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If enthusiasm can work, we may have a shot at this. Plus amazing telecom traffic. Beyond amazing.

My old Australian boss told me I’d love the Americans because, like me, they substitute enthusiasm for intelligence. You can stretch that “logic” to this remarkably upbeat piece from The New York Times, which says the tax overhaul will boost the economy, despite what economists believe.

Believe hard enough and we’ll get that 4% annual growth. Stranger things have happened.

In Tax Overhaul, Trump Tries to Defy the Economic Odds

When President Trump adds his distinctive signature to the tax bill, he will also be making a huge bet that the Republican strategy of deep cuts for businesses and wealthy individuals will fuel extraordinary growth across the board.

Perhaps more than any other American political leader, Mr. Trump knows that long shots, like his own presidential bid, sometimes pay off. In that vein, he and congressional Republicans are arguing that their bitterly contested and expensive rewrite of the tax code will ultimately create more jobs and raise wages.

If they are proved correct, they will be repudiating not only historical experience, but most experts. From Congress’s own prognosticators to Wall Street’s virtuosos, scarcely any independent analyses project anything like the rosy forecasts offered by the president’s top economic advisers.

To Mr. Trump and his allies, the normal models just do not fully capture the high-octane “rocket fuel” embedded in the tax plan. Mr. Trump intuitively understands just how much attitudes and expectations can shape economic decisions.

With a businessman in the White House, Mr. Trump argues that companies, large and small, have a renewed faith in the economy. And the corporate tax cut, combined with the rollback in regulation, will prompt waves of new investment and hiring, as middle-class Americans liberally spend the extra money in their pockets.

“We’re going to easily see 4 percent growth next year,” the National Economic Council director, Gary D. Cohn, said. Steven Mnuchin, the Treasury secretary, declared the tax plan would generate enough growth to more than pay for its $1.5 trillion cost.

But those pronouncements are at odds with estimates from the former employer of both men, Goldman Sachs. The bank projected that the tax bill will add just three-tenths of 1 percent of growth in the next two years, before its impact peters out.

The firm’s annual growth estimate of 2.5 percent for 2018 matched the one issued this week by the nation’s central bank, the Federal Reserve, while the latest median Wall Street forecast hovered close by. And in 2019, growth is expected to drop to 1.8 percent, Alec Phillips, chief United States political economist for Goldman, said Wednesday after the Senate vote.

“We note that the effect in 2020 and beyond looks minimal and could actually be slightly negative,” the company said in a recent published summary.

Such projections are unlikely to deter Mr. Trump and Republican leaders from declaring success next year. Lower taxes and extra incentives to invest in 2018 are almost certain to encourage consumers to spend and businesses to expand.

Reduced rates mean most Americans will start taking home more money right away. Roughly three-quarters of taxpayers are expected to get a cut next year, according to the nonpartisan Tax Policy Center.

Employers may offer other sweeteners, even if they were not specifically spurred by the tax plan. AT&T announced Wednesday that it was giving more than 200,000 domestic employees a $1,000 bonus when the tax bill is signed. Fifth Third Bancorp, based in Cincinnati, also promised a $1,000 bonus and said it would raise the company’s minimum wage to $15 an hour.

Bitcoin. My “perfect” timing.

GBTC was the easiest, but not the most painless way into bitcoins. As one reader wrote, Fidelity, which is peddling GBTC, also peddled auction rate preferreds. Look what happened to them: They all went bust.

In short, caveat emptor. That means buyer beware. It also means don’t believe everything Harry (that’s me) tells you.

The rule is clearly: When things go up parabolicly, they’ll come down parabolicly (if that’s a word). Here’s the last ten days of GBTC, a vastly overpriced way of gambling on bitcoins (which is not a good idea, to begin with):

GBTCrash

Beyond amazing telecom traffic

I’m in Jerusalem (more about that later). I’ve got jet lag big time. I’m surfing the net at 3:30 AM Israeli time and I find this incredible research piece from Fidelity. My bolding. Read on:

2018 outlook: telecommunication services
Cable companies stand to benefit from broadband growth.
BY MATTHEW DRUKKER, SECTOR PORTFOLIO MANAGER,
Investing in Stocks Telecommunications Sector

Tremendous growth in broadband consumption continues unabated and remains a key trend for the telecommunication services sector. Globally, mobile-data traffic is growing by more than 50% per year and wireline traffic is increasing by about 20%.

 The biggest driver of this increase has been internet video, which is becoming mainstream. Telecom giant Verizon Wireless recently shared that its network carries as much traffic in one hour as it did in an entire week just 10 years ago — close to a 170-fold increase.

But while usage continues to skyrocket, companies are still trying to figure out how to profit from this trend. (Harry comments — keep reading.)

I estimate video to account for about two-thirds of the traffic on wireline networks, including cable, while less than half of traffic is coming through on wireless networks. Overall, as demand for broadband and higher-speed internet access rises, active investors have an opportunity to identify companies that can monetize this trend. As such, I am looking for ways to capitalize on increased adoption of broadband services and the proliferation of mobile data globally, which includes considering not only stocks that are within the telecommunication services sectors, but also those related to the telecom industry.

Cable companies represent one of the communications services segments that are benefiting from the uptick in broadband usage and growth. Certain cable companies have produced better growth simply due to their limited number of competitors and their ability to differentiate themselves. In most markets, there are just two competitors, which enables these companies to segment customers into different pricing tiers based on service level, and gives them the opportunity to capture market share.

