This is going to be a mix of my daily and the links post. And I have two broad themes which dominate the links. First, there is the recent post-Facebook scandal market volatility. That has seen Amazon, Apple, Netflix and Google follow Facebook down. And the question is what that means going forward. Second is the new Donald Trump, what I am calling ‘Trump Unchained’. He is acting more boldly and more aggressively now. Early reactions have come in from trading partners and allies.
The Facebook scandal will blow over
My read here is that this scandal involving privacy at Facebook is much like many before it. The company’s services are simply too important to too many people to think users will abandon the platform.
Moreover, Facebook is doing what all tech companies do now. It is pre-emptively taking out competition by buying rival platforms like Instagram and WhatsApp. This is where Facebook can grow a lot. All of the big tech companies are doing this. And sometimes, if the acquired platform is still fledgling, they simply kill the acquired company sometime after acquisition. And then they incorporate into their platforms whatever threat to their own services they acquired.
As I put it in February, “technological disruption [creates] competition out of nowhere. That puts fear into the minds of corporate executives and drives them to get big just for the sake of forestalling competition.” The only thing that will change this is regulation. And in the lax regulatory environment today, that’s not going to happen.
Eventually regulators will step in. But not yet. Regarding Facebook’s specific regulatory problems, I see a slap on the wrist after Facebook shows contrition as the likely outcome.
Here are the links. Note the first one on Amazon because Trump seems to be going after the company due to Amazon founder Bezos’ ownership of the Washington Post. That’s a burden other tech companies don’t have.
- Amazon shares fall after report Trump wants to curb its power
- Facebook cuts ties to data brokers in blow to targeted ads
De-FAANGed markets?
I am equally sceptical that the recent losses in big tech are anything other than a blip, an event-driven correction. These companies still have high valuations by most all traditional valuations metrics though.
John Authers at the FT gets the framing on Facebook, Amazon, Apple, Netflix and Google right:
Two explanations were touted for their success. One was that they had what Warren Buffett would call “wide economic moats” and others might call entrenched monopolistic advantages, and could be relied on to dominate the world for a generation.
The other was that, as with the “Nifty Fifty” stocks of the late 1960s and the dot-coms and TMT stocks of the late 1990s, dominance by a small group of companies was a symptom of a bull market in its final phase.
I’ll leave it there. Also see this from Reuters: FANG stocks’ bite has U.S. fund managers looking for alternatives
More on ‘Trump Unchained’
I mentioned the Bezos thing above. This is part and parcel of the new Trump. He now feels emboldened. And he is going to go his own way. How much of what he does is bluster is still unknown. But how much his policy inexperience will end up as a liability is the biggest unknown.
Note that he fired his VA Secretary by tweet and installed his personal physician, a military man into the job. This action displays three Trump habits that will become more acute.
- He will use Twitter to bypass the media and to give him a sense of control
- He will increasingly surround himself with trusted allies and family
- And Trump will continue to over-represent the military in future appointments, even where a military background is not necessary
Here are some links associated with ‘Trump Unchained’ and US foreign policy.
- Veterans Affairs Secretary Is Latest to Go as Trump Shakes Up Cabinet – The New York Times
- Poland signs $4.75 billion deal for U.S. Patriot missile system facing Russia
- China warns U.S. not to open Pandora’s Box, unleash trade ills on world
Business links