50 State AGs Are Pushing To Breakup Google’s Ad-Tech Dominance Alongside DOJ

50 State AGs Are Pushing To Breakup Google’s Ad-Tech Dominance Alongside DOJ

Tyler Durden

Sat, 06/06/2020 – 19:00

In what would be a monumental move — and we might ad good for independent media breaking the shackles of the mainstream’s ongoing attempts to police content and punish dissent — Google’s total dominance over online advertising could soon come to an end.

CNBC revealed Friday that no less than 50 sate attorneys general have been investigating Google’s business practices as part of a months long probe alongside a parallel DOJ effort, and momentum is gaining toward a looming major antitrust lawsuit against the internet giant.

Source: Ad Age

Leading the probe among the states is Texas Attorney General Ken Paxton, who did not comment in Friday’s CNBC report. Google, however, did respond, with a Google spokesperson rebutting with, “The facts are clear, our digital advertising products compete across a crowded industry with hundreds of rivals and technologies, and have helped lower costs for advertisers and consumers.”

President Trump has lately put big tech in the spotlight over allegations of targeted censorship of conservative content, lately signing an executive order which seeks to reduce liability protections of major internet companies like Twitter, Facebook, and Google.

Independent and alternative voices have also long complained of being demonetized or unfairly targeted for analysis and commentary falling outside of accepted ‘groupthink’. 

It remains that the bulk of Google’s some $161 billion in revenue comes via ad sales, with a far smaller amount coming through products the tech giant and its parent company Alphabet Inc. are traditionally known for: software and technology.

CNBC summarizes what’s at stake as follows

Critics have said that Google bundles its ad tools so that rivals can’t afford to match its offerings and that its operation of search results, YouTube, Gmail and other services to hinder ad competition. They also say that Google owns all sides of the “auction exchange” through which ads are sold and bought, giving it an unfair advantage. 

But a key legal obstacle the courts would have to consider is the fact that Google’s ad group doesn’t function as a stand alone business, but is made up of Google Ads, Google Marketing Platform, and Google Ad Manager.

* * *

A prior WSJ explainer walked through how Google ad dominance works in three charts:

Source: the company’s website, via WSJ

If said company wants advertise on third-party websites and apps:

And finally, if the airline wants to advertise on YouTube:


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Author: Tyler Durden


The Real Looters Are The Politicians

The Real Looters Are The Politicians

Tyler Durden

Sat, 06/06/2020 – 18:30

Authored by James Bovard via The American Institute for Economic Research,

The brutal killing of George Floyd by Minneapolis police spurred widespread protests which have been followed by looting in dozens of American cities. CNN’s Don Lemon compared looters who plundered Neiman Marcus and other upscale stores to those at the Boston Tea Party. But far more Americans likely agreed with Quinta Caylor, a black North Carolina nurse on Twitter, who denounced the looters who “THUGGED OUT in 1 day” businesses that owners had worked long and hard to build.  

There are not yet any solid estimates of the total damage from the looting and burning that has occurred in many cities across the nation. Total losses may range in the tens of millions of dollars or perhaps in the hundreds of millions of dollars. The pillaging has been especially ruinous to many small family-owned businesses, some of whom may not have insurance to cover their losses. 

Many cities have responded to violent rampages by imposing curfews and other severe restrictions on movement.

Many such edicts are remarkably similar to the “shelter-in-place” COVID dictates imposed by many state governments. While the city curfews are a reflexive response to rioting, the unprecedented state-wide quarantines appear to have had scant impact in curbing the contagion.

In Portland, Oregon, “rioters have broken into Portland’s main mall in downtown and began looting the Louis Vuitton. Youths ran out with designer bags. They shouted about expropriation,” as Andy Ngo tweeted.

But that state suffered far more from Gov. Kate Brown’s edict that banned residents from leaving their homes except for essential work, buying food, and other narrow exemptions, and also banned all recreational travel, even though much of the state had few if any COVID casesAlmost 400,000 Oregonians have lost their jobs after Brown’s shutdown. 

In Grand Rapids, Michigan, looters pillaged a shoe store and many other businesses.

But the damage they inflicted was not even pocket change compared to the wreckage produced by Gov. Gretchen Whitmer. She prohibited anyone from leaving their home to visit family or friends. Whitmer severely restricted what stores could sell; she prohibited purchasing seeds for spring planting in stores after she decreed that a “nonessential” activity (unlike buying state lottery tickets). Though COVID infections were concentrated in the Detroit metropolitan area, Whitmer shut down the entire state – including northern counties with near-zero infections and zero fatalities, boosting unemployment to 24% statewide

In Louisville, Kentucky, looters attacked the Omni Louisville Hotel and many other businesses. 

But that isn’t why the Bluegrass State has the nation’s highest unemployment rate – 33%. That is thanks to Gov. Andy Beshear’s shutdown order that paralyzed the state even though COVID’s impact in Kentucky “has not been worse than an average flu season,” according to Sen. Rand Paul. 

In the District of Columbia, looters pillaged an Apple Store. “I bet this is about the [COVID] contact tracing in the latest upgrade,” quipped one wag on Twitter.

But Washington Mayor Muriel Bowser has inflicted vastly more damage on the city with a lockdown order that helped destroy almost 100,000 jobs. 

In Richmond, Virginia, looters pillaged many black-owned small businesses as well as torching the headquarters of the United Daughters of the Confederacy. 

Local damage is far outweighed by Gov. Ralph Northam shutting down the state economy for more than two months– including vast swaths of the Old Dominion that had few if any COVID cases, helping destroy more than half a million jobs. 

In Rochester, New York, looters ransacked the Villa shoe store and many other businesses and brutally beat a female store owner seeking to defend her small business. New York City also saw widespread looting. 

But more than two million New Yorkers have lost their jobs since Gov. Andrew Cuomo effectively put almost 20 million people under house arrest – a drastic step that he said would be justified if it “saves just one life.” Most counties had only a smattering of COVID cases before Cuomo caused profound upheaval in the lives of vast numbers of his subjects. Also, unlike for Cuomo, there is no evidence tying the looters to 5,000+ deaths in nursing homes

In Minneapolis, looters plundered stores and restaurants in East Lake Street, a well-known haven for Black and Latino-owned businesses, as well as burning down the nation’s oldest independent science fiction bookstore. black former firefighter was left in tears after looters ravaged the sports bar he was planning to open. Gov.

Timothy Walz’s statewide shutdown decree helped destroy almost 400,000 jobs, including that of George Floyd, who lost his gig as a bouncer after the governor’s order shut down the restaurant where he worked. 

Most of the media coverage, reciting the official narrative that shutdowns were vital and justified, has ignored the human carnage of the COVID shutdowns. 

