measure Wednesday during a panel in the Roosevelt Room with Verma and female medical professionals.

When a reporter asked whether he would keep trying to overhaul the ACA if the House bill failed, the president replied, “We’ll see what happens.”

During the Rules Committee session Wednesday, Republicans acknowledged the legislation would undergo even more changes before it reaches Trump’s desk.

“This isn’t a once and forever bill, or vote, or anything of the kind,” said Rep. Tom Cole (R-Okla.). “What we do today isn’t going to be the final word.”

Many of the changes made to the bill so far were aimed at placating conservatives, including giving states the option to take a fixed Medicaid block grant and to impose work requirements on childless, able-bodied adults covered under the program. Others responded to broader concerns about the sufficiency of the tax credits offered to help Americans purchase insurance.

One revision was more narrowly targeted — added at the behest of a group of Republicans from Upstate New York who wanted to end their state’s practice of commandeering local tax revenue to fund state Medicaid benefits.

That concerned Donovan, who said a day after meeting with Trump in the Oval Office that he would oppose the bill.

In an op-ed for the Staten Island Advance, he said the change “gives our district short shrift” and also said the GOP bill would disproportionately harm older Americans.

“Seniors on fixed incomes would likely see a big jump in their healthcare expenses without a near-term reduction in premiums,” he wrote. “We can’t burden seniors who deserve better from us!”

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