Why They Won’t End the Fed

“To put this into perspective, in 2020, the Federal Reserve generated more income than Apple, Microsoft, JP Morgan, Facebook, McDonald’s, Coca-Cola, Walmart, Home Depot, Intel, Johnson & Johnson, Bank of America, Nike, Visa, Amazon, and Netflix – COMBINED.

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The Most Profitable Company In The World

Written by Lance Roberts | May 17, 2021 PRINTER FRIENDLY VERSION

You can thank the most profitable company in the world for the recovery in corporate profits. More importantly, with asset prices near record highs, just how much are investors willing to pay? Unsurprisingly, the answer is quite a lot, as per a recent CNN Money article:

“Investors are pouring money into unprofitable companies more than any time since the dot-com bubble. This according to a recent report by Scott Opsal, director of research at The Leuthold Group.

Of the largest 1,500 companies by market capitalization today, around 200 weren’t profitable during any of the last three years. But instead of punishing them, investors have rewarded them with a total market value of more than $2.3 trillion. Wall Street hasn’t been willing to attach such high market values to unprofitable companies since the late 1990s. (Even then, the total market valuation of the unprofitable companies wasn’t even half of what it is now.) Of course, if you’re betting on a company becoming profitable in the future, you’re taking a risk.

“You’re going off to these uncharted regions where just about anything might happen,” Opsal says.”

Most Profitable Company, The Most Profitable Company In The World

Such isn’t the first time we have discussed this issue.

Profits Or GAAP Earnings?

In October 2019, we warned of the deviation of the stock market from corporate profitability. To wit:

“If the economy is slowing down, revenue and corporate profit growth will decline also. However, it is this point which the ‘bulls’ should be paying attention to. Many are dismissing currently high valuations under the guise of ‘low interest rates,’ however, the one thing you should not dismiss, and cannot make an excuse for, is the massive deviation between the market and corporate profits after tax. The only other time in history the difference was this great was in 1999.”

Of course, in March, that gap began to close, but the Fed and Government’s massive interventions wound up exacerbating the issue. The updated chart from 2019 shows the problem.

Most Profitable Company, The Most Profitable Company In The World

The bigger problem is the gap between the market and GAAP (actual) earnings. It is improbable that earnings will catch up with the markets even with a jump in economic growth this year.

Most Profitable Company, The Most Profitable Company In The World

While GAAP earnings will indeed recover in 2021, they will be hard-pressed to justify current price levels. Furthermore, analyst’s estimates are always too optimistic which leaves much room for disappointment.

Debt Supported Profits

“A topic not raised in the article, but a frequent theme of ours is the role that share buybacks play in this bull market. Corporations remain the largest buyer of stocks over the last few years. However, share buybacks result in misleading earnings per share data, which warp valuations and makes stocks look cheaper.” – Michael Lebowitz

Over the last ten years, corporate debt issuance increased sharply to facilitate share buybacks. In doing so, earnings per share appeared to sustain a healthy upward trajectory. However, such was only because of reducing the ratio’s denominator (the number of shares) as debt on the balance sheet rises. This corporate shell game is one of the most prominent and egregious manifestations of the past decade’s imprudent Federal Reserve policies.

Most Profitable Company, The Most Profitable Company In The World

The growing divergence between debt and profits is a clear warning of the misuse of debt for non-productive purposes. If it were, profits would be rising in a manner commensurate, or greater, than the debt curve. We can also see the unproductive nature of corporate debt in the record levels of the corporate debt to GDP ratio. There is too much debt used for buybacks. Such continues to curtail capital investment, innovation, productivity, and ultimately profits.  

Lot’s Of Manipulation

It isn’t just the deviation of asset prices from corporate profitability, but also reported earnings per share. As I discussed previously, the manipulation of operating and reported earnings per share by accounting gimmicks, share buybacks, and cost suppression is rather extreme. To wit:

“It should come as no surprise that companies manipulate bottom line earnings to win the quarterly ‘beat the estimate’ game. By utilizing ‘cookie-jar’ reserves, heavy use of accruals, and other accounting instruments they can mold earnings to expectations.

‘The tricks are well-known. A difficult quarter can be made easier by releasing reserves set aside for a rainy day. Or recognizing revenues before sales are made. A good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb.

What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.’

As noted in “Easy Money,” stock buybacks just hit a new record.

Most Profitable Company, The Most Profitable Company In The World

Not surprisingly, the most prominent players in buybacks are the ones that need to subsidize their earnings the most to beat estimates; technology and financials.