Almost 40% of households earning less than $40,000 per year have someone who lost their job in recent months, according to the Federal Reserve. Politicians destroyed much of the economy in the name of “risk reduction.” Unprecedented restrictions on personal and economic freedom were justified in part by federal Centers for Disease Control fatality forecasts that turned out to be wildly exaggerated

Some leftists on Twitter urged the looters to go after national chain stores such as Target and avoid small family-owned businesses.  Politicians issuing COVID shutdown decrees followed the opposite standard, effectively padlocking small businesses while Walmart and other large stores easily received the “essential” bureaucratic holy water and Amazon practically won the lottery. The recent riots may have destroyed hundreds of businesses. But forecasts predict that millions of businesses could be forced to close or file bankruptcy because of the pandemic disruptions.

The people who pillaged stores in recent days deserve vigorous prosecution, and the deluge of Twitter plundering-in-progress videos could make it easier to identify culprits. It remains to be seen whether mayors will have the gumption to throw the book at the thieves. But it is even less likely that the politicians and other government officials who inflicted far greater damage on the economy will ever be held liable.

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Author: Tyler Durden

Anything But “Incredible”: For Millennials And Women, The Jobs Report Was Catastrophic

Anything But “Incredible”: For Millennials And Women, The Jobs Report Was Catastrophic

Tyler Durden

Sat, 06/06/2020 – 18:05

There were clear problems with Friday’s “incredible” – as Trump put it – jobs report.

First and foremost the BLS’ own admission there was a “survey error” which may have reduced the real unemployment rate by up to 3% as survey-takers mistakenly counted about 4.9 million temporarily laid-off people as employed, then moving through some very aggressive statistical assumption revisions to boost the “birth/death” model, the curious case of millions of “jobs” resurrected temporarily thanks to the PPP program: as recruitment firm LaSalle Network head Tom Gimbel said, today’s jobs report may offer a “false ray of light” because almost all job gains stemmed from furloughed employees kept on the books due to PPP loans (he said he was seeing real weakness in new hiring).

But even if one accepts the report at its face, if one digs beneath the glossy veneer, the details are anything but “incredible” as described by the president.

Start with Trump’s “incredible” V-shaped rebound: after the 2.5mm new jobs added, total US employment is basically where it was at the depth of the financial crisis, while 21 million workers find themselves unemployed – this number was 6 million just two months ago.

Putting that number in context, with roughly 133 million employed workers, there are a record 102 million Americans who are not in the labor force, of whom 92.7 million don’t even want a job.

Among those who were lucky enough to remain in the work force, millions were shifted from full to part-time.

Adding insult to injury, the only jobs created in May according to Deutsche Bank were for highly-skilled, highly-paid workers as low and medium wage jobs continue to shed millions of workers – mostly young, recent graduates – as employers shift to zoom-ing or outsourcing.

That said, we find the above chart unlikely since a breakdown of actual jobs added by industry shows that the low-paying leisure and hospitality, education and health, and retail trade made up 3 of the top 4 sectors.

In any case, the unemployment rate for those without a college education is around 16% (and 20% for those who never finished high school), which is why with young, unemployed people already protesting almost daily, it is shaping up as a summer of teenage/young adult discontent and violence for the ages.

It’s not just teenagers: millennials, already facing dire labor prospects as a result of the zombie post-GFC economy, just saw their employment rate plummet to recession levels.

The core, prime-aged segment of the workforce, those 25-54 just saw a historic collapse in their job prospects.

Yet while millennials are fired by the millions, so are older Americans: the ratio of employment of those 65 and older to the overall population just plunged to crisis levels as well.

And here is the catalyst for the next round of social discontent: women unemployment is now far higher than that of men after being roughly the same before covid: how long before accusation of rampant employer sexism are the next big thing?

What is one to do with these data? Why buy stocks of course, what else. It is “Jay’s market“, where an economic depression means +∞ for the S&P.

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Author: Tyler Durden

Military Pilot Grounded After Low-Flying Helicopter Maneuvers Over D.C. Protests

Military Pilot Grounded After Low-Flying Helicopter Maneuvers Over D.C. Protests

Tyler Durden

Sat, 06/06/2020 – 17:15

Despite according to a prior New York Times report top Pentagon brass initially ordered that National Guard helicopters assist in dispersing protests and riots which overwhelmed streets outside the White House early this week, at least one helicopter pilot has been grounded pending an investigation over low-flying maneuvers.

The Black Hawk helicopter presence created a huge stir among activists nationwide, as footage went viral of the pilots using gusts from the helicopter blades to deter crowds

The Pentagon had described the “show of force” tactic as a menacing “persistent presence” to dissuade the below throngs amid raging Black Lives Matter protests.

Reporters and demonstrators alleged that in some locations where the swooping maneuver was made store windows were broken by the severe downdraft along with tree limbs, which in at least one case reportedly hurt a bystander when branches struck the person.

Caught on film were US Army UH-72 Lakota helicopters, as well as UH-60 Black Hawks coming within as little as 100 feet over the crowds. 

As The Hill describes Saturday:

Army Secretary Ryan McCarthy told reporters that the helicopter crew was grounded pending results from an internal investigation, according to local CBS affiliate WUSA9. A Pentagon spokesman told the outlet that the move was standard procedure during such investigations.

The aircraft was one of two Army National Guard helicopters that hovered between 100 and 300 feet above the streets of the District on Monday night, according to an aircraft tracker. Gusts from their helicopter blades were aimed at dispersing crowds of protesters.

Via The Drive/social media footage stillframes.

And further the D.C. National Guard commander, Maj. Gen. William Walker, had indicated in a prior statement that he’d “directed an immediate investigation into the June 1 incident.”

“I hold all members of the District of Columbia National Guard to the highest of standards,” Walker said. “We live and work in the District, and we are dedicated to the service of our nation.” 

No doubt, the pending investigation and grounding of the pilot is largely a political response, given not only the widespread condemnation of military armed forces being utilized for crowd and riot control on American streets, but at a moment the Pentagon and White House are increasingly at odds over the role of soldiers amid the nationwide unrest. 

And given the controversy, we’re unlikely to see low-flying helicopters during Saturday’s protest, despite the prediction that they’ll be the biggest yet on the capitol, and potentially most dangerous given the chaos of early this week. 

It also suggests a broader trend of lower ranking police officers and soldiers potentially being thrown under the bus when the “orders” from their higher-ups come under media scrutiny.

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Author: Tyler Durden

“Only Official Sources Permitted” – Amazon Censors COVID-Truther Book In Latest ‘Ministry Of Truth’ Moment

“Only Official Sources Permitted” – Amazon Censors COVID-Truther Book In Latest ‘Ministry Of Truth’ Moment

Tyler Durden

Sat, 06/06/2020 – 17:40

Authored by Mark Jeftovic via AxisOfEasy.com,

Update #2: It’s been pointed out on Hackernews thread that the book is now available on Amazon!

