Trump’s Corporate Masters.

Corporate Colonialism

The MoU with Iran quietly expired, so our Dear Leader took to Truth Social to announce that he was willing to bomb the shit out of Oman, and instructed Pete Hegseth to stop joint military exercises with South Korea. The latter request was made because of his personal friendship with the Dear Leader of North Korea. Confused? That’s the point.

With approval ratings lower than any president in history, Trump keeps on Trumpin’. Pundits warn that it will come back to bite him in the ass in the midterms, but he seems unbothered by that. Inflation continues to eat away at purchasing power, job losses are slowly mounting with only 61% of the population gainfully employed, and retail sales posted a staggering reversal in July. Gas prices are higher than they were at the start of Trump’s second term, and our strategic reserves are nearly drained.

Corporate debt is on the rise among the most profitable companies in the world, with several now reporting negative cash flows as a result. Yields on both ends of the curve are steepening as we roll over a historic amount of long-term debt into short-term notes. AI financing has quickly progressed from venture funding to equity to debt, and now we’re testing new circular financing and guarantees, as we’ll cover in the Chart of the Week. Consumer debt is once again at an all-time high, and defaults are on the rise in private credit, the auto market, student debt, and personal loans. It’s making the market rather unpredictable, so President Trump is planning to sell early access to his social posts to help make sense of it. In other words, insider trading. Oh, and his family company, World Liberty Financial, was cleared to gain a banking license. Because that’s normal.

American consumers are losing healthcare coverage at an alarming rate, and nearly every financial pundit is now saying that any month where we don’t lose jobs is now a positive month. Those are related thoughts, considering the private employer-provided insurance market is now the most viable way to obtain and maintain health coverage. And speaking of insurance, our Killer Left Take of the Week is a piece from More Perfect Union that uncovers how consumer insurance loss ratios are the lowest they’ve ever been. Translation: they’re denying claims and reducing coverage while raising premiums to pad profits.

The one standout in all of this is, of course, the stock market, something we’ve covered in great detail. But there’s another element that plays into this thesis of shit that I’m putting forward. Yes, the market is wildly overvalued. Yes, public companies have engaged in historic stock buybacks to inflate their valuations. Yes, it continues to be a safe haven for foreign investors and sovereign wealth funds that help drive up prices. And yes, it’s partly because corporate America has been awash in trillions of free to low-cost government dollars for the better part of 15 years, so it’s high on its own supply.

But there’s something else.

For the most part, corporate earnings have been amazing.

So what’s the correlation here? How do corporate earnings relate to North Korea, the war with Iran, gas prices, consumer debt, a weak job market, rising defaults, and skyrocketing debt? It all ties back to Stanley Deetz’s theory of Corporate Colonialism, whereby corporations exert a form of “colonial” control by embedding their values, priorities, and decision-making processes into the social and political fabric, often at the expense of democratic ideals and the public good.

It’s not just the white Christian nationalist doctrine of Project 2025, though that’s part of it. It’s not just the extreme corruption of the Trump family on display each day in the Oval Office. Also part of it. It’s the fact that we have unwittingly ceded control to the corporatocracy.

The longstanding project to undermine the public’s faith in our institutions has taken a deep psychological toll on the American psyche writ large. Take the case of the insurance companies. The More Perfect Union piece reveals that, on average, the country’s largest consumer insurance companies like Nationwide, Progressive, Geico, and Liberty Biberty spend 16% of their revenues on advertising. It’s why we can all sing their theme songs. That’s not what they’re supposed to spend money on.

Russell Vought and Project 2025 have contributed to the corporate takeover of the public square and our institutions by undermining the regulatory bodies created to protect us. From gutting the Environmental Protection Agency to utterly dismantling the Consumer Financial Protection Bureau, they’ve left us with no choice but to deal with our corporate overlords. ICE rounds up immigrants and sends them to private detention centers, and there’s no one to appeal to. Medicaid is actively jettisoning people from its rolls and sending them into private exchanges they cannot afford. Insurance companies are denying coverage and price gouging because there’s no one to stand in their way. Consolidation in media, food suppliers, Big Pharma, Big Tech, and Big Ag means higher prices for everything, everywhere, all the time.

Scott Bessent admitted out loud that Trump Accounts for newborns were a Trojan horse for someday privatizing Social Security. A new Yale study showed how Medicare for All would provide both universal coverage and savings for the American people, and yet our Democratic leaders like Hakeem Jeffries are now even bigger obstacles to attaining this dream than the Republicans.

Behind every inflationary aspect of your life or decision that costs more and delivers less is a corporation whose bank account gets fatter and fatter.

In this way, Trump has made good on at least one promise: he is running the country like a business.

This philosophy is the full and final realization of the infamous Powell Memorandum from 1971, which declared war on social welfare programs and the administrative state. If you’ve never read it or it’s been a while, I would encourage you to read it. It’s a stunningly straightforward blueprint to imprint the supremacy and omnipotence of corporate America by attacking college campuses, the legal system, labor unions, and liberal institutions and movements everywhere. It’s the clarion call to capitalists to bend the masses to the will of the board of directors and to leverage the innate public relations and advertising savvy of corporate America to sully the reputation of leftists, socialists, Marxists, and consumer advocates like Ralph Nader. In other words, use corporate profits to launch a large-scale propaganda campaign against the state and democracy.

