Category: Economy

Analysis of the global economy

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ASX: Rate cuts not helping

From David Scutt at SMH:

A growing body of evidence suggests interest rate cuts from the Reserve Bank of Australia may be draining confidence in the economy rather than boosting it.

Key Purchasing Managers Index (PMI) figures released on Thursday showed a deterioration in Australian business conditions, impacted by what firms are describing as a general lack of confidence across the economy.

The Commonwealth Bank’s Australia “flash” Composite PMI produced in conjunction with IHS Markit, fell 2.6 points to 49.5 in August.

Commonwealth Bank Markit Flash PMI

The Composite PMI surveys firms from manufacturing and services sectors, accounting for around 75 per cent of the Australian economy. Activity levels have only declined three times since the survey started in May 2016, the last time in March this year.

“Households are taking the lower cash rate as a negative sign, raising concerns about what is happening with the economy that we need interest rates to go even lower,” said Kristina Clifton, senior economist at the Commonwealth Bank.

Ms Clifton cited the ongoing trade dispute between the United States and China, the RBA’s rate cuts, and the drought as factors hurting confidence. “Businesses are feeling this pessimism,” she said.

The decline in the PMI data echoes a similar slump in consumer confidence in the wake of the RBA’s July rate cut, which took the cash rate down to 1 per cent. “That lines up with what we’ve seen in [consumer confidence] where we saw quite a sharp drop following the June and July rate cuts” Ms Clifton said.

The Westpac-Melbourne Institute consumer sentiment survey fell to its the lowest level since August 2017 that month. Confidence subsequently recovered in August following the RBA’s decision to keep the cash rate steady.

Westpac Melbourne Institute Consumer Sentiment

Consumer sentiment is trending lower but there is also a recent series of higher troughs. Breakout from the triangle will indicate future direction.

On the downside, new vehicle sales for July 2019 fell for the 16th straight month.

Vehicle Sales

New vehicle sales are a leading indicator for the economy. Automotive Holding Group (AHG) is normally a useful bellwether for the overall ASX 200 index but its latest rally is distorted by a proposed merger with rival AP Eagers (APE).

AHG/ASX 200

The consumer outlook (below) is bearish, with family finances for the next 12 months down 6.5% (YoY) and the next 5 years down 5.3%. But one factor has definitely improved with the latest rate cuts: time to buy a dwelling (YoY) is up 16.7%.

Westpac Melbourne Institute Consumer Survey

Improving sentiment towards housing and rising auction clearance rates, albeit on low volumes, has helped banks, with ASX 200 Financials index finding support at 6000.

ASX 200 Financials

But UBS warn that further interest rate cuts would squeeze bank interest margins and may force them to cut dividends.

Australia: Bank Net Interest Margins

And a major threat is the potential cutback in business investment, because of the uncertain global outlook, and its impact on employment and consumer sentiment.

Australia: Business Investment

Iron ore is edging below support at $94/tonne, suggesting another decline to test support at $80/tonne.

Iron Ore

Materials are undergoing a strong correction. Declining Money Flow peaks warn of strong selling pressure. Breach of support at 12700 is likely and would warn of a test of primary support at 10700/11000.

ASX 200 Materials

On a more positive note, REITs are enjoying strong buying pressure, signaled by Money Flow troughs above zero, as the scramble for yield intensifies. Breakout above 1700 would signal another advance.

ASX 200 REITs

With a bearish outlook in its two largest sectors, the ASX 200 is likely to follow. A harami consolidation above support at 6350/6400 is bearish and breach would warn of a strong decline.

ASX 200

With the uncertain impact of a trade war on the Chinese economy, we reduced our exposure to Australian equities to 20% of portfolio value on 19 August 2019.

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Approaching stall speed

With 89.7% of companies having reported, S&P are projecting 4.4% earnings growth for June quarter 2019 compared to the second quarter in 2018. Even more interesting is their projection of 3.4% growth for the September quarter. With EPS growth boosted by a stock buyback yield of 3.5%, this warns that the economy is close to stall speed.

S&P 500 Earnings per share Forecast

The daily chart for the S&P 500 shows support at 2830/2840, while a higher trough on 21-Day Money Flow indicates (secondary) buying pressure. I expect another test of resistance at 3030; breakout above resistance at 2940 would confirm.