*  *  *

Update #1: File under irony, some folks on Hackernews “flagged” this post as inappropriate, after hitting the top-10 and the front page. Article about Big Tech censorship, flagged as inappropriate.

*  *  *

Yesterday, author Alex Berenson reported via Twitter that Amazon had spiked his new book about COVID-19 and the lockdowns.

Berenson is a former New York Times reporter, author of other books, fiction and non-fiction, and he’s even a Twitter blue check. This morning I exchanged a few emails with him and he’s slammed with emails so he sent me his statement on the matter:

The booklet was the first in a series of coronavirus pamphlets I plan to put out covering various aspects of the crisis. Readers of my Twitter feed encouraged me to compile information in a more comprehensive and easier-to-read format, and when I polled people on Twitter to ask if they would be willing to pay a nominal fee for such a pamphlet, the response was strong.

Originally I only planned to write one, but I had so much information I realized that the booklet would be an awkward length – longer than a magazine article but shorter than a book. Also, doing so would take too long, and I wanted to put it out quickly. So I decided to split the booklet into pieces. Part 1 included an introduction and a discussion of death coding, death counts, and who is really dying from COVID, as well as a worst-case estimate of deaths with no mitigation efforts. It is about 6,500 words, and I planned to sell it for $2.99 on ebook or $5.99 paperback. It is called “Unreported Truths about COVID-19 and Lockdowns: Part 1, Introduction and Death Counts and Estimates.”

I created covers for both yesterday and uploaded the book. I had published Kindle Singles (Amazon’s curated program for short Kindle pieces, which now focuses more on fiction from established writers), so I was relatively familiar with the drill. I briefly considered censorship but assumed I wouldn’t have a problem because of my background, because anyone who reads the booklet will realize it is impeccably sourced, nary a conspiracy theory to be found, and frankly because Amazon shouldn’t be censoring anything that doesn’t explicitly help people commit criminal behavior. (Books intended to help adults groom children for sexual relationships, for example, should be off-limits – though about 10 years ago Amazon did not agree and only backed down from selling a how-to guide for pedophiles in the face of public outrage.)

I didn’t hear anything until this morning, when I found the note I posted to Twitter in my inbox. I will forward it to you in its entirely. Note that it does not offer any route to appeal. I have no idea if the decision was made by a person, an automated system, or a combination (i.e. the system flags anything with COVID-19 or coronavirus in the title and then a person decides on the content). I am considering my options, including making the booklet available on my Website and asking people to pay on an honor system, but that will not solve the problem of Amazon’s censorship. Amazon dominates both the electronic and physical book markets, and if it denies its readers a chance to see my work, I will lose the chance to reach the people who most need to learn the truth – those who don’t already know it.

The text of the Amazon notice follows:


We’re contacting you regarding the following book(s):

Unreported Truths about COVID-19 and Lockdowns: Part 1: Introduction and Death Counts and Estimates by Alex Berenson (AUTHOR) (ID: PRI-GRW1ZENP2S2)

Your book does not comply with our guidelines. As a result we are not offering your book for sale.

Due to the rapidly changing nature of information around the COVID-19 virus, we are referring customers to official sources for health information about the virus. Please consider removing references to COVID-19 for this book.

Amazon reserves the right to determine what content we offer according to our content guidelines.

Berenson is considering releasing the book from his website, so check there for updates. But it looks like I’ll have to add a chapter to my book on surviving deplatform attacks for what to do when the world’s largest retailer (a.k.a The Company Store), refuses to sell what you have to say.

Is it censorship or is it free markets in action?

It’s been an ongoing theme in our #AxisOfEasy newsletter (most recently mentioned this week) that when Big Tech insists that when it comes to coronavirus only information emanating from “official sources” is permissible, it becomes increasingly problematic for two reasons:

  1. Official sources frequently get it wrong. We saw this when CDC flip flopped on mask use, or when the WHO waited until March to declare coronavirus a pandemic. There are numerous other examples to mention.

  2. Sometimes the unofficial sources get it right and when you decide to tilt the scales of discourse in favour of the former and to squelch the latter, you are no longer a mechanical distributor and you are an arbiter of truth.

It is inevitable that applying this template to coronavirus because we’re in some worldwide global emergency, will sooner than later be applied to adjacent realms, because, hey, emergency, and then over time, to all realms. In Berenson’s case, his material about the COVID-19 virus is being suppressed, as is his material about the lockdowns.

The lockdowns especially, are a contentious issue. Recall the two California doctors, Dan Erickson and Artin MAssihi, who were deplatformed from Youtube for saying that the lockdowns, while initially warranted, were now becoming destructive and would lead to rampant mental health issues such as depression, spousal and child abuse, and suicide. Not only was their video dropped by Youtube, who’s stated policy is also “official sources only”, Facebook dropped their clinics page as well.

It didn’t take long for data to emerge that, being poor statisticians aside, maybe, quite possibly, they were actually onto something.

Now that Big Tech has embraced an Only Official Sources Permitted (OOSP?) policy, what field of endeavour will be next?

My audiobook shop is due to release the Incrementum guys’ book on The Zero Interest Rate Trap this month. Should we be expecting an email someday, from Amazon, telling us they’re no longer selling the book because:

Due to the rapidly changing nature of information around low and negative interest rates, Fed and Central Bank policy, inflation and wealth inequality, we are referring customers to official sources for monetary policy. Please consider removing references to these topics from your book.

…and from then on the only book Amazon will sell that has anything to say about the matter is Ben Bernanke’s “The Courage To Act”? Is this where we’re headed?


People often argue, and libertarians are especially prone to this, that the idea of freedom of speech only applies to protection against the government, “why don’t you start your own Amazon?”. While that may be ideologically tenable, practically speaking it’s an impossible remedy. So as a libertarian, it pains me to say, I would encourage and welcome anti-trust investigations into big tech platforms such as Amazon, Google, Facebook, Twitter, Microsoft and Apple.

All  the aforementioned companies have formed quasi-monopolies in their respective spheres. In the cases of Google and Facebook they did so with intelligence agency seed funding. While in the case of Amazon they routinely knock-off their own retailers and they all systemically squeeze out independent competitors and pad out their cash reserves with cushy government and military contracts.

When it comes to Big Tech platforms who were funded with QE-generated hot money and who are the primary beneficiaries of the Brave New World / “never going back to normal” reality we find ourselves in: they get to make their own rules, while everybody else has to play by the rules somebody else decrees.

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Author: Tyler Durden

Mass Distraction And Fake “V-Shaped” Recovery Provide Cover For The Fed-Induced Crash

Mass Distraction And Fake “V-Shaped” Recovery Provide Cover For The Fed-Induced Crash

Tyler Durden

Sat, 06/06/2020 – 16:50

Authored by Brandon Smith via Birch Gold Group,

The scapegoating has already started. In almost every sector of the economy that is collapsing, the claim is that “everything was fine until the pandemic happened”. From tumbling web news platforms to small businesses to major corporations, the coronavirus outbreak and the national riots will become the excuse for failure. The establishment will try to rewrite history and many people will go along with it because the truth makes them look bad.

