December 21: Daily Contrarian Reads

Tax Reform And The Japanification of America

Even as Kevin Brady noted in our interview, when I discussed the “fiscal” side of the tax reform bill, without achieving accelerated rates of economic growth – “the debt will balloon.”.....The reality, of course, is that is exactly what will happen because there is absolutely NO historical evidence that cutting taxes, without offsetting cuts to spending, leads to stronger economic growth.

The Strzok Texts: FBI Plotted to Unseat Trump Before Election

We now have proof that the FBI was actively plotting a coup d’etat against President Trump even before he was elected.....When the smoke cleared, Russia-gate, the Mueller investigation, and what amounts to a regime-change operation of the sort the CIA pulled off in Chile, in 1973, and in Guatemala, in 1954, went into high gear. The goal: to obstruct the incoming Trump administration at every turn, and, in effect, achieve a condition of dual power despite the election results.

Zombie Corporations: 10% Of Companies Depend On Cheap Fed Money

Ten percent of corporations survive only because central banks have kept real interest rates negative. The BIS defines Zombie firms as those with a ratio of earnings before interest and taxes to interest expenses below one, with the firm aged 10 years or more. In simple terms, Zombies are those firms that could not survive without a flow of cheap financing. The above chart shows the median share of zombie firms across AU, BE, CA, CH, DE, DK, ES, FR, GB, IT, JP, NL, SE and US.

Why Rising Interest Rates Are Starting to Bite And Are Heading For Worse

The 2-year yield crossing over the S&P500 divie yield this past week for the first time in the last ten years is unlikely to slow the momentum driving risk markets. Nevertheless, they are getting closer to the zip code — after two years since the tightening cycle began — where they will begin to impact fundamental valuations (what is the fundamental value of Bitcoin?) and the relative pricing of risk assets. Keep it on your radar. Long-term rates are so utterly distorted by the central banks we are not sure if the markets even pay attention anymore. Pancaking of the yield curve? Not the signal it used to be.  Meh!

Red Ponzi "Growth" Story----Don't Look For A Happy Ending

These economists postulate that rising domestic demand coupled with continued growth as the global exporter will push both China and the global economy into high gear.  China suggests that it will achieve 6.5% annual GDP growth.  However, I'll briefly show why none of these outcomes is remotely likely.

The Darkest Hour

The Tax “Reform” bill working its way painfully out the digestive system of congress like a sigmoid fistula, ought to be re-named the US Asset-stripping Assistance Act of 2017, because that’s what is about to splatter the faces of the waiting public, most of whom won’t have a personal lobbyist / tax lawyer by their sides holding a protective tarpaulin during the climactic colonic burst of legislation.

Lessons Of The 2004 Foreign Tax Holiday-----94% of Return Cash Went to Shareholders, Not Investment Or Wages

Mr. Dharmapala co-authored a working paper for the National Bureau of Economic Research that found that after companies brought back cash during a tax holiday in 2004, they spent 79 cents of every dollar on share repurchases and 15 cents on dividends.

The Real Broadband Monopoly----Local Governments and Rights-of-Way Barriers

While popular arguments focus on supposed “monopolists” such as big cable companies, it’s government that’s really to blame. Companies can make life harder for their competitors, but strangling the competition takes government.... the real bottleneck isn’t incumbent providers of broadband, but incumbent providers of rights-of-way. These incumbents — the real monopolists — also have the final say on whether an ISP can build a network. They determine what hoops an ISP must jump through to get approval.

Albert Edwards Wars----Stocks As Bloated As Bitcoin

It takes guts to be a doomsayer when the majority is caught up in the euphoria of one of the most powerful stock market rallies in years. Yet, that has not deterred Albert Edwards, global strategist at Société Générale, from warning of a massive bubble in U.S. equities and likening it to the controversial bitcoin mania.

The National Security State And JFK, Part 2

We have examined the CIA’s regime-change operation in Guatemala in 1954 and its regime-change operation in Chile in 1973. Let’s now go to a year between those two operations. Let’s go to 1960, to the CIA’s regime-change operation in Cuba.

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