- The ex-Communist country with higher internet speeds than America
- Why fiber optic won’t rescue you from the cable monopoly…
- … but an entirely new technology will (and make early investors a fortune)
- The weird job report and the market’s weirder reaction
- Traders double down on December rate hike; Rickards still says they’re wrong
- The bureaucrats who wouldn’t give up… “our government’s lies and the idiots who believe them”… another nasty surprise in the GOP tax plan… and more!
“This is a really big hit in my pocket, a really big hit,” says Portland, Oregon, businesswoman Tress Prefontaine. “I’m in a panic.”
Last Friday night, a small local internet service provider called SpiritOne suddenly went offline with no notice. Prefontaine is among the customers left in the lurch. She says weekly revenue at her travel advisory firm is down 25%.
The Oregonian newspaper reports many people in the Portland area chose SpiritOne “because they wanted to support a local business in an industry that typically favors behemoths.”
For them, it’s cold comfort that SpiritOne’s chief executive tells the paper his firm is migrating to new servers and will be up again within “four–48 hours.” He blames the hired help for failing to notify customers in advance.
“For too many of us, and for far too long, broadband internet service has meant turning to the same bloated monopoly that furnishes cable TV wherever you live.
“You want speedy downloads and streaming video with no hiccups? In huge swaths of the country, you’re stuck with cable.”
We wrote those words in this space on Feb. 20, 2014. Nothing has fundamentally changed since then.
Until now.
Competition is coming to the rescue. Soon the high costs and horrible customer service that come with cable internet will be a memory. And even sooner, you’ll have a shot at making a small fortune alongside the entrepreneurs who are about to turn the cable industry on its head.
For the moment, however, Americans remain stuck with internet speeds slower than those in many other developed countries.
In our 2014 report, we noted that the average broadband download speed in the United States was 21.29 megabits per second.
The good news is that the number has increased dramatically, according to the Speedtest Global Index — a collection of worldwide data from people who use the Speedtest app on their computers or mobile devices. The average speed is up to 72.71 Mbps.
The bad news is that’s good for only ninth place worldwide. Among the countries with speedier broadband than ours is Romania — a former Communist bloc country, for cryin’ out loud…
Don’t get the wrong idea: The technology that’s about to break the back of cable is not fiber optic.
When it comes to fiber’s potential to deliver the internet to your home, we’re reminded of an old joke about Brazil: “Brazil is the country of the future — and it always will be.”
We’ve been hearing big promises about fiber since 2010 — when Google announced ambitious plans to lay fiber and deliver blistering speeds of up to 1,024 Mbps.
At the time of our 2014 report, Google had launched a pilot program in three cities and announced plans to launch in 34 more.
Today? It’s up and running in only 18 cities. And many of those are on the map only because Google bought another fiber provider last year called Webpass. (Notice the skew toward hipster havens…)
What happened?
DSLReports says: “Last fall Google Fiber announced it would be putting a number of new fiber deployments on hold.”
Customers in Kansas City have standing orders for service that have been canceled; deposits have been refunded. In suburban Atlanta, Google has stopped asking for city permits to install fiber.
“Google Fiber has had a scattered, positive impact on many communities,” says DSLReports, “but locals are pretty clearly growing agitated by the company’s refusal to seriously address the company’s obvious wavering enthusiasm.”
Enthusiasm might indeed be curbed when Google execs ponder an installation cost of $3,000 per customer. In our 2014 report, we noted an Associated Press report citing Google investors who were “unnerved” about such costs. Guess investors weren’t the only ones, huh?
But soon, America’s long cable nightmare will be over.
“Imagine worldwide accessible internet — delivered straight to your home through thin air — with nothing slowing it down along the way,” says our science-and-wealth maven Ray Blanco.
He’s been on the trail of a technology he calls “Halo-Fi.”
“It could wipe out the entire bulk of internet providers with one swift blow, making the current $252 billion cable market obsolete.
“Best of all, backing it with a 40% stake is Japan’s richest man and greatest success story, known for turning young, promising startups into the well-known giants they move on to be.”
Profit potential: 5,349%.
You can see how Ray arrives at that number when you follow this link. No long video to watch.
To the markets, where stock traders have little reaction to a miserable monthly job number.
All of the major U.S. stock indexes are down from yesterday’s record closes, but by no more than a few hundredths of a percent.
For the first time since 2010, the wonks at the Bureau of Labor Statistics have conjured a monthly decline in nonfarm payrolls.
The “expert consensus” among dozens of economists polled by Bloomberg called for a subpar number, thanks to hurricanes Harvey and Irma — a weak gain of 100,000 jobs. Instead, the number is far worse at minus 33,000.
But to a degree, that’s only short-term noise. The unemployment rate fell to 4.2%, the lowest since January 2001. The number counts people as employed even if they weren’t paid during the week of the survey — i.e., folks in Florida and Texas. Even the real-world unemployment rate from Shadow Government Statistics rings in at a seven-year low of 21.9%.
But it’s another number in the jobs report that’s tanking bonds and gold today.
Treasury prices are falling, pushing yields up; the 10-year note is up to 2.39%, the highest since May. Gold, meanwhile, has sunk to a two-month low of $1,261.
The jobs report shows a 0.5% bump in average hourly earnings. The year-over-year change is now 2.9%.