And what is the truth?

The truth is that the U.S. economy – and in some ways, the global economy – was already collapsing. The system’s dependency on ultra-low interest rates and central bank stimulus created perhaps the largest debt bubble in history – the Everything Bubble. And that bubble began imploding at the end of 2018, triggered primarily by the Federal Reserve raising rates and dumping its balance sheet into economic weakness, just like it did at the start of the Great Depression. Fed Chair Jerome Powell knew what would happen if this policy was initiated; he even warned about it in the minutes of the October 2012 Federal Open Market Committee, and yet once he became the head of the central bank, he did it anyway.

For a year leading up to the pandemic, the Fed was struggling to maintain and suppress a repo market liquidity crisis. National debtcorporate debt and consumer debt were at all-time highs. Companies were desperate for new stimulus, and they were getting crumbs from the Fed, rather than the tens of trillions that they needed just to stay afloat. The central bank had sabotaged the economy, but they had to keep it in a state of living death until they had a perfect cover event for the collapse. The pandemic and inevitable civil unrest do the job nicely.

What many people do not understand is that the Fed does not care about the economy. In fact, every Fed action since its inception in 1913 has led to the downfall of the U.S. The Fed is not a maintenance man trying to stave off collapse; the Fed is a suicide bomber willing to destroy everything including itself in order to serve a greater ideology.

Total global centralization is the goal, and every new disaster is exploited to this end by the establishment. “Order out of chaos” is the motto of the global elites; in other words, in every crisis there is “opportunity”. This crisis has been no different. Suggested solutions have ranged from the creation of a cashless society operating on a digital currency system, to permanent lockdowns in the name of stopping “global warming”, to a surveillance state and medical tyranny utilizing 24/7 tracking of citizens in order to “stop the spread of the virus”. But how does the establishment plan to get people to go along with such freedom-crushing policies?

The pandemic by itself is not enough. The George Floyd riots may be a motivator, but they might fizzle out over time. The real catalyst, as I have said for many years now, will be an ongoing economic crash. This crash, engineered in 2008, has been a long time coming. Everything that is happening today is an extension of what happened over a decade ago. That said, the current phase was set in motion in 2018, as noted above.

The virus and the lockdowns solidified the crash, and while some people including Trump are calling for a V-shaped recovery, this is not going to happen.  Perhaps Trump is referring to stock markets artificially inflated by the Fed stimulus backstop?  Is anyone gullible enough to believe the stock market represents the real economy?  Because today’s jobs report from the BLS, despite all the hype, does not suggest V-shaped recovery to me.  The US lost 40 million jobs in the span of 6 weeks.  The BLS reports a gain of 2.5 million jobs in May as the country “reopened”.  So, we are still down nearly 38 million jobs in the past couple months yet the BLS stats are being called “stunning” and a “sign of recovery”?

The assumption being made here I think is that job gains will now be constant each month from now on.  I think not.  I think the jobs that were gained in May are the peak, and every jobs report after today will disappoint.  Here’s why…

The latest Fed models predict a GDP plunge of 52.8%, and the manner in which the Fed calculates GDP is actually rigged to the upside. It is difficult to predict the REAL fall in data, but we know it will likely be larger than 52%. Keep in mind that this crash is in the 2nd quarter, while the Fed pumped trillions into the system. What exactly did this money printing buy? Well, stock markets stabilized, but the rest of the economy didn’t, and stock market optimism isn’t going to last much longer either is there are renewed lockdowns.

The primary reason we now face a second Great Depression is because the small business sector has been destroyed. Small businesses are vital to the U.S. economy, representing around 50% of the job market. The closures resulted in around 40 million job losses in the past two months. Add that to the 95 million Americans that have been out of work but not counted by the BLS as unemployed – as well as the 11 million people that are counted – and you are looking at nearly 150 million working age people not generating an income.

The latest BLS jobs gains and the way they are being hyped by the media are suspicious to me.  It seems as if the establishment is trying to convince the public that the pandemic will have no affect on the economy and that their jobs will simply be waiting for them after every new shutdown (as long as they adhere to the rules and restriction set up by state and federal governments).

But it’s only going to get worse from here on…

The public doesn’t realize it yet, but many of the businesses that shut down over the past couple months are not coming back. Sure, a lot of them will try to reopen, and there will be a last gasp of activity during the next month or two, but the levels of debt attached to these ventures was already high before the pandemic hit. The recent small business bailouts seemed as if they were designed to give people false hope. According to figures out of JP Morgan, of the 300,000 clients that applied for the small business aid, only 18,000 actually received any. And, of that 18,000, many were larger corporation, not small businesses.

Business sectors most affected include retail and service, which crashed a record 16.4% overall in April. Food service lost approximately 30% of sales. Electronics and appliances lost 60%. Clothing plunged 78%. Auto sales fell 33% in May, and the expected rebound after the reopening has been disappointing.

The businesses most likely to die first are those that had large debt obligations before the lockdowns, as well as those that received no bailout money. Even though companies like General Electric, Verizon, IBM and Tesla all have massive debt issues, they may be kept alive by government bailouts, at least for a time. Small businesses, on the other hand, appear to be slated for destruction.

In particular, I suspect most restaurants besides major chains will go into bankruptcy. Boutique stores and clothing outlets will run out of money fast. Movie theater chains will collapse. Car rental outlets will collapse. Tourism businesses will close en masse and tourism towns will suffer profit losses despite the “reopening” in some states. Larger companies, like airlines, will continue to decline, and they will have to diversify into other areas, such as shipping, in order to survive. The auto industry is not coming back any time soon.

In the case of restaurants, the social distancing requirements reduce the number of customers that they can seat at any given time. Restaurants were already suffering major declines before the pandemic, and while take-out venues might have seen an uptick because of the lockdowns, this will not last as people begin to run out of cash and start cooking at home.

The same goes for small boutique stores, which rely on consumers with expendable cash flows. Such consumers no longer exist, and notions of “extra cash” will disappear along with waning government checks. As for tourism, I think there will be some travel, as lockdown restrictions are partially lifted. Many people in the cities will try to get away for a week or two just to escape and feel normal for a little while. However, I also think mainstream economists are underestimating the number of people who will refuse to travel because of concerns about coming in contact with the coronavirus. Just as retail refuses to rebound, so will tourism profits.

Air travel is unlikely to improve for the same reasons. Social distancing makes airplane flights a losing investment as passenger capacity is reduced. New car sales will remain stagnant because people are traveling less, and the used car market is being stocked with product as average people sell off vehicles to get extra cash to make ends meet.

All of these factors result in long-term job losses and debt defaults for small businesses as well as some larger companies. Which means much higher poverty rates and further dependency on government welfare programs.

