Market Morning: PG&E Bankruptcy Trouble, Trade Deal, Costco Holiday List, Trump Financial Records

Stock Market Roundup

California Governor Rejects PG&E Restructuring Plan

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PG&E (NYSE:PCG) wants to restructure after bankruptcy, but California governor Gavin Newsom won’t allow it, at least under current proposals. He says that the monopoly’s proposals do not adequately meet the requirements of a new wildfire law. PG&E has until Tuesday to submit a new plan that Newsom likes. He wants major changes in the upper echelons of the utility, tougher safety enforcement, and less money paid in settlements. He said that the amount of money proposed to be spent on settlements with wildfire victims is too much and leaves it with “limited ability to withstand future financial and operational headwinds.” He continued, “In my judgment, the amended plan and the restructuring transactions do not result in a reorganized company positioned to provide safe, reliable and affordable service to its customers, as required by AB 1054.”

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PG&E disagrees. “We believe it does and is the best course forward for all stakeholders,” the company said. “We’ve welcomed feedback from all stakeholders throughout these proceedings and will continue to work diligently in the coming days to resolve any issues that may arise.”

Trade War Cools Off, For Now

The long-awaited phase 1 trade deal has been agreed upon and China is suspending additional tariffs that were to go into effect yesterday, December 15. US tariffs on China won’t get any worse, but the 25% tariff already in effect will remain as is. On China’s side, corn and wheat were going to see higher tariffs, as well as US-made cars and car parts. Those are now in the clear. Chinese tariffs already in place on US products will also remain as is, so the question is what exactly did the phase one trade deal accomplish besides giving President Trump an excuse to say he passed something? Nobody is quite sure.

There is supposedly some kind of a commitment to import $200 billion more in goods over 2 years than it imported in 2017. How China can assure this sort of thing is also a big question, since the Chinese government isn’t the things that is doing the importing. Unless Trump is asking Beijing to legally limit imports in China from other countries until a minimum has been imported from the US, but this seems a bit much. Trump is really excited though, or at least pretends to be on TV.

Mainstream Media Begins to Doubt Fed on Rates

“But what if the consensus is wrong?” asks CNN’s Matt Egan, in the wake of doubts from Dutch Bank Rabobank on the Fed’s self-proclaimed intention not to do anything with rates through 2020. After all, most banks and analysts and talking heads and hedge funds and all the rest of the finance community were pretty much saying back in early 2018 that rate hikes would continue throughout 2019. So much for that forecast. Neither did the Fed accurately predict the popping of the dot com bubble or the 2008 financial crisis. So why would they be right now about rates and the economy?

“The Fed thinks it has everything under control,” said Philip Marey, Rabobank’s senior US strategist, but he claims that the Fed will need to cut rates back down to zero before the end of next year. He disagrees with the Fed’s position that the US is in the middle of the credit cycle. He believes the US is at the end of the current cycle. “While the Fed is still convinced that they have made a mid-cycle adjustment, we think that it is more likely that we are late in the cycle.” Why there should even be a cycle, in that the very existence of the Fed is supposedly to end the cycle itself, he did not say. He predicts that the next rate cut towards zero will be in April. Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) don’t agree. Neither do fed funds futures traders. But that could change very quickly, as it did this year.

Costco Holiday Shopping List For Big Spenders Who Like Crazy Things

Mashed is out with a list of weird things you can get at Costco (NASDAQ:COST) if you have a lot of money to burn. How about a 72-pound wheel of Parmigiano Reggiano? It’s only $900, and it should last you through the apocalypse, assuming we can get the division of labor back up and running within, say, a year or so from societal collapse, at which point you’ll probably be out of cheese. If you’d like to have something to eat that isn’t as cheesy, you can get a $6,000 Doomsday kit with 600 cans of food weighing 1,800 pounds. The kit includes fruits, vegetables, grains, and other edible things that aren’t cheese. The cashier may look at you askance though, so be prepared to wrinkle a few eyebrows. On the plus side, you’ll have enough cans of food and cheese to outlast the zombie hordes. The kits aren’t always available, so they’ll probably be even less available in the event of an actual apocalypse. You can top off your 72 pounds of cheese and year’s supply of canned food with a $22 6.6lb tub of Nutella.

In the unlikely event that 72 pounds of cheese isn’t enough, or you find the variety in a single kind of cheese wanting, you can get a wedding cake made entirely of different kinds of cheeses. But you’ll have to assemble the layers in a stack yourself, or at least have your wedding planner do it.

Supreme Court to Hear Trump Financial Records Case

Three cases are coming to the Supreme Court about President Trump’s financial records, which he does not want released to the public. A decision is expected by the end of June. Trump is at a disadvantage here since he needs the court to reverse the rulings of three lower courts that require his accountants and two of his banks to hand over financial records to investigators. The Supreme Court has two Trump appointees on it, but since they are appointed for life they have no obvious incentive to rule in his favor. Trump is the first president in over 40 years to not make his tax records public. Trump’s attorneys argue presidential immunity.

One case is from the Manhattan district attorney’s office about how the Trump Organization accounted for money used to silence women who alleged affairs with Trump prior to the 2016 election. The second comes from the Democratic House Oversight Committee which alleges ethics violations. The third involves subpoenas of Deutsche Bank (NYSE:DB) and Capital One (NYSE:COF), the former of which may not continue to exist in its present form by the time rulings are expected in June.

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