The market psychology goes like this: If the Federal Reserve is looking for an excuse to raise interest rates in December, this might be it — wage inflation. Higher rates are bad news for bonds and gold.
Earlier this week, traders in fed funds futures were pricing in a 72% probability of a December rate increase. This morning, it’s 92%.
And Jim Rickards still doesn’t buy it. “No change in the forecast,” he tells us via email this morning: “I expect the Fed will not hike rates in December.
“‘Wage inflation,’” he explains, “does not translate directly into price inflation… It’s true people are getting more money in their paychecks, but they’re not spending it. They’re saving it or using it to pay down debt. Neither of those feeds into price inflation.”
Indeed, as we mentioned on Monday, the Fed’s preferred measure of price inflation is now 1.3% year over year — far from its 2% target.
There’s another factor Jim says will keep the Fed from raising in December.
“Janet Yellen does not want her legacy to be that of the Fed chair who tightened into weakness and caused a recession. She will pause and hand policy off to her successor for a decision at the March 2018 FOMC meeting.
“As the markets come to realize the Fed will not hike, they will rapidly correct the reflation trade. This will be bullish for gold, yen, euros and bonds and bearish for the U.S. dollar.”
By the way, it’s looking increasingly likely Yellen’s successor will be financier and former Fed governor Kevin Warsh — as Jim forecast here six months ago. In the weeks ahead, Jim will help us tease out where Warsh will take Fed policy, and its market impact.
Bureaucrats gone wild, Badger State edition: You have to sorta admire the persistence of the Wisconsin attorney general’s office.
Four months ago, we told you how three women had gone to court, helped by the good folks at the Institute for Justice, to challenge a statewide ban on the sale of homemade baked goods. We also told you how Lafayette County Judge Duane Jorgenson declared the ban unconstitutional, saying it’s clearly aimed at protecting outfits like the Wisconsin Bakers Association.
Turns out the bureaucrats didn’t give up. They interpreted Judge Jorgenson’s ruling to apply only to the three women who went to court… and they continued to target other small-scale entrepreneurs selling cookies and such made at home.
Yesterday, Judge Jorgenson clarified his ruling: It is not limited to the three plaintiffs. It applies to everyone.
“This is more than a win for us home-based bakers,” says plaintiff Lisa Kivirist. “It’s recognition that all small businesses have the right to earn an honest living free from irrational government regulation.”
Irrational, indeed: Violations carried a penalty of up to a year in jail and a $10,000 fine.
To the mailbag: On the subject of out-of-control government, one of our regulars is compelled to write in light of the week’s news…
“How many guns does one have to purchase before it raises the suspicion of the FBI, NSA, et al.?
“Twenty-three weapons at the scene and another 19 at his home. Nothing unusual here.
“Why is no one addressing the incompetence of our government that continues to miss the signs?
“As horrific as this incident was, the worst mass killing in our country (other than those carried out by our government) was accomplished with gasoline. In 1990 the fire killed 87 people in the Happy Land social club in New York.
“Why no hue and cry for gasoline control?
“Smoking, drinking, obesity and traffic fatalities kill hundreds or thousands of people every year, yet not a peep about how we must control these top killers.
“I’m sick of our government’s lies and the idiots who believe them.
“How many people are naive enough to believe the government actually gives a $hit about them?”
The 5: We don’t have an answer, but we did spot a meme on Twitter this morning that sums up things nicely…
“I noticed you talked about increasing the standard deduction,” a reader writes of the Republican tax plan, “but failed to mention that it plans to take away the personal exemption!
“Under many scenarios this can work out to be a tax increase! The devil is in the details!”
The 5: You’re right about the devil in the details, but read yesterday’s episode more closely: We even ran a few numbers about how the loss of the personal exemption could result in a tax increase for many middle-class households.
As long as we’re on the subject, here’s another nasty surprise buried in the GOP tax plan — relying on “chained CPI” as a measure of inflation.
Without getting into the weeds of how it’s calculated, chained CPI understates the rise in your cost of living even more than the government’s other bogus inflation yardsticks.
If you’re a really longtime reader, you might recall back in 2011 the Obama administration and Congress were kicking around the idea of using chained CPI as a way to keep a lid on the annual cost-of-living adjustment for Social Security.
In the end, the idea was dropped… but chained CPI is once again rearing its head in the nine-page tax plan the president was touting last week.
Result? You could end up in a higher tax bracket sooner than you would otherwise. “The difference is not large, but it adds up,” writes Max Gulker from the American Institute for Economic Research. Depending on where the brackets are set, “five years from now, an individual earning $75,000 would pay $70 more in income tax under the chained CPI, and an individual earning $150,000 would pay an extra $231.”
Combined with the loss of the personal exemption, which is indexed for inflation, the proposal “would especially hit low- and moderate-income households that rely on the earned income tax credit and standard deduction,” adds Howard Gleckman from the Tax Policy Center, “but it would affect all taxpayers in some way.”
The president puts his imprimatur on this proposal and still tries to pass himself off as a tax-cutting man of the people. Amazing…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. A few more facts about the “Halo-Fi” internet technology mentioned above…
- While it’s faster than cable, monthly service could be seven times cheaper
- The technology is about to start coming off a Florida assembly line
- The startup with exclusive distribution rights could leap from $1.2 billion in value to $251 billion, almost instantly.
Imagine how rich early investors could become. Discover the full story here.