The real test for the public will come when lockdowns return. I realize that there is a bit of denial in the population when it comes to this idea. I see many people operating on the assumption that the “reopening” is a long-term situation. I assure you, it is not. As I have noted in many previous articles, the establishment intends to use what I call “wave theory”, or a cycle of shutdowns and openings over the span of a year or longer. There WILL be new lockdowns, if not in the name of a resurgence in COVID infections, it will be in the name of stopping the national riots.

The response from the American people will be critical here. Will we support further lockdowns or martial law, even though the measures would harm us economically? Or will the public resist? Will the political left embrace a second lockdown in the face of further infection spikes? Will conservatives embrace lockdowns in the face of leftist protests and riots? Both sides of the political spectrum are being tempted with the use of a totalitarian government response in order to ensure their personal “safety”.

People must be made to understand the reality of our situation: the economy has already been undermined and this threat is far greater than either the virus or the riots. This is the danger that is being hidden by the pandemic and civil unrest distractions, and it is a threat that the government has no means or intention of saving us from. We must save ourselves, and doing that requires preparation and acceptance that the world is changed.

*  *  *

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Author: Tyler Durden

12th Day Of Protests Underway As Millions March Across US; Chicago Police Find Suspicious Buckets Of Bricks Around City

12th Day Of Protests Underway As Millions March Across US; Chicago Police Find Suspicious Buckets Of Bricks Around City

Tyler Durden

Sat, 06/06/2020 – 16:40

Update (1625ET): As dinner time approaches on the east coast, protests are underway in dozens of cities across the US, with only a few isolated incidents to speak of so far. Though, if the 12th night of protests and unrest fits the pattern of last weekend, mobs typically don’t turn violent until after dark, when many of the peaceful demonstrators have gone home, and the organized criminals looking to take advantage of the situation come out.

There’s a big protest heading down Pennsylvania Avenue.

In Chicago…

In San Francisco, that shining beacon of equality, demonstrators crossed the Goldengate bridge, stopping traffic on the way.

Meanwhile, a second memorial service has been held for Floyd today in North Carolina, where he was born and raised. Though he lived much of his life in Houston, and Minneapolis.

Hundreds of mourners are attending.

Twitter of course is doing everything it can to amplify the protests, though, to be fair, it’s all many of its most active users have been talking about since we all collectively forgot about the coronavirus.

One Twitter user called it “a day for the books” in DC.

Protesters take a moment for prayer at the Lincoln Memorial…

Protesters in Arlington marched across the Memorial Bridge to join another crowd in DC.

This people seem totally normal.

Meanwhile in Chicago, police have confiscated 14 buckets of bricks placed on the ground throughout areas where protests were planned.











* * *

Update (1415ET): As the latest round of protests begins, governors in 32 states and Washington DC have activated more than 40,000 national guard soldiers, though the Secretary of Defense has asked that they keep the peace while unarmed.

The political opponents of the prime minister spent the last week relentlessly bashing Boris for allegedly moving “recklessly” forward as he tries to restore some normalcy back to the UK, which has endured a particularly strict and trying lockdown as one of the worst-hit countries in Europe.

But now since it’s a protest, they’ve thrown caution to the wind, and are out in the streets scrapping with police, social distancing be damned.

In the US, arge crowds gathered in Chicago…

…and Philly…

…and Washington DC, where Reuters has set up a live feed to monitor what some local officials expect may be the largest gathering of the George Floyd-inspired movement so far:

In Buffalo, cops applauded the two officers who were charged with felony assault on an elderly man who walked too close to a crowd of officers while they were clearing the square. An officer shoved the man, who proceeded to fall backwards and hit his head on the pavement. He immediately started bleeding, and the officers appeared to continue on as if nothing had happened, and moved on to arrest another protester.

Meanwhile, Atlanta Mayor Keisha Bottoms has followed Washington by scrapping the curfew in another example of political pandering to the “peaceful” protesters.

* * *

Update (1135ET): ~20,000 people attended racial justice protests in Sydney on Saturday “in solidarity” with Black Lives Matter and protesters in the US, according to police in New South Wales.

Meanwhile, the Pentagon has ordered National Guard troops in the federal district not to fire on protesters (an order that presumably includes rubber bullets and bean bags) while ordering all active-duty troops that the administration had tried to amass on the outskirts of the city to return to their posts.

According to the Washington Post, police expect between 100k and 200k protesters on Saturday, far short of the million people organizers had brought together.

There are now more than 43,300 National Guard members actively responding to demonstrations across the US. The National Guard is typically deployed by the governor in a given state.

Except in Washington DC where, because it’s a federal city, the president has power to command the National Guard, which Trump has chosen to delegate to the Pentagon.

* * *

Following more than a week of widespread peaceful protests pockmarked by occasional homicidal violence, arson, assault and looting, activists are hoping to assemble a massive demonstration in Washington DC, with some hoping to draw a million people to the capital just one day after Mayor Muriel Bowser renamed the street leading up to Lafayette Square after ‘Black Lives Matter’.

The bright yellow letters spelling out the words ‘Black Lives Matter’ were put in place for a reason: for what we imagine will be an extremely powerful photo op as police and national guardsmen move to disperse the crowds, revealing the message below as tyrannical Trump gazes out the window, twirls his mustache while cackling loudly.

Demonstrations against police brutality following George Floyd’s death are expected to continue for the 12th night on Saturday.

Though he didn’t give a crowd size estimate, the chief of the Washington DC police says he expects Saturday’s gathering to be one of the biggest so far.

“We have a lot of public, open source information to suggest that the event on this upcoming Saturday may be one of the largest we’ve ever had in the city,” Washington DC Police Chief Peter Newsham told local media, adding that much of the city center would be closed to traffic from early in the day.

Newsham did not give a crowd estimate. Local media has predicted tens of thousands of attendees.

Demonstrators in the Washington DC area are still sore over the national guard’s decision to use tear gas and rubber bullets to clear Lafayette Square for a presidential photo-op at St. John’s Church, angering the Episcopal Church in the process.

Further south, in North Carolina, Governor Roy Cooper is ordering all flags at state facilities to be lowered to half-staff from sunrise to sunset on Saturday to honor Floyd, who was born in Fayetteville. A televised memorial service will also be held in the city on Saturday, per USAToday.

On Friday, marches and gatherings took place in Atlanta, Los Angeles, Minneapolis, Miami, New York and Denver, among other places, while protesters massed again, in the rain, in front of the White House. The night-time protests were largely peaceful but tension remains high even as authorities in several places take steps to reform police procedures. Politicians and judges around the country also announced new restrictions on law enforcement powers and tactics, including a federal judge in Denver, who ordered city police to stop using tear gas, plastic bullets and other “less-than-lethal” devices such as flash grenades, claiming that too many peaceful protesters and journalists have been injured by police.