S&P 500

But divergence on 13-Week Money Flow, as on the Nasdaq 100 below, warns of longer-term selling pressure.

Nasdaq 100

Small-cap stocks, as depicted by the Russell 2000 ETF below, are not enjoying the same support as large caps. A sign of rising risk aversion.

Russell 2000 ETF

Bellwether transport stock Fedex is testing primary support at 150. Breach would warn of a primary decline, suggesting a slow-down in activity for the broad economy.

Fedex

We maintain a bearish outlook on the global economy and maintain less than 50% exposure to US and International equities. Our view is that probability of a US recession in the next 6 to 12 months is as high as 70% to 80%.

We expect stocks to rally for another attempt at the 3020/3030 high for the S&P 500 and will use opportunity to further reduce our exposure to equities.

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Trump: This is going to hurt me more than it hurts you

The chart below depicts container traffic at the Port of Los Angeles, the largest volume US container port. Loaded inbound containers (blue), measured in twenty foot units or TEUs, have far exceeded loaded outbound units (red) for a number of years. What is noteworthy is that the ratio of loaded outbound to inbound containers has deteriorated from 48% to 38% over the last 6 years.

Port of Los Angeles Container Traffic

Imposition of tariffs has not reversed this. In fact the opposite. Stats for July 2019 show an 8.7% increase in inbound traffic and a 4.0% decrease in outbound traffic, while the ratio of inbound to outbound containers fell to a new low of 34%.

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Recession ahead

There are clear signs of trouble on the horizon.

10-Year Treasury yields plunged to near record lows this month as investors fled stocks for the safety of bonds.

10-Year Treasury Yield

The Federal deficit is widening — unusual for this late in the cycle as Liz Ann Sonders points out. We are being prepared for the impact of a trade war: pressure the Fed to cut rates and raise the deficit to goose stocks.

Federal Deficit

Gold surges as Chinese flee the falling Yuan.

Spot Gold

Commodity prices fall in anticipation of a global recession.

DJ-UBS Commodity Index

Are we there yet? Not quite. The Philadelphia Fed Leading Index is still above 1% (June 2019). A fall below 1% normally precedes a US recession.

Leading Index

Volatility (Twiggs 21-day) for the S&P 500 is rising, as it usually does ahead of a market down-turn, but has not yet formed a trough above 1% — normally a red flag ahead of a market top.

S&P 500 Volatility

And annual payroll growth is still at 1.5%. This is the canary in the coal mine. A fall below 1% (from its 2015 peak) would warn that the US is close to recession.

Payroll Growth and FFR

What to watch out for:

  • Falling commodity prices below primary support (DJ-UBS at 75) will warn that the trade war is starting to bite;
  • Falling employment growth, below 1%, would signal that the US economy is affected; and
  • September is a particularly volatile time of the year, when fund managers clean up their balance sheets for the quarter-end, with a history of heavy market falls in October as cash holdings rise.

I tell my clients to sell into the rallies. Don’t wait for the market to fall. Rather get out too early than too late.

Of course I cannot guarantee that there will be a recession this year, but there are plenty of warning signs that we are in for a big one soon.

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S&P 500: Treasuries reflect flight to safety

10-Year Treasury yields plunged below 2.0% on Donald Trump’s announcement of further tariffs (10% on $300bn) on China. The fall reflects rising demand for Treasuries as a safe haven in these turbulent times.

10-Year Treasury Yield

The spread between 10-Year and 3-Month Treasuries recovered above zero. This is a bearish sign: recession normally follows the recovery and not the initial inversion.

10-Year 3-Month Treasury Spread

The S&P 500 retreated below 3000 on Trump’s announcement, strengthening the bearish divergence signal on Twiggs Money Flow which warns of a correction. A test of support at 2750 is likely.

S&P 500

The Russell 2000 ETF (IWM) is expected to test primary support at 145. Small cap stocks have lagged the S&P 500 this year, highlighting risk aversion.

Russell 2000 Small Caps Index

Dow Jones Euro Stoxx 600, reflecting large cap stocks in the European Union, is similarly headed for a test of primary support at 365. Strong bearish divergence on the Trend Index warns of a reversal.

DJ Euro Stoxx 600

Falling commodity prices reflect market concerns for the global economy. A Nymex Light Crude breach of $51/barrel would signal a primary down-trend. Declining peaks on the Trend Index warn of selling pressure.