It’s what makes this fight existential. Trump will someday be gone. And after the distractions die down and the professional bureaucrats move back into power as they always do, we will face an even stronger and more emboldened corporate enemy. In fact, the biggest threat to the left isn’t Trump. It’s the day after Trump. When the air comes out of the balloon and the pressure valves release a little. The moment we exhale and the normies say, “Thank goodness that’s over.” That’s the moment the real fight begins anew. Fighting Trump is a losing proposition. Hell, even Trump fights Trump. The guy has never held a consistent policy in his life.

I’m not sure what the Powell Memo equivalent will be on the left, but I’m damn sure its author isn’t currently in a leadership position in the Democratic Party.

Phantom Liabilities and the AI Buildout

Much has been written about Nvidia’s new $500 billion financing partnership announcement, which tracks closely with other financing deals for chips and data centers that are, quite frankly, confusing. I centered this COTW analysis on a Bloomberg article that attempts to explain the concept of residual value guarantees (RVGs) in this new round of financing arrangements because things are getting unhinged in the world of AI financing.

Investors are trying to quantify something like $70 billion in what Bloomberg calls “phantom liabilities”—real financial promises that simply don’t show up on the balance sheets of the companies making them. Nvidia, Broadcom, and Meta are all involved. And Nvidia just added fuel to the fire with a new $500 billion Wall Street financing partnership that will layer tens of billions more of this stuff on top of what’s already out there.

The financial fuckery behind the circular financing, vendor financing, whatever the fuck you want to call the near-trillion-dollar scheme to get data centers built and chips deployed across the United States is questionable enough. But RVGs are genuinely impressive if the goal is to confuse everyone.

Essentially, an RVG is a promise to pay for whatever is left on a note if it goes bad. These data centers are so capital-intensive that they’re being built through partnership, so the company that owns the data center is new. For example, Meta won’t own a massive data center. Another company will, and Meta will lease it. (Meta basically invented this style of financing.) If Meta walks away 10 years into a 20-year lease, then the company is on the hook for whatever is owed on the construction. After the lender strips the data center for parts like a chop shop and sells them off, the “residual” value—whatever is still left over—is then recognized as a liability.

Why do this? So Meta doesn’t have to carry the entire financing of the project on its books. Because if it did, Wall Street would instantly recognize that it was over its skis. Not to mention, the agencies rating the original bonds would take all of Meta’s debt into account instead of just rating the data center buildout on its own. And if you’re getting 2007 vibes right now, you’re on the right track.

Right now we’re seeing more than one version of this, which is adding to the confusion. I’ve put this flowchart together to help us walk through it.

Source: UNFTR via Bloomberg

So in our example above, Meta’s version is a bet on itself. Meta borrows money—in one case nearly $27 billion for its Hyperion data center in Louisiana—through a special-purpose vehicle that leases the property back to Meta for 20 years. The guarantee only fires if Meta walks away from its own lease early. Meta is the customer and the guarantor.

Broadcom’s version, and by extension Nvidia’s, is a bet on someone else. Take the Broadcom deal backing Anthropic, called Big Sky. Apollo and Blackstone put up $35 billion in actual cash. A special-purpose vehicle borrows that money and buys the chips from Broadcom. The vehicle leases those chips to Anthropic, and Anthropic’s lease payments are supposed to pay down the debt over time. If Anthropic stops paying, the chips get repossessed and resold or re-leased to claw back value. And only if that recovery still comes up short does Broadcom step in and cover the difference, up to roughly $29 billion of exposure on this one deal alone.

It’s a clever way to keep things off the balance sheet for as long as possible. Broadcom and Nvidia aren’t guaranteeing that the bond gets paid in full. They’re guaranteeing the leftover value after everything else has already been tried—after the customer defaults, after the hardware gets sold off. That’s the “residual” in residual value. It only becomes real money for Nvidia if Anthropic-style customers default and the used-chip market is also cratering at the same time, because everyone else is trying to unload capacity simultaneously.

Nvidia’s version of this, tucked into the new $500 billion partnership, works the same way but wider. Jensen Huang says Nvidia will backstop up to 25% of a given deal’s value, assessed case by case, spread across a much larger web of financing deals rather than concentrated in one customer like Anthropic. Less concentrated risk, but a much bigger total number riding on it.

One of my problems with Wall Street in general is that they never call things what they are. These special-purpose vehicles are shell companies. Plain and simple. The circular financing deals they’ve done thus far—the ones where Nvidia “invests” in a company that then buys its GPUs—those are Ponzi schemes. And it all makes sense when things are working, money is flowing and people are paying their bills. Just like collateralized debt obligations on mortgage-backed securities and credit default swaps as a backstop made sense until they didn’t.