“These are peaceful demonstrators, journalists, and medics who have been targeted with extreme tactics meant to suppress riots, not to suppress demonstrations,” U.S. District Judge R. Brooke Jackson wrote in the ruling.



In Minneapolis, Democratic city leaders voted to end the use of knee restraints and choke-holds, where pressure is applied to the neck.

In California, Gov Gavin Newsom ended state police training of carotid restraints, and ordered officers not to use the tactic.

In New York, Gov Andrew Cuomo said his state should lead the way in passing “Say Their Name” reforms, including making police disciplinary records publicly available, while also banning the chokehold (which we thought had already been banned following the killing of Eric Garner).

“Mr Floyd’s murder was the breaking point,” Cuomo said. “People are saying ‘enough is enough’.”

The cause of the peaceful protesters received a major boost last night from the NFL, which admitted for the first time that it was “wrong” to oppose players who kneeled.

Once again, the demonstrators in the US expect sympathizers from around the world to join in, with more demonstrations at American embassies and consulates in Europe expected.

Already, thousands have gathered in London’s Parliament Square “in solidarity” with their American peers.

The protest, which has so far proven to be entirely peaceful, according to CNN. At one point, everybody too a knee in unison.

Once again Portland, Ore., roughly 20 adults were arrested and one juvenile was detained last night as peaceful demonstrations morphed into violent street battles into the night, as agitators threw bricks and bottles at cops.

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Author: Tyler Durden

Cornell Professor Dave Collum Publicly Shamed By His University For Defending Buffalo Police Officers

Cornell Professor Dave Collum Publicly Shamed By His University For Defending Buffalo Police Officers

Tyler Durden

Sat, 06/06/2020 – 16:25

In America you are now allowed to have an opinion, as long as the thought police agrees that it is the right opinion.

That is basically what Cornell University said at the end of the week last week, after Zero Hedge contributor and longtime Cornell Organic Chemistry professor Dave Collum did nothing more than offer his opinion on the events that took place in Buffalo, where an elderly man was pushed down by riot police, leading to him fracturing his skull, and the eventual resignation of the entire police response team.

Professor Dave Collum

Collum’s Tweets, collectively comprising just under 500 characters of opinion, sparked a public shaming from the Ivy League institution which was inundated with snowflakes complaining about Collum having an opinion that differed from whatever the Marxist norm of the day was. 

When the Buffalo video first surfaced, the internet was immediately outraged. The video went viral on Thursday night and was national news on Friday.

Perhaps naive enough to believe that “social” media was a forum express one’s opinion as in – socially Collum took the position of defending the Buffalo police, publicly on Twitter, stating that officers across the country have had raw nerves due to the riots, looting and general chaos…

…and he said that he thought the man should have given the police space. He called the man’s cracked skull “self-inflicted”. 

An unpopular opinion in the left-wing stratosphere of social media? Sure. But an opinion nonetheless, and one shared by the 57 police officers who immediately resigned in protest of how the officers involved with the incident were being treated. 

It was also an opinion that appeared to be backed up by Buffalo’s mayor on Saturday morning. Buffalo’s Mayor described the man involved in the video as “an agitator” who was asked to leave the area “multiple times”:

Byron Brown, the mayor of Buffalo, N.Y., said Friday the 75-year-old man who was shoved to the ground by two cops the previous day was an “agitator” who had been asked to leave the area “numerous” times.

“There has been vandalism, there have been fires set, there have been stores broken into and looted. According to what was reported to me, that individual was a key major instigator of people engaging in those activities,” the mayor said.

But in the world of instant outrage, there’s no time for facts. Collum’s Tweet, within minutes of being posted, had been re-tweeted by comedian and actor Kumail Nanjiani, who has more than 3 million Twitter followers.

Dropping this bomb onto the actor’s followers set off a nuclear reaction, with hundreds of replies and re-tweets calling for Collum to lose his job and for Cornell to punish the professor: all for just speaking his opinion.

As a result, Collum had to lock down his Twitter account.

This was followed by an article in the Cornell Daily Sun – which led with the Professor’s opinions and not the actual news item itself…

“Prof. David Collum ’77, chemistry, has come under fire from both students and administrators for a series of Thursday night tweets defending police officers that pushed and severely injured an elderly man.”

and Cornell itself responding in a statement on Friday, claiming that Collum’s justification of police action was “insensitive”, “deeply offensive” and “at direct odds with Cornell’s ethos”.

The statement then said that “Professor Collum has a right to express his views in his private life”, which supposedly one should be grateful for: at least our learned institutions aren’t determining what opinions people can hold in private, at least not yet. But if someone dares to publish a contrarian opinion in public, well that’s just going too far.

We watched the video of the events in Buffalo yesterday where police officers shoved an elderly man to the ground and walked past while he lay bleeding on the sidewalk. The behavior we saw was deplorable. We are heartened that the authorities took immediate actions and that the two police officers involved have been suspended.

We agree with Governor Cuomo that the incident was “wholly unjustified and utterly disgraceful.” We also saw the tweets by Cornell professor David Collum justifying the actions of the police. While Professor Collum has a right to express his views in his private life, we also have a right and an obligation to call out positions that are at direct odds with Cornell’s ethos.

Especially at a moment at which this nation is grappling with the vital need to implement reforms that end police brutality, we find Professor Collum’s comments to be not just deeply insensitive, but deeply offensive.

In other words, Cornell has now publicly said: You can have an opinion, as long as it’s the right opinion: our opinion. Or else just keep it to yourself.

Collum was also forced to cancel an upcoming podcast appearance. Collum’s initial Tweets were in response to a podcast host who had a difference of opinion on the matter. The two were looking forward to discussing the incident this weekend. Now, that discourse will not take place, which the podcast host called “a shame” in a video defending Collum’s right to his own opinion.

In the end, we agree with Collum: he is being shamed for having the “wrong opinion”.

And we have to ask both Cornell and the social justice warriors of the world: Isn’t shaming someone for expressing an opinion peacefully – no matter how contrarian to the current virtue signaling flood – the exact antithesis of the “diversity”, “freedom” and “justice” that everyone is currently in the midst of fighting for, and is Cornell now an institution that only encourages “thinking” and “opinions” which are only first vetted with the thought police of what was once an institution where original and free thought was actually permitted if not, gasp, encouraged?

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Author: Tyler Durden

Free The Liquor Stores!

Free The Liquor Stores!

Tyler Durden

Sat, 06/06/2020 – 16:00

Authored by Laurence Vance via The Future of Freedom Foundation,

The Fine Wine & Good Spirits liquor stores are slowly beginning to reopen in Pennsylvania after they were all closed on March 17 in response to the spread of the coronavirus.

During the time when the liquor stores in Pennsylvania were all closed, Pennsylvania residents flocked to liquor stores in other states such as New Jersey, West Virginia, and Ohio.