Most Profitable Company, The Most Profitable Company In The World

It doesn’t matter how you look at it; investors are overly exuberant about future returns.

The Most Profitable Company In The World

So, who is the most profitable company in the world? You probably think the answer is: “Apple.”

However, you would be wrong.

The calculation of corporate profits includes an interesting company not widely recognized in most analyses. If you are an astute follower of our blog, you already know the answer.

Most Profitable Company, The Most Profitable Company In The World

Yes, you guessed it (and it’s in the title). It’s the Federal Reserve.

When the Treasury Department pays interest on the debt, an expense to the U.S. Government, the Federal Reserve takes that in as “profits,” as reported on their balance sheet. At the end of the year, the Fed remits a portion of the “revenue” back to the Government.

Most Profitable Company, The Most Profitable Company In The World

These profits,” which are generated by the Federal Reserve’s balance sheet, are included in the NIPA measure of corporate profits. As shown, actual corporate profitability substantially weaker once you extract the Fed’s profits from the analysis.

Most Profitable Company, The Most Profitable Company In The World

WHO does a Flip Flop on Lockdowns

The World Health Organization’s special envoy on COVID-19 Dr. David Nabarro told The Spectator in an interview aired on Oct. 8 urging world leaders to stop using lockdowns as the primary control method against the spread:

“We in the World Health Organization do not advocate lockdowns as the primary means of control of this virus. The only time we believe a lockdown is justified is to buy you time to reorganize, regroup, rebalance your resources, protect your health workers who are exhausted, but by and large, we’d rather not do it.”

Nabarro pointed to the collateral damage that lockdowns are having worldwide, especially among poorer populations:

“Just look at what’s happened to the tourism industry, for example in the Caribbean or in the Pacific, because people aren’t taking their holidays. Look what’s happened to smallholder farmers all over the world because their markets have got dented. Look what’s happening to poverty levels. It seems that we may well have a doubling of world poverty by next year. Seems that we may well have at least a doubling of child malnutrition because children are not getting meals at school and their parents, in poor families, are not able to afford it,”

“This is a terrible, ghastly global catastrophe actually,” he added. “And so we really do appeal to all world leaders: Stop using lockdown as your primary control method, develop better systems for doing it, work together and learn from each other, but remember – lockdowns just have one consequence that you must never ever belittle, and that is making poor people an awful lot poorer.”

Watch the video:

https://twitter.com/spectator/status/1314573157827858434?s=20

Voting for the the “Lesser Evil” or Better Liars?

With 26 days left until the election, perhaps it’s worthwhile to reflect on what this whole charade is really is all about…something majority of American voters do not quite understand.

Congress doesn’t actually write legislation, special interest groups or lobbyists do. Lobbyists are paid very handsomely to get politicians to go along with the need of the special interest group. The last item of legislation written by congress was probably sometime around the mid 1990’s.

“It’s a big club, and you ain’t in it.” – George Carlin. He sums up the state of the country today even though he’s been dead for 12 years.

Today, legislation is sub-contracted to a section of DC outfits known as K-Street. That’s where the lobbying industry lives. Lobbyists write the laws; congress sells the laws; lobbyists then pay congress lucrative commissions for passing their laws that will use your taxpayer dollars to enrich them. That’s the modern legislative business in DC.

Remember this when you are voting for a Congressional Rep or a U.S. Senator you are not voting for a person who will write laws. Your rep only votes on legislation to approve or disapprove of projects that are written by special interest groups and sold to them through lobbyists who work for those outside groups.

Back home in Tanzania, when we talk about paying-off politicians, we call it bribery. However, when we undertake the same process in the U.S. we call it “lobbying”. This is how politicians become multi-millionaires.

19 Years of Endless War

Yesterday marked the 19th anniversary of the never ending “War on Terror”. Millions of deaths, tens of millions of people displaced, trillions of dollars spent to kill people in countries that pose no threat to us.

The mainstream media is silent since it’s really a propaganda arm of the government. There’s really no such thing today as a “free press” – if you expose crimes, you end up in prison like Julian Assange, Chelsea Manning or Edward Snowden, even in the “debates” not a word about the war – nothing – like it doesn’t even exist.

If you watched the “debates”, it’s just two power hungry psychopaths arguing about who’s going to steal your taxes and spend them on wars, or billions of dollars worth of military contracts to Israel, Egypt, etc. nothing that actually benefits the average American – only now at a $27 trillion national debt – it will be not just you paying higher taxes, but also your children and grandchildren who will be punished. Don’t kid yourself, please, you are not voting for the “lesser evil”, only voting for the better liars.

