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Rail Strike Looms This Winter; Plus, the Most Polarizing Person in Washington

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Insights and Market Perspectives

Rail Strike Looms This Winter; Plus, the Most Polarizing Person in Washington

Author: Greg Valliere

November 22, 2022

THE THREAT OF A CRIPPLING RAIL STRIKE this winter suddenly has returned as a major wild card for the economy.

A KEY RAIL UNION narrowly rejected a contract yesterday that came close to passage in September after President Biden got involved with the talks. This latest snag raises the threat of a walkout beginning on Dec. 5, when current cooling off provisions expire.

A STRIKE in the heart of the holiday season could cost the economy $2 billion per day, according to most estimates, since it would cripple coal shipments, shut down most passenger service, and imperil agricultural traffic. Another major transportation player, the trucking industry, has been hit hard in recent weeks by soaring diesel fuel prices.

IT’S LIKELY — BUT FAR FROM CERTAIN — that Congress would intervene next month but lawmakers don’t return from the Thanksgiving break until Nov. 29, facing a full plate of budget issues.

YESTERDAY’S VOTE WAS CLOSE — one union endorsed the September deal, another union narrowly rejected it — so a settlement theoretically is within reach. But the unions bitterly oppose the industry’s sick leave policies and other non-salary benefits. The very generous salary portion of the deal is done.

THE PENDING DEAL would grant rail workers a 24% pay increase over five years, their biggest hike in 40 years. This includes an average of $16,000 in immediate back pay. The unions also would retain their platinum healthcare package with only a 15% premium contribution, the Wall Street Journal reports.

A DILEMMA FOR THE FED? A strike this winter could create a huge headache for the Federal Reserve; up to 700,000 workers in the rail industry and affiliated sectors could be out of work. Would this lead to a GDP growth slowdown, or an inflationary spike as the trucking industry hikes its fees? Either way, this could produce a most unwelcome start to the new year.

* * * * *

THE MOST POLARIZING PERSON IN WASHINGTON? High on the list is uber-regulator Gary Gensler, head of the Securities and Exchange Commission. A lengthy article in this morning’s Politico concludes that Wall Street and Republicans are preparing to litigate against his proposals, with some Democrats critical that Gensler may lighten up on the financial services industry.

THE SEC IS PURSUING new rules that would force companies to disclose their carbon “footprints,” and Gensler wants to fundamentally revamp the stock market’s inner workings, starting with much greater transparency. He has long warned about crypto currencies, and the collapse of FTX may focus — ironically — on why he hasn’t cracked down more aggressively against the industry.

GENSLER’S DETRACTORS ON WALL STREET are preparing to sue him for over-reaching his authority, while House Republicans plan hearings next year designed to drum up support for cutting the SEC’s budget.

THE POLITICO ARTICLE — too lengthy to summarize here — is definitely worth reading, because regulatory policy will be in the limelight next year. As for Gensler, he reminds us of our favorite cliché: if you want a friend in Washington, get a dog.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2023 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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