Nymex Light Crude

The DJ-UBS Commodity Index is similarly headed for a test of support at 75. Breach would signal a primary down-trend. A peak near zero on the Trend Index warns of strong selling pressure.

DJ-UBS Commodity Index

Dr Copper, often used as a barometer of the global economy, has breached primary support at 5800, signaling a decline. Again, a Trend Index peak below zero warns of strong selling pressure.

Copper

Employment stats for July have improved slightly, with Average Hourly Wages growth easing to 3.3% (Total Private).

Average Hourly Wage

And annual payroll growth ticked up to 1.5%

Employment Growth & FFR

But weekly hours worked are declining, warning that real GDP will decline further, after printing 2.3% for the second quarter.

Real GDP & Weekly Hours Worked

I have warned my clients to cut exposure to the market. It’s a good time to be cautious.

“Price is what you pay; value is what you get.”

~ Benjamin Graham

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Australian banks: Still overpriced

Summary

We have just completed a review of Australia’s four major banks — Commonwealth, Westpac, ANZ and NAB — and conclude that they are collectively overpriced by 23.5 percent. Our review is based on APRA’s quarterly reports, where the four banks can be viewed as a collective unit.

The ASX 300 Banks Index ($XBAK) is in a primary down-trend and we expect it to re-test support at 7000.

We estimate forward PE at 17.2. Allowing a 20% margin of safety — for increases in capital and risks associated with under-performing assets — we calculate a combined fair value of $310.7 billion, compared to current market cap of $406.1 bn, based on a 13-year payback period.

Our conclusion is to wait for $XBAK to re-test support at 7000.

Future Growth

Total assets are the base which generates most bank revenue. Heady growth of the last two decades is unlikely to continue. Growth in total assets has lagged GDP since 2015. Private credit growth for Australia slowed to 4.4% in FY18 and 3.3% in FY19.

Majors: Total Assets to Nominal GDP

Private borrowers are near saturation point, with household debt at an eye-watering 190% of disposable income.

Australia: Household Debt to Disposable Income

David Ellis at Morningstar writes:

Many investors are concerned about a potential sharp downturn or crash in the Australian housing market. While Australian housing is expensive and debt/household income ratios are high, we remain comfortable for several reasons despite recent weakness in house prices. Tight underwriting standards, lender’s mortgage insurance, low average loan/valuation ratios, a high incidence of loan prepayment, full recourse lending, a high proportion of variable rate home loans, and the scope for interest-rate cuts by the Reserve Bank of Australia, or RBA, combine to mitigate potential losses from mortgage lending. Average house prices in Australia are falling, with the national average declining 5% during the 12 months to end December 2018 based on CoreLogic data. But investors who readily compare the Australian residential real estate market to that of the U.S. and other markets are ignoring fundamental differences.

The counter-argument is that loose lending policies exposed by the Royal Commission, vulnerable mortgage insurers with concentrated exposure in a single sector and low bank capital ratios have created a banking sector “more likely to act as an accelerant in a down-turn rather than a shock absorber” in the words of FSI Chair David Murray.

Nominal GDP is growing at an annual rate of 5.0% (March 2019) and we expect this to act as a constraint on book growth. We project long-term book growth of 4.0%.

Margins

Net interest margins declined to 1.73% for Q1 2019 and we expect a long-term average of 1.70%.

Majors: Income & Expenses

Expenses declined to 1.10% of average total assets but non-interest income has fallen a lot faster, to 0.60%. The decline in non-interest income is expected to continue and we project a long-term average of 0.50%.

Fees & Commissions

Fees and commissions — the major component of non-interest income — have suffered the largest falls, with transaction-based fees the worst performer. Lending-based fees are likely to be impacted by declining credit growth.

Majors: Fees & Commissions

Expenses

Operating expenses have also fallen but sticky personnel costs are declining at a slower rate.

Majors: Expenses

Non-Performing Assets

Charges for bad and doubtful debts remain low but we expect an up-tick in the next few years and project a long-term average of 0.20%.

