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Eric Maugendre<a href="https://social.coop/tags/paymentSystem" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#paymentSystem</a> <a href="https://social.coop/tags/default" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#default</a> <a href="https://a.gup.pe/u/economics" class="u-url mention" rel="nofollow noopener noreferrer" target="_blank">@economics</a> 🧵When will the markets acknowledge the breakdown in the USA governance and the elevated risk of voluntary defaults across the spectrum of government obligations?Stephanie Kelton: <a href="https://stephaniekelton.substack.com/p/will-the-ratings-agencies-react-to" rel="nofollow noopener noreferrer" translate="no" target="_blank">https://stephaniekelton.substack.com/p/will-the-ratings-agencies-react-to</a><a href="https://social.coop/tags/Treasury" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Treasury</a> <a href="https://social.coop/tags/bankruptcy" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#bankruptcy</a> <a href="https://social.coop/tags/sovereignty" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#sovereignty</a> <a href="https://social.coop/tags/money" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#money</a> <a href="https://social.coop/tags/currency" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#currency</a> <a href="https://social.coop/tags/DOGE" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#DOGE</a> <a href="https://social.coop/tags/economy" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#economy</a> <a href="https://social.coop/tags/debt" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#debt</a> <a href="https://social.coop/tags/Musk" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Musk</a> <a href="https://social.coop/tags/ratings" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#ratings</a> <a href="https://social.coop/tags/agencies" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#agencies</a> <a href="https://social.coop/tags/USA" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#USA</a> <a href="https://social.coop/tags/governance" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#governance</a> <a href="https://social.coop/tags/compliance" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#compliance</a> <a href="https://social.coop/tags/responsibility" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#responsibility</a> <a href="https://social.coop/tags/techCulture" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#techCulture</a> <a href="https://social.coop/tags/techBros" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#techBros</a> <a href="https://social.coop/tags/manliness" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#manliness</a> <a href="https://social.coop/tags/masculinity" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#masculinity</a> <a href="https://social.coop/tags/spending" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#spending</a> <a href="https://social.coop/tags/expenditures" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#expenditures</a> <a href="https://social.coop/tags/ruleOfLaw" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#ruleOfLaw</a> <a href="https://social.coop/tags/lawAndOrder" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#lawAndOrder</a> <a href="https://social.coop/tags/Constitution" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Constitution</a> <a href="https://social.coop/tags/MMT" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#MMT</a>

Chuck DarwinA 'cash crunch' forces Senate Republicans to abandon traditional adsHigh ad rates and a Democratic cash advantage have the GOP scramblingThe National Republican Senatorial Committee has canceled all of its planned independent expenditures across the country and will instead use the money to finance "<a href="https://c.im/tags/hybrid" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#hybrid</a>" <a href="https://c.im/tags/ads" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#ads</a> with its candidates, reports Politico's Ally Mutnick. The move, she explains is due to a "cash crunch" Republicans are facing thanks to superior fundraising by Democratic candidates.Thanks to that deficit, the NRSC's shift has been underway for months. Only the Senate races in Michigan and Nevada are still seeing traditional "<a href="https://c.im/tags/independent" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#independent</a> <a href="https://c.im/tags/expenditures" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#expenditures</a>" from the committee, and these, too, will soon come to an end.Hybrid commercials, allow outside spenders to split the cost of advertising with the campaign they're boosting -- and take advantage of federal rules requiring stations to charge lower rates to candidates rather than the higher rates third-party groups face.Party committees and super PACs can therefore get more bang for their buck, especially in media markets where an influx of political ads has caused the cost of ad time to skyrocket. Unnamed Republicans tell Mutnick that one such market is <a href="https://c.im/tags/Missoula" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Missoula</a>, Montana, where 🔸outside groups now need to pay an astonishing 25 times as much as a candidate would. Those same sources also relay that, had the NRSC continued to air ads against Democratic Sen. Jacky Rosen in Nevada, it would need to pay a rate 10 times greater than the one its nominee, Sam Brown, is getting.👉 There's a drawback, though. Hybrid ads are subject to more stringent content requirements than other commercials. Most notably, such ads are required to reference a political party writ large, as opposed to just a single candidate. These requirements, Mutnick notes, can make these spots "clunky and difficult to design."That may not be much of a concern in ♦️red states like Montana or Ohio where a message broadly attacking Kamala Harris and the Democratic Party will likely be popular. However, it can be more of an impediment in ♦️swing seats where the GOP candidates need to win over at least some voters open to backing Harris.It's an especially serious obstacle in ♦️dark blue Maryland where Republican Larry Hogan is doing whatever he can to distance himself from Donald Trump and his allies. ⚠️However, the NRSC may not feel a need to invest in Maryland because a super PAC funded in part by 🆘 conservative <a href="https://c.im/tags/megadonor" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#megadonor</a> <a href="https://c.im/tags/Ken" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Ken</a> <a href="https://c.im/tags/Griffin" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Griffin</a> is spending huge amounts on independent expenditures, and those ads are under no obligation to mention the rest of the GOP<a href="https://www.the-downballot.com/p/morning-digest-a-crash-crunch-forces" rel="nofollow noopener noreferrer" translate="no" target="_blank">https://www.the-downballot.com/p/morning-digest-a-crash-crunch-forces</a>