In April, Ohio’s governor, Mike DeWine, signed an executive order “requiring six Ohio counties near the Pennsylvania border to require proof of local residency for the purchase of alcohol.” Said the governor, “This is necessary because of repeated instances of persons from Pennsylvania coming into these counties for the sole or main purpose of purchasing liquor. Any other time, we’d love to have visitors from Pennsylvania, but right now this creates an unacceptable public health issue.”

When the Fine Wine & Good Spirits liquor stores closed, why couldn’t residents of Pennsylvania just go to another liquor store in Pennsylvania instead of having to drive to another state? Because the Fine Wine & Good Spirits liquor stores are the only liquor stores in Pennsylvania. They are government liquor stores. No private liquor stores are allowed to exist.

Pennsylvania is one of seventeen “alcoholic beverage control” states where the state government controls the wholesaling, and often the retailing, of distilled spirits, and in some cases, beer and wine.

The other states are: Alabama, Idaho, Iowa, Maine, Michigan, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Utah, Vermont, Virginia, West Virginia, and Wyoming. There are also jurisdictions in Alaska, Maryland, Minnesota, and South Dakota that control the sale of alcoholic beverages.

According to the National Alcohol Beverage Control Association (NABCA) — the national association representing jurisdictions that directly control the distribution and sale of beverage alcohol within their borders — “control jurisdictions represent approximately 24.8% of the nation’s population and account for roughly 23% of distilled spirit sales and a significantly smaller percentage of beer and wine sales.” The mission of the NABCA is “to support member jurisdictions in their efforts to protect public health and safety and ensure responsible and efficient systems for beverage alcohol distribution and sales.”

In 1933, the Twenty-First Amendment repealed the Eighteenth Amendment that had, since 1920, prohibited the “manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all the territory subject to the jurisdiction thereof.” However, some states, such as Pennsylvania, instead of allowing liquor freedom, chose to institute liquor socialism and monopolize the retail sale of hard liquor.

The Pennsylvania Liquor Control Board (PLCB) “was created by state law on Nov. 29, 1933, at the end of Prohibition.” “The agency is governed by a three-member Board whose members are appointed by the Governor and confirmed by two-thirds of the state Senate.”

The mission of the PLCB

is to responsibly sell wine and spirits as a retailer and wholesaler, regulate Pennsylvania’s alcohol industry, promote alcohol education and social responsibility and maximize financial returns for the benefit of all Pennsylvanians. The PLCB regulates the manufacture, importation, sale, distribution and disposition of liquor, alcohol, and malt or brewed beverages in the commonwealth. The agency issues licenses to private individuals or entities that wish to engage in wholesale operations of beer, either as an importing distributor or as a distributor. The agency is also responsible for wholesale distribution of wine and spirits, which licensees may pick up from state-operated Fine Wine & Good Spirits stores or licensee service centers or have delivered from PLCB distribution centers.

The PLCB operates “more than 600 Fine Wine & Good Spirits stores across Pennsylvania, including more than 90 Premium Collection stores and an e-commerce retail website.” Since 1987, Pennsylvania’s liquor code has been enforced by the Pennsylvania State Police.

But the PLCB is not the only way that alcoholic beverages are restricted in Pennsylvania. The state also allows voters in each municipality to limit certain alcohol sales or ban the sale of alcohol altogether. According to the PLCB, “681 of 2,560 Pennsylvania municipalities are at least partially dry.” According to the Pennsylvania Liquor Code, “a local option referendum to change what alcohol sales a municipality allows or prohibits may be voted on during any election.” Thirty-two other states also allow localities to prohibit the sale of liquor. Pennsylvania is different from most states with a local option in that it applies to municipalities and not to counties.


Why is alcohol treated differently than any other commodity? Why are alcohol sales restricted in some way in most states on Sundays? Why is the drinking age 21, when Americans are considered legal adults at age 18? Why do some states make a distinction between alcohol consumed on-premises and alcohol purchased for consumption off-premises? Why are alcoholic beverages heavily taxed? Why in Louisiana is the sale of alcoholic beverages of any kind permitted in supermarkets, drug stores, gas stations, and convenience stores, but in other states grocery stores can sell distilled spirits only in a separate store or in an attached location that has its own entrance?

Free the liquor stores.

Free the liquor stores to sell what products they want, what days of the week they want, what hours they want, and to whom they want. Free the liquor stores from government regulation, oversight, licensing, and control. Free the liquor stores from government ownership. Free the liquor stores from local options that can institute dry counties or municipalities. Free the liquor stores from modern-day prohibitionists. Free the liquor stores from religious zealots.

Now, none of this means that there are no health risks associated with alcohol abuse. According to the Centers for Disease Control and Prevention (CDC),

Drinking too much can harm your health. Excessive alcohol use led to approximately 88,000 deaths and 2.5 million years of potential life lost (YPLL) each year in the United States from 2006 – 2010, shortening the lives of those who died by an average of 30 years. Further, excessive drinking was responsible for 1 in 10 deaths among working-age adults aged 20-64 years. The economic costs of excessive alcohol consumption in 2010 were estimated at $249 billion, or $2.05 a drink.

But since when is it the proper function of government to discourage the drinking of alcohol, prohibit commerce in alcohol, license the sellers of alcohol, educate anyone to “make informed, smarter decisions about alcohol,” restrict the hours when alcohol can be sold or consumed, or set a minimum age to purchase, possess, or drink alcoholic beverages?

At the bottom of the website of Pennsylvania’s Liquor Control Board, next to the seal of the state of Pennsylvania, it says, “Keystone State. Proudly founded in 1681 as a place of tolerance and freedom.” Yet, when it comes to the commodity of alcohol, there is no tolerance or freedom in Pennsylvania. Not when no one is permitted to open a private liquor store. Not when all restaurants are allowed to purchase the liquor they sell only from the PLCB. Not when business must get a license to sell alcoholic beverages. Not when the liquor stores need to be freed.

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Author: Tyler Durden

Goldman’s Clients Are Asking What Happens If Trump Loses And Dems Take The Senate

Goldman’s Clients Are Asking What Happens If Trump Loses And Dems Take The Senate

Tyler Durden

Sat, 06/06/2020 – 15:35

Over the past week, a significant change has taken place in the US political world and we are not talking about the unprecedented nationwide protests, riots and looting that have prompted comparisons to 1968, or the economic collapse resulting from the covid shutdowns. We are referring to the fact that after dominating the PredictIt online betting poll for who will win in 2020, for the first time ever, Donald Trump has relinquished first place with a material margin to his challenger, Joe Biden, who last night officially clinched the democratic nomination.