Majors: Provisions for Bad & Doubtful Debts

Capital

Common equity Tier 1 capital (CET1) remains low, with a CET1 capital ratio of 10.7% in March 2019, based on risk-weighted assets. If we calculate CET1 as a percentage of total assets, the ratio falls to 4.9%. Leverage ratios, which calculate CET1 against total credit exposure, are even lower because of off-balance sheet exposure.

The Reserve Bank of New Zealand has asked the big four Australian banks for “more skin in the game” and to increase their capital holdings in New Zealand subsidiaries by $12 billion:

The RBNZ proposal calls for systemically important banks to hold a minimum of 16% Tier 1 capital against risk-weighted assets, of which 6% would be a regulatory minimum and 10% would act as a counter-cyclical buffer to absorb losses without triggering “resolution or failure options”.

The move by RBNZ has exposed ineffectual supervision of major banks in Australia. A new chairman at APRA could see increased pressure on Australian banks to improve their capital ratios.

Management & Culture

Australian regulator APRA is suffering from regulatory capture. There have been calls in Parliament and the media for APRA chairman, Wayne Byers, to resign after the Royal Commission revealed numerous shortcomings in bank culture and supervision.

A 146-page capability review, stemming from David Murray’s Financial System Inquiry found APRA “slow, opaque, inefficient, and in urgent need of a culture and leadership overhaul.”

Clancy Yeates at SMH weighs in:

A rare public intervention from banking royal commissioner Kenneth Hayne could be aimed at ensuring his recommendations are not watered down by financial sector lobbying, former watchdog Allan Fels says….

“It’s very unusual for a royal commissioner, especially a former High Court judge, to speak after a report, but probably he is concerned about weak implementation of his report due to enormous pressure from the financial institutions, an enormously powerful lobby.”

There have been several recent changes at major banks whose poor conduct was exposed by the Royal Commission. NAB CEO Andrew Thorburn and Chair Ken Henry resigned in the wake of the findings. Earlier, in 2018 Ian Narev resigned as CEO of Commonwealth after an APRA investigation into money-laundering found there was “a complacent culture, dismissive of regulators, [and] an ineffective board that lacked zeal and failed to provide oversight.”

A change at the head of APRA could have even more long-lasting consequences for the banks.

Valuation

We project:

  • long-term asset growth at 4.0% p.a.;
  • net interest margins at 1.7% of average total assets;
  • non-interest operating income of 0.5%;
  • operating expenses at 1.1%;
  • provisions for bad/doubtful debts averaging 0.2%; and
  • a 30% tax rate.

That delivers a forward PE of 17.2. Allowing a 20% margin of safety — for increases in capital and risks associated with under-performing assets — we arrive at a combined fair value of $310.7 billion (current market cap is $406.1 bn) based on a 13-year payback period.

Technical Analysis

The ASX 300 Banks index, dominated by the big four, reflects a primary down-trend. The recent rally is currently testing resistance at the descending trendline. Reversal below 7000 would warn of another decline. The previous false break below 7000 suggests strong support.

ASX 300 Banks Index

Conclusion

Expect another test of support at 7000. Respect of support would provide an entry point at close to fair value.

Valuations are sensitive to assumptions: LT book growth of 5% and a 0.1% increase in net profit (% of average total assets) would increase intrinsic value to $387.4 bn (4.6% below current prices). At present we favor a conservative fair value of $310.7 billion, 23.5% below current market capitalization.

We currently have no exposure to the four major banks in our Australian Growth portfolio.

Disclosure

Staff of The Patient Investor may directly or indirectly own shares in the above companies.

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Rate cuts and buybacks – the emperor’s new clothes

The interest rate outlook is softening, with Fed chairman Jerome Powell hinting at rate cuts in his Wednesday testimony to Congress:

“Our baseline outlook is for economic growth to remain solid, labor markets to remain strong and inflation to move back over time.”
but…. “Uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies and that weakness could affect the US economy.”

Stephen Bartholomeusz at The Sydney Morning Herald comments:

“Perhaps the most disturbing aspect of the Fed shifting into an easing cycle before there is strong evidence to warrant it, is economies already stuck in high debt and low growth environments will be forced even deeper into the kind of policies that in Japan have produced more than 30 years of economic winter with no apparent escape route.”

If the Fed moves too early they could further damage global growth, with long-term consequences for US stocks. But markets are salivating at the anticipated sugar hit from lower rates. Stocks surged in response to Powell’s speech, with the S&P 500 breaking resistance at 3000. A rising Trend Index indicates buying pressure.