As customers spend more time on the internet, they are demanding higher speeds. In most markets, cable companies are advertising the fastest internet speeds, and many households are switching to cable or are willing to pay for a higher-speed tier. Collectively, cable is capturing the entire broadband subscriber share (see chart). But despite having a superior product and a market that is increasingly coming to them, cable companies have less than 50% penetration of serviceable customers. As such, cable companies have a runway to win share and maintain pricing power, in offering high-speed internet service to sustainably grow revenue and free cash flow, especially since the barriers to entry are high and competition is weak.

cablecompanies

Cable companies have been capturing all new broadband subscriptions.

Telco = telecommunication services. “Net adds” refers to the number of households adding broadband service less the number of households canceling broadband service. Data represents a basket of cable and telco companies. Source: company reports, as of December 31, 2016.

Beyond market-share gains in broadband, cable companies may also have a better chance of capitalizing on growth in online video consumption with usage-based pricing. If done properly, usage-based pricing could more than offset headwinds from paid-TV cord-cutting-the consumer trend toward opting out of more expensive cable plans in favor of streaming services such as Netflix, Amazon Prime, and Hulu.

Online streaming services require high-speed internet, and cable faces little competition in this area. As more viewing migrates online, on-demand cable offerings could become the default aggregators of video content. This edge could offer cable companies yet another way to differentiate themselves and maintain flexibility in pricing, and the opportunity to harness long-term revenue growth and increase free cash flow, both drivers of valuation growth.

OK., Harry talking now. I’ve never been big on cable companies or ISPs like Verizon. For the time being, I think (and like) Netflix, Amazon, Adobe, Nvidia, and Roku.  Not easy to find big beneficiaries.  Definitely not Broadcom. I don’t like roll-ups. Others? Anyone got some ideas?

Travel tips learned

1. Take a decent  down feather travel pillow. Duxiana makes the best.

2. Take PJs. Delta provided nothing to Tel Aviv. Qantas and American give out cotton PJs to Australia. PJs are more comfortable than your street clothes for sleeping.

3. Planes now have power for your laptop. Take a power supply.

4. Take a three-pin (grounded) plug adapter. Planes’ outlets are loose.

4. Gogo WiFi Internet on planes is not reliable.

5. Replacing the battery in your old iPhone will speed it up.

6. Using U.S. carrier services overseas can be pricey. But not if you make very occasional, very short calls. Hotels have WiFi. WhatsApp is very popular overseas. And free. You can buy a SIM card. But they’re too fiddly.

7. Drink water. Lots of it. The world seems to lack humidity. New York. Jerusalem. ..

Favorite products

eyepad Technology

Finally someone has made something useful.

DietWater

The world’s dumbest invention are electronic Christmas cards.

This morning I got one from someone’s dog.

I don’t make this up. The dog’s name is Karny.

HarryNewton
Harry Newton, who’s thoroughly enjoying and marveling at Israel and its incredible technology prowess. Here are a couple of views from the old city:

MakeIsrealGreat GodBlessTrump

 

8 Comments

  1. Dman says:

    Harry, my Telcom picks for 2018 and beyond are GTT, CALX and WTT.

    In the Biotec sector I like CDXC. ChromaDex has an anti-aging compound called True Niagen that could experience a sales boom, especially in Asia. Harry this is the third time I’v mentioned this fascinating “speculation” to you.

    Harry maybe you’r beginning to believe like CNN’s Van Jones, who said the whole Trump/Russia investigation was a “nothing burger”…….

  2. Scooter says:

    If you look at how much of a bitcoin you actually get when you buy GBTC, the premium is extremely expensive. This is due to the outrageous transaction fee and one reason is because there can be only so many transactions in a certain time frame.

    “Bitcoin Cash” which is a different crypto currency doesn’t have quite that drawback and is taking the money away from Bitcoin.

    For me to give a friend $20.00 worth of bitcoin, a couple of days ago it would have cost $27.xx in transactions fees. Unreal.

    Watch those transactions fees.

    • harrynewton says:

      I dumped GBTC when it fell 10%.
      I’m back to square one on bitcoin. It’s rapidly going into the “too hard” basket.

  3. Big Fan says:

    Harry,
    The Fidelity analyst who wrote this garbage should be fired. Verizon: if VZ could selloff the wireline assets, they would, but they can’t find a buyer. It was less than 2 years ago when VZ sold the old GTE Florida, Texas and California wireline properties to Frontier. How bad is Frontier (FTR) doing? Very, very bad.
    Stock is down 80% YTD ! VZ is not doing any further FiOS rollouts; they promised NYC they would deploy Fiber everywhere, then said, “we’re not, sue us”
    Wireless 5G is the future. Not Cable, nor Telco wireline.
    Safe Travels,
    Big Fan

  4. Claude LeTien says:

    Harry, Webpass, which is now owned by Google, has a good start in the process of eating those cable companies lunch. http://www.sandiegouniontribune.com/business/technology/sd-fi-webpass-sunday-20170515-story.html

    We have it in our condo. We cut cut the cable cord and now have Webpass. For $60 per month, we get reliable high speed internet service to meet all of our streaming, browsing and phone.

  5. TomFromVa says:

    OK, Telco question – you can bring in gigabits of data via fiber optic, like Verizon does – so why is cable the answer?

  6. Glen says:

    Harry, the GTBC – Bitcoin Investment Trust – you bought last week is down almost 40 percent SINCE YOU POSTED THIS MORNING. This is scary, scary stuff. I hope you didn’t put millions into it because you’re down something like, what – 70 percent in seven days?