I hear people claiming to be “enlightened” and “woke” activists while regurgitating mindless slogans that were fed to them by the media and politicians. The same people will be either out there protesting or looting and destroying property depending on which color of lives matter to them but color blind to their own government’s war crimes that amount to genocide. The apathy is truly astonishing. In fact, on a NatGeo survey 83% of Americans couldn’t even point to Afghanistan on the map.

Copyrights Studio Bendib. For more political cartoons, please visit http://www.bendib.com.

The Science is “Settled” Idiocy

You often hear people regurgitate the rubbish arguments for lockdowns and shutdowns with voodoo “science” from the CDC or the media . One day they’ll show studies saying “Masks are ineffective” and then next “Masks saves lives”. One day they’ll issue guidelines for staying 6 feet apart from people, the next they’ll say COVID-19 is airborne so you can get it by just breathing. Masks in California are mandatory, but when you sit down to eat and drink in a restaurant you can take it off and COVID won’t attack you while you’re nibbling your nachos. But wait, now California governor Newsom is urging diners to wear a mask in between bites.

When you start questioning this nonsense from a scientific perspective you’re shutdown – “The science is settled”.

Actually, there is no such thing as “settled science”. That is not how science works. This is something even little kids in elementary school know. There is a process and method of scientific inquiry which begins with questions, research, a hypothesis, experiments, observations, data and analysis. You constantly align your results and data with the hypothesis to see if you’re right or wrong and make decisions accordingly.

Today despite all the evidence proving lockdowns don’t work and all the crazy scenario pandemic models are wrong, people still insist on destroying a country’s economy with mass business shutdowns, wiping out people’s livelyhoods. This way more people are likely to die of starvation than COVID.

Stacey Rudin writes:

Carl Sagan famously said, “the cure for a fallacious argument is a better argument, not the suppression of ideas.” This wisdom has been sadly forsaken during the COVID19 pandemic, when one powerful narrative has taken not only the public, but the scientific community, by storm. The story is that societies cannot survive the pandemic without society-wide lockdowns until we have a vaccine, despite the fact that we have never had a vaccine for a coronavirus, vaccines usually take many years to develop, and many of them are not all that effective once made. Penetrating this narrative has been incredibly difficult even for impeccably credentialed scientists. One might even say that this pandemic killed scientific debate.

Even as evidence proving that lockdowns do not stop the virus rolls in by the truckload, the scientists who argue for a different approach are marginalized, censored, affixed with disparaging labels, and ostracized. Sweden’s chief epidemiologist Anders Tegnell was accused of “leading Sweden to catastrophe” and of “experimenting” on the Swedish people. Nobel Laureate Michael Levitt’s careful studies and models were labeled “lethal nonsense” as he weathered attacks left, right and center. John Ioannidis, one of the world’s most productive scientists, found his studies smeared and ignored. Sunetra Gupta, one of the world’s foremost epidemiologists at The University of Oxford, found that expressing her wide-ranging infectious disease knowledge suddenly made her “unethical and dangerous.”

Reaad the article at:

The Pandemic that Killed Debate

Travel and Trade Gave Humans Immunities Against Diseases

If you think about how the the Native Americans died from disease when the Europeans landed in the Americas, you find that they were not immune against disease. Europeans with their immune systems could battle diseases like influenza, typhoid, measles and smallpox. But these diseases had a devastating effect on Native peoples who had never encountered them before and had no immunity for them, killing off an estimated 90% of Native Americans since the arrival of Columbus. This was largely due to the biological isolation and the limited intrusion of infectious diseases in America before A.D. 1492. It was only through travel and trade that boosted immune systems of humans everywhere – not lockdowns and isolations.


“One of the brave and intelligent voices here is Sunetra Gupta, the professor of theoretical epidemiology who leads a full team of experts at Oxford University. 

Her understanding is so profound that she has, in an interview, offered up a fascinating thesis concerning why the flu pandemic of 1918 was the last truly catastrophic plague we’ve seen in the modern world. 

Gupta’s claim is that when we live in isolated tribes that are sheltered from exposure, those people gradually become weaker and more vulnerable. The wrong pathogen arrives at the wrong time and the people have not been biologically prepared for it. It wipes them out in shocking ways. But with modern capitalism came the end of such sterile isolation. It gave us new methods of travelling, mixing, associating, moving, and hence led to more exposure to disease and the resulting antibodies. Hence, it is not just better therapeutics and vaccines that helped us conquer some plagues but immunities themselves. Our biological toolkit for fighting disease became improved simply through travel, trade, and global commerce.”