To be sure, this dramatic reversal has not been lost on either the president – who has unleashed an all out push to demonstrate that the US economy is recovering after Friday’s surprisingly strong, some would say manufactured, jobs report to halt the downside momentum. It has also not been lost on Wall Street, because as Goldman’s chief equity strategist David Kostin writes, with markets looking ahead to the post-pandemic recovery, investor conversations have increasingly focused on the political landscape where, as noted above, prediction markets now show roughly 50% likelihoods of Democrats winning the presidency and the Senate in November. This is notable because as Kostin explains, for many Goldman clients, the most important equity market implication is the potential for higher corporate tax rates.

Follows is an interesting admission from the Goldman strategist who writes that although the coronavirus has caused the sharpest decline in economic activity on record – this is largely affecting the poor and middle classes – while it is tax policy that represents a larger risk to earnings and consequently to equity prices, and by extension Goldman’s predominantly wealthy clients. Furthermore, with the help of record policy support and inflecting data, investors have largely looked through the coronavirus as a temporary hit to total corporate earnings according to Kostin, although as we have shown before even the most optimistic forecasts don’t show corporate earnings returning to pre-covid levels until the end of 2022 at the earliest, so it depends on one’s definition of “temporary”.

In contrast, a shift in government policy toward higher corporate taxes would reduce expectations for the entire long-term stream of profits.

To explain why investors are more concerned about tax policy than covid, Kostin uses an interest analogy, namely that “every company in the world is in a joint venture.” Taking this further, the JV partner is the government and its stake is represented by the effective corporate tax rate. In the case of S&P 500 constituents, companies had a 70% interest for many years that jumped above 80% following the passage of the Tax Cut and Jobs Act (“TCJA”) in December 2017.

From a valuation perspective, the NPV of the incremental future earnings reallocated by the reduced tax rate suddenly inured to the shareholders whereas it previously benefited the government. That is what happens when the JV split goes from 70/30 to 80/20.

But the split may change – and not to the benefit of shareholders – in 2021 depending on the outcome of the November election.

Here it is also worth recalling that one of the main reasons for the market’s outperformance during the Trump administration is that declining tax rates have been arguably the biggest contributor to S&P 500 profit growth. Consider this:

The TCJA effected a  number of changes in the corporate tax code, including reducing the federal statutory rate on domestic income from 35% to 21% (from 39% to 26% including state and local taxes). In practice, this reduced the effective corporate tax rate paid by the median S&P 500 company by 8 percentage points, from 27% to 19%, and boosted S&P 500 EPS in 2018 by 10%.

Overall, since 1990, declining effective tax rates have accounted for 200 bp of the 400 bp increase in net profit margins and 24% of total S&P 500 earnings growth, according to Goldman calculations.

Not that this was a secret of course, and in fact in much of the world corporate taxes were far lower than in the US, which for years had an uncompetitive corporate tax regime compared with most other countries. In 2017, the 39% statutory tax rate for US firms was the highest among OECD countries, which otherwise had an average statutory rate of 24%. Several years ago, Goldman – correctly – predicted that this disparity could not exist indefinitely, and as a result in 2013, the bank created two baskets of US stocks based on their effective corporate tax rates:

“Our belief was that legislation would be enacted to level the playing field. From an investment strategy perspective, the intuition was that firms with the highest effective tax rates would benefit the most from tax reform and that the resulting upward EPS revision would translate into relative share price outperformance. In the two months around the passage of the tax reform in late 2017, our 50-stock, sector-neutral High Tax basket outperformed our Low Tax basket by 910 bp (16.5% vs. 7.4%) and the S&P 500 by 580 bp as those firms experienced the strongest upward EPS revisions.”

The problem for shareholders is that if Trump wins, much if not all of this would be reversed, as Joe Biden has proposed partially reversing the 2017 TCJA. In fact, according to the Tax Foundation the former Vice President’s plan would raise the statutory federal tax rate on domestic income from 21% to 28%, reversing half of the cut from 35% to 21% instituted by the TCJA.

In addition, the plan would double the GILTI tax rate on certain foreign income, impose a minimum tax rate of 15%, and add an additional payroll tax on high earners.

These changes would be complemented by a variety of changes to the personal tax code, including an increase in the tax rate applied to capital gains and dividends for the highest income individuals, as well as potential changes in non-tax regulatory policy that could also affect corporate earnings and equity valuations.

Long story short, if Biden’s tax proposals are enacted, this tax reform would reduce Goldman’s S&P 500 earnings estimate for 2021 by roughly $20 per share, from $170 to $150.

As Kostin explains, according to a a rule of thumb, every percentage point change in the effective corporate tax rate should change S&P 500 earnings by 1.2% or $2 per share.

And while the Biden plan would only reverse half of the TCJA cut to the statutory domestic tax rate, along with the other proposals Goldman estimates it would lift the S&P 500 effective tax rate to 26%. Combined with a drag on US GDP of a similar magnitude to the boost that Goldman’s economists estimate the TCJA created in 2018, this would reduce the bank’s 2021 EPS estimate by roughly 12%, although it is unclear yet if Kostin will do a bifurcated S&P price forecast as he did ahead of the midterm elections, giving one target in case Trump retains the presidency and another in case of a Democratic sweep.

What are the implications for stocks:

At the sector level, domestic-facing cyclicals generally experienced the largest earnings boost and strongest outperformance resulting from the passage of the TCJA. Financials, Consumer Discretionary, and Comm Services experienced the largest absolute and beta-adjusted returns in the two months around the TCJA passage as earnings expectations surged. Energy and Industrials also outperformed but fared worse on a beta-adjusted basis and benefited from a rise in crude oil prices. At the other end of the distribution, Utilities and Real Estate firms declined as investors rotated to firms with more EPS exposure to tax cuts. Info Tech, which tends to pay low tax rates, also lagged. However, the GILTI and minimum tax provisions could cause some Tech firms to lag again if the Biden plan is enacted.

At the stock level, the firms that had the highest effective tax rates benefited  most from the TCJA, and many of these companies would be particularly vulnerable to a rate hike. The next chart highlights a list of 37 stocks that experienced large reductions in tax rates relative to sector peers and outperformed following the TCJA passage.

These stocks lagged in March as prediction market odds of Democratic Senate victory jumped, but they have recently outperformed despite a continued shift in prediction market-implied odds. Ultimately, the precise impact of tax reform on individual stocks will depend on the details of any legislation.

But before investors dump their exposure to all stocks that stand to see their tax rates jump, Kostin caveats that extreme uncertainty helps explain why the performance of tax-sensitive stocks has not fully reflected the tightening election race; and after all it’s not that first time that polls showed Trump behind his challenger only for a shock outcome to emerge. Furthermore, in late 2017, Goldman reminds us that “high tax stocks outperformed sharply only once the TCJA legislation reached its final stages of Congressional ratification, despite months of negotiation and drafting beforehand.” Fast forward to today, when Goldman’s clients and investors in general not only face  uncertainty regarding the specifics of potential tax reform, but also five more months of market volatility before the resolution of a close political race that could eliminate the likelihood of tax reform altogether.

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Author: Tyler Durden