Chuck DarwinAnd — oh, here’s an interesting cash windfall — <a href="https://c.im/tags/Texas" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Texas</a> <a href="https://c.im/tags/Instruments" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Instruments</a> raised about 💥$2.5 billion by selling stock over these five years. Wait, what? Selling stock, not buying stock? ⁉️Selling stock to whom? Hold that thought …Put it all together and I figure the company generated about $25 billion in truly free cash flow over this 5-year span. ‼️What is management going to spend this treasure chest on?Well, surely you’re going to spend a healthy amount on <a href="https://c.im/tags/capital" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#capital</a> <a href="https://c.im/tags/expenditures" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#expenditures</a>, right? I mean, you took a $5.2 billion depreciation and amortization charge over this time span, and we all know that semiconductor manufacturers need to stay on that bleeding edge of technological innovation to keep earnings growing in the future, right?Nope. Texas Instruments spent $3.3 billion on fixed assets from 2014 through 2018, one-third of that total in 2018. Some significant proportion of that was maintenance capex as opposed to growth capex.Well, if you didn’t spend your money on property, plant and equipment, then surely you spent a healthy sum in <a href="https://c.im/tags/MandA" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#MandA</a>, right?Nope. $1.6 billion over five years. Tuck-in stuff.I guess you were paying down debt, then. <a href="https://c.im/tags/Deleveraging" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Deleveraging</a> up a storm, right?Nope. Paid down debt by $500 million a year in 2014, 2015 and 2016, but increased debt by $500 million in 2017 and $1 billion in 2018.So it’s <a href="https://c.im/tags/dividends" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#dividends</a>, right? This is where all the cash went?Now we’re getting there: ⭐️$9.1 billion in dividends over five years. A healthy direct return of capital to shareholders.But it’s just a warm-up to the main event: $15.4 billion in <a href="https://c.im/tags/buying" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#buying</a> <a href="https://c.im/tags/back" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#back</a> <a href="https://c.im/tags/stock" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#stock</a> from 2014 through 2018.⭐️Between stock buybacks and dividends, that’s $24.5 billion in cash “returned to shareholders”, essentially 100% of the free cash flow generated by the company over the past five years.❗️Now here’s the kicker.What sort of share-count reduction would you think that this $15.4 billion in buybacks gets you? I mean, that is the logic here, that investing $15.4 billion in the company’s own stock is the best possible capital allocation that the company can make.I would have guessed that surely $15.4 billion would retire anywhere from 20% to 25% of the shares outstanding over this time frame, with the stock price ranging from $40 to $100.♦️In truth, Texas Instruments retired only 10% of its outstanding diluted shares with its $15.4 billion investment, going from 1.1 billion shares to 990 million shares.⚠️But wait, there’s more.From 2014 through 2018, Texas Instruments bought back 228.6 million shares for $15.4 billion. That works out to an average ♦️purchase price of $67.37.Over that same span, Texas Instruments sold 90.8 million shares to management and board members as they exercised options and restricted stock grants, for a total of $2.5 billion. That works out to an average ♦️sale price of $27.51. ⚠️The difference in average purchase price and average sale price, multiplied by the number of shares so affected, is $3.6 billion.🔥In other words, 40% of Texas Instrument’s stock buybacks over this five-year period 🧨were used to sterilize stock issuance to senior management and the board of directors, who received $3.6 billion in direct value from these buybacks.👀♦️But wait, there’s more …As of Dec. 31, 2018 there were still 40 million shares outstanding in the form of options and restricted stock grants to management and directors, at an average weighted exercise price of $55. At today’s stock price, that means an additional $2.6 billion in stock-based compensation has already been awarded.Well golly, these surely must have been <a href="https://c.im/tags/amazing" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#amazing</a> <a href="https://c.im/tags/managers" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#managers</a> and directors to warrant that sort of stock-based compensation in addition to their cash compensation.This is the performance of Texas Instruments (in white) and the iShares PHLX Semiconductor ETF (in gold) over the same five years. Texas Instruments is the fifth-largest position in that ETF and that underlying index, with a 7.1% weight.⚠️For the past five years, Texas Instruments has been nothing more than a tracking stock for a passive semiconductor index. 🆘And for this privilege, shareholders have rewarded management and directors with 💰 $6.2 billion in stock, plus a couple of billion in cash compensation.‼️That’s why it’s never been a better time in the history of the world to be a senior manager of a publicly traded company.It’s a crying shame, because here’s the thing … the total return on owning Texas Instruments is, in fact, 👉15% higher than the ETF over this five-year span.❇️Because of the dividend.Do you want to run your company for cash generation? Do you want to return that cash to shareholders? Great!➡️ Use a special dividend, not buybacks.There, fixed it for you. <a href="https://c.im/tags/financialization" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#financialization</a> <a href="https://c.im/tags/Share" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#Share</a> <a href="https://c.im/tags/buybacks" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#buybacks</a><a href="https://www.epsilontheory.com/yeah-its-still-water/" rel="nofollow noopener noreferrer" translate="no" target="_blank">https://www.epsilontheory.com/yeah-its-still-water/</a>

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