S&P 500

The argument for higher stock prices is that lower interest rates may stave off a recession. The chart below shows how recessions (gray bars) are normally preceded by rising interest rates (green) followed by sharp cuts when employment growth (blue) starts to fall.

Fed Funds Rate & Payroll Growth

Rate cuts themselves are not a recession warning, unless accompanied by declining employment growth. Otherwise, as in 1998 when there was minimal impact on employment, the economy may recover. Falling employment growth is, I believe, the most reliable recession warning. So far, the decline in growth has been modest but should be monitored closely.

Falling employment is why recessions tend to lag an inverted yield curve (negative 10-year minus 3-month Treasury yield spread) by up to 18 months. The negative yield curve is a reliable warning of recessions only because it reflects the Fed response to rising inflation and then falling employment.

Yield Spread

Valuations

A forward Price-Earnings ratio of 19.08 at the end of June 2019 warned that stocks are highly priced relative to forecast earnings. The forward PE  jumped to 19.55 by Friday — an even stronger warning.

S&P 500 Forward Price-Earnings Ratio

June 2019 trailing Price-Earnings ratio at 21.52 warned that stock prices are dangerously high when compared to the 1929 and 1987 peaks preceding major crashes. That has now jumped to 22.04.

S&P 500 Price-Earnings (based on highest trailing earnings)

The only factor that could support such a high earnings multiple is unusually strong earnings growth.

But real corporate earnings are declining. Corporate profits, before tax and adjusted for inflation, are below 2006 levels and falling. There are still exceptional stocks that show real growth but they are counter-balanced by negative real growth in other stocks.

Corporate Profits before tax adjusted for Inflation

Impossible, you may argue, given rising earnings for the S&P 500.

S&P 500 Earnings

There are three key differences that contribute to earnings per share growth for the S&P 500:

  1. Inflation;
  2. Taxes; and
  3. Stock Buybacks.

Inflation is fairly steady at 2.0%.

GDP Implicit Price Deflator & Core CPI

Quarterly tax rates declined from 25% in Q3 2017 to 13.22% in Q4 2018 (source: S&P Dow Jones Indices).

S&P 500 Quarterly Tax Rates

Stock buybacks are climbing. The buyback yield for the S&P 500 rose to 3.83% in Q4 2018 (source: S&P Dow Jones Indices).

S&P 500 Buyback Yield

The 2017 Tax Cuts and Jobs Act caused a surge in repatriation of offshore cash holdings — estimated at almost $3 trillion — by multinationals. And a corresponding increase in stock buybacks.

S&P 500 Buybacks, Dividends & Earnings

In summary, the 2018 surge in S&P 500 earnings is largely attributable to tax cuts and Q1 2019 is boosted by a surge in stock buybacks in the preceding quarter.

Buybacks plus dividends exceed current earnings and are unsustainable in the long run. When the buyback rate falls, and without further tax cuts, earnings growth is going to be hard to find. Like the emperor’s new clothes.

It’s a good time to be cautious.

“Only when the tide goes out do you discover who’s been swimming naked”.

~ Warren Buffett

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Still cautious

Inflationary pressures are easing, with average hourly earnings growth declining to 3.35% in June, for Production and Non-Supervisory Employees, and 3.14% for Total Private sector.

Average Wage Rates

But this warns that economic growth is slowing. Annual growth in hours worked has slowed to 1.25%, suggesting a similar decline in GDP growth for the second quarter.

Real GDP and Hours Worked

Jobs growth held steady at 1.5% for the 12 months ended June 2019, after a decline from 2.0% in January.

Payroll Growth

Further decline in jobs growth is likely in the months ahead and a fall below 1.0% would warn that recession is imminent.

The Case Shiller index warns that growth in housing prices is slowing.

Case Shiller Index

Growth in construction expenditure (adjusted for inflation) has stalled.

Construction Expenditure/CPI

Retail sales growth is faltering.

Retail Sales

Units of light vehicle sales has stalled.

Light Vehicle Sales

And capital goods orders (adjusted for inflation) are faltering.

Manufacturers Orders for Capital Goods

One of the few bright spots is corporate bond spreads — the difference between lowest investment grade (Baa) and equivalent Treasury yields — still low at 2.3%, indicating that credit risk is benign.