Read the Full Article by Jeffrey Tucker (Director of the American Institute of Economic Research):

https://www.aier.org/article/how-global-capitalism-boosted-immunities





Two Harvard Professors Argue for a “Radical” Covid Strategy

Check out this whole enlightening interview as author Nicole Aschoff interviews two Harvard Medical School professors.

Both argue that lockdowns are a terrible strategy that devastate the most vulnerable in society.

Katherine Yih is a biologist and epidemiologist at Harvard Medical School and Martin Kulldorff is a professor of medicine at Harvard Medical School.

Sadly the government prefers to choose politics over science. The politicians don’t protect the vulnerable (New York – they forced COVID-19 patients into elderly nursing homes which killed thousands).

We need to get the state COMPLETELY out of the decision-making process.

Humanity spent much of the 20th century learning that top-down, centralized decision-making consistently produces humanitarian disaster.

Why are we still talking about this?

“But I have been struck by how this emphasis on keeping the numbers down at all costs has NOT EVOLVED with time. There is a kind of SIMPLISTIC goal of keeping people from getting infected, period. Now this may seem like a worthy goal, but with a highly contagious respiratory virus to which most of the world’s population is probably still not immune, people ARE going to get infected. The virus will spread, quickly or less so, until herd immunity is reached.”

https://www.jacobinmag.com/2020/09/covid-19-pandemic-economy-us-response-inequality

COVID: Is It Time We Learned to Live With It?

“This is how we have always managed viruses. Why is this so different? If we keep introducing restrictions and lockdowns while we wait for a vaccine it will be the young that suffer the most, particularly those from more deprived backgrounds. We can’t keep doing this – it would be an injustice.”

– Prof. Sunetra Gupta, infectious disease epidemiologist, professor of theoretical epidemiology at the University of Oxford.

https://www.bbc.com/news/health-54228649

Gupta, who has been called the world’s preeminent infectious disease epidemiologist, says it’s a good thing for young and healthy people to be exposed. She’s been a critic of the lockdown approach to the COVID-19 pandemic, arguing that the cost is too high for the poorest in society. She has also questioned the quality of the debate on the pandemic. Pointing out that herd immunity is a way of preventing vulnerable people from dying, her view is that countries should follow the general approach taken by the infectious disease epidemiologists in Sweden, shielding the vulnerable as best possible while those with minimal risk go about their lives and allow herd immunity to build up.

She has has been awarded the Scientific Medal by the Zoological Society of London and the Royal Society Rosalind Franklin Award for her scientific research. In July 2013, Gupta’s portrait was on display during the prestigious Royal Society’s Summer Science Exhibition along with leading female scientist such as Madame Curie.

Covid-19 Antibodies Last 4 Months

A new study published in the New England Journal of Medicine, finds that antibodies to SARS-CoV-2 infection lasted for at least 4 months after initial infection, a large serosurvey in Iceland found. Although the study didn’t go into if the antibodies adequate to prevent re-infection.

“Conclusions

Our results indicate that antiviral antibodies against SARS-CoV-2 did not decline within 4 months after diagnosis. We estimate that the risk of death from infection was 0.3% and that 44% of persons infected with SARS-CoV-2 in Iceland were not diagnosed by qPCR.” -New England Journal of Medicine

More confirmation that immunity is possible. A lot more effort should be put into treating the symptoms early to reduce the damage to the body and reducing the fatality rate than relying on a vaccine to prevent spreading it. So far the recovery rate is around 98% and obviously evidence shows they are now well armed with antibodies to fight further infections and do not need vaccination.”

Read the study at:
Humoral Immune Response to SARS-CoV-2 in Iceland

How Iceland Beat Coronavirus

In Iceland, some businesses were closed for a few weeks, but when they realized they didn’t need to, quickly re-opened up everything. Lockdowns don’t work and are derimental.

“Iceland never imposed a lockdown. Only a few types of businesses—night clubs and hair salons, for example—were ever ordered closed. Hardly anyone in Reykjavík wears a mask. And yet, by mid-May, when I went to talk to Pálmason, the tracing team had almost no one left to track. During the previous week, in all of Iceland, only two new coronavirus cases had been confirmed. The country hadn’t just managed to flatten the curve; it had, it seemed, virtually eliminated it.”

https://www.newyorker.com/magazine/2020/06/08/how-iceland-beat-the-coronavirus