Corporate Bond spreads

The S&P 500 broke through 2950 and is testing 3000. The 3000 level is an important watershed, double the 2000 and 2007 highs at 1500 (1552 and 1576 to be exact), and I expect strong resistance.

S&P 500

A rising Trend Index indicates buying pressure but this seems to be mainly stock repurchases and institutional buying. Retail money, as indicated by investment flows into ETFs, favors fixed income over equities despite the low yields.

ETF Flows source: ETF.com

It’s still a good time to be cautious.

The prevailing wisdom is that markets are always right. I take the opposite position. I assume that markets are always wrong……I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.

~ George Soros

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S&P 500: Plan B

The S&P 500 is testing its all-time high at 2950. Bearish divergence on Twiggs Money Flow warns of secondary selling pressure. Respect of resistance is likely and would signal retracement to test support at 2750.

S&P 500

The 10-Year Treasury yield has fallen to 2.0%, indicating that the Fed is expected to cut interest rates in the second half of 2019.

10-Year Treasury yield

Stocks are still running on hope of a deal in the US-China trade dispute. Xi Jinping and Donald Trump will meet this weekend to discuss the way forward. Chinese preconditions for a trade agreement are likely to include the US lifting its ban on the sale of technology to telecommunications giant Huawei and removal of US tariffs on Chinese imports, according to The Wall St Journal. The US is unlikely to accede and chances of a deal are slim to nonexistent.

Trump doesn’t seem concerned: “My Plan B with China is to take in billions and billions of dollars a month and we’ll do less and less business with them……My plan B’s maybe my plan A.” (Bloomberg)

Plan B is the likely outcome, with a moderate impact on US corporate earnings and Fed rate cuts to keep the market on track. Risks rise while the potential upside declines. It’s a good time to be cautious.

We must recognize that as the dominant power in the world we have a special responsibility. In addition to protecting our national interests, we must take the leadership in protecting the common interests of humanity……There is no other country that can take the place of the United States in the foreseeable future. If the United States fails to provide the right kind of leadership our civilization may destroy itself. That is the unpleasant reality that confronts us.

~ George Soros: The Age of Fallibility

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Australia needs to break the downward spiral

Ross Gittins, Economics Editor at The Sydney Morning Herald, sums up Australia’s predicament:

“The problem is, the economy seems to be running out of puff because it’s caught in a vicious circle: private consumption and business investment can’t grow strongly because there’s no growth in real wages, but real wages will stay weak until stronger growth in consumption and investment gets them moving.

Policy has to break this cycle. But, as [RBA governor] Lowe now warns in every speech he gives, monetary policy (lower interest rates) isn’t still powerful enough to break it unaided. Rates are too close to zero, households are too heavily indebted, and it’s already clear that the cost of borrowing can’t be the reason business investment is a lot weaker than it should be.

That leaves the budget as the only other instrument available. The first stage of the tax cuts will help, but won’t be nearly enough…..”

Cutting already-low interest rates is unlikely to cure faltering consumption and business investment. Low wage growth and a deteriorating jobs market are root causes of the downward spiral and not much will change until these are addressed.

Low unemployment is misleading. Underemployment is growing. Trained barristers working as baristas may be an urban legend but there is an element of truth. The chart below shows underemployment in Australia as a percentage of total employment.

Australia: Underemployment % of Total Employment

How to halt the spiral

Tax cuts are an expensive sugar hit. The benefit does not last and may be frittered away in paying down personal debt or purchasing imported items like flat-screen TVs and smart phones. Tax cuts are also expensive because government is left with debt on its balance sheet and no assets to show for it.

Infrastructure spending can also be wasteful — like school halls and bridges to nowhere — but if chosen wisely can create productive assets that boost employment and build a healthy portfolio of income-producing assets to offset the debt incurred.

The RBA has already done as much as it can — and more than it should. Further rate cuts, or God forbid, quantitative easing, are not going to get us out of the present hole. What they will do is further distort price signals, leading to even greater malinvestment and damage to the long-term economy.

What the country needs is a long-term infrastructure plan with bipartisan support. Infrastructure should be a national priority. There is too much at stake for leadership to take a short-term focus, with an eye on the next election, rather than consensus-building around a long-term strategy with buy-in from both sides of the house.

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