Breaking Up Google Will Rob Your Retirement of Billions

Keith Fitz-Gerald Apr 27, 2017
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Jonathan Taplin authored an op-ed in the The New York Times April 22nd Sunday Review making the case that it could be time for the government to break up “break up Google” or “regulate them like public utilities.”

I couldn’t disagree more vehemently.

Yesterday’s antitrust laws can’t regulate today’s technology but they sure as heck can certainly destroy its profit potential. And, unfortunately, yours, too.

Here’s what you need to know… and how to defend your money against government meddling.

The Government Wants a Piece of Google Pie

Jonathan Taplin is no slouch. In fact, he’s a very bright guy who is the Director Emeritus of the University of Southern California’s Annenberg Innovation Lab.

Normally, I agree with him – especially when it comes to Silicon Valley, which he characterizes as being populated by a bunch of spoiled, ignorant brats who are clueless when it comes to the consequences of their actions… to which I’ll add, “and their products.”

There is nothing more frustrating to me than knowing Google – aka Alphabet Inc. (NasdaqGS:GOOG) – dominates today’s digital world.

Speaking personally, I hate the fact that every digital footprint I leave is tagged somewhere by some company unknown to me that’s anxious to sell it to the highest bidder in an effort to “monetize” my behavior.

And, while we’re at it, I loathe the fact that the technology is increasingly being sold to medical providers, insurance companies, financial providers – all of which are using it to deliver “targeted” advertising and services to me at prices that somehow always seem higher than they used to be.

The very term is an insult.

But having the government break Google up??!!

No way.

The markets will take care of that all by themselves, and investors who are along for the ride will do very well by letting that happen instead of falling prey to out of touch regulators who don’t understand what’s going on.

Take Google’s browser, Chrome, for example. It’s got an 88% market share of browser traffic because competing browsers like Microsoft’s Internet Explorer stinks and Yahoo’s ill-fated Axis stunk. Users selected Google because they liked it and found it valuable.

The argument that antitrust regulation works on behalf of the consumer is a four letter word that I can’t print. When you take a closer look, most of the people complaining about big monopolies are not consumers, but other suppliers who stand to benefit if there’s enforcement action.

Naturally, regulators will try to sell the break up as a great story.

Instead of trying to help existing and new companies develop, the government wants to compete by punishing the successful. They always have – with railroads, with oil, with airlines – and now they’re going to do it with technology (and, if this idea gathers steam, with Alphabet Inc., specifically).

People don’t realize it, but the Justice Department, working in concert with a wide variety of Washington agencies, has canned a number of deals over the past few years, including Sysco Corp.’s (NYSE: SYY) attempt to buy U.S. Foods, Comcast Corp.’s (NasdaqGS:CMCSA) attempt to purchase Time Warner Cable (NYSE:TWX), Staples Inc. (NasdaqGS:SPLS) and Office Depot Inc. (NasdaqGS:ODP), just to name a few.

Things are so egregious that even Thai Union (OTC:TUFBY), which makes Chicken of the Sea, was stopped from buying Bumble Bee Tuna back in 2015, for crying out loud. Tuna fish!

What Policy Wonks Are Missing

The last thing a regulator should want to do is hobble one of the world’s most successful companies. Doing so will squash innovation and destroy hundreds of billions of dollars in shareholder value – much of which is in retirement plans.

The numbers are hard to come by, but this is especially important when you consider that individual households may own as much as 80% of the corporate equity market when you combine the estimated 38% of stocks owned directly by U.S. households with the indirect ownership associated with mutual funds, pension funds, and insurance policy investments.

I can all but guarantee that regulators haven’t thought about how much wealth they’ll destroy if they move ahead. And, of course, that’s also part of the problem.

Companies like Alphabet are completely changing the face of what we think about regulation, utilities, government, structure – you name it – specifically because they’re unconventional, innovative, and empowering. Like the other companies in the so-called “Fabulous Five” we talk about frequently, Alphabet has become so integral to our lives that it’s a “must-have.”

I’m not surprised in the least that the company rubs Washington’s inner circle the wrong way because it bypasses what they consider to be the proper relationship between those who rule and those who follow.

Big Companies Are Not Anti-Competitive – Antitrust Laws Are

Antitrust laws have their roots in the Sherman Act of 1890 and the Federal Trade Commission Act and Clayton Act of 1914, all of which are intended to ensure lower prices, efficient competition, and higher quality in the name of consumer protection.

Here’s the rub…

Unlike most laws, which have a very clear cut basis for what’s right or wrong, antitrust laws are based on an unreasonable restraint of trade. That means they’re decided on a case-by-case basis.

Obviously certain things like price fixing and bid rigging are so blatant that they’re considered “per se” violations, a legal term meaning there is no justification nor allowable defense under the law.  But – and you’ll see where I’m going with this in a minute – violations are determined one by one.

The Justice Department, acting on input from global regulators worried about competition and product development in more than 30 markets, has iced deals left and right to in the name of “consumer protection.”

This makes plenty of sense to government watchdogs who would rather use government policy as a punitive measure than a tool for national ambition and success. Yet, it makes no sense whatsoever to anybody interested in actual competition, let alone profits.

Never mind that this country and capitalism are based on opportunity, not coercion. Government apparatchiks cannot understand the very fundamentals of capitalism let alone how money actually works.

Every individual and company has the right to enter any market they choose and to sell goods and services at a price that the market will bear. Nobody is forced to sell and nobody is forced to buy. Ever.

The hypocrisy is staggering.

Microsoft isn’t going to roll over and let Apple take over huge sections of its business simply because they’re too dominant with a 90% market share. The DOJ’s said nothing.

Amazon isn’t going to pause to let Alibaba gain ground because they’re feeling guilty about the fact that the company accounted for more than 50% of e-commerce volume growth last year. The DOJ’s taken no action.

Facebook isn’t going to slow down now that it accounts for 43.9% of all social media site visits, let alone give that back to MySpace because they’ve been too successful. The DOJ’s been silent.

Or consider Becton, Dickinson and Co. (NYSE:BDX) when it bought CareFusion Corporation in 2015. In fact, we specifically noted the merger as a catalyst for higher profits when I brought it to subscribers’ attention in our sister publication, the Money Map Report, and gave anybody who followed along the opportunity to capture triple-digit returns of at least 163% since.

Nobody raised a stink when Vincent Forlenza, Becton Dickinson’s Chairman, noted specifically that the deal was a major milestone in the company’s 118-year history and “significantly accelerates BD’s strategy” … “as we become one of the largest global leaders in medical technology.”

At the end of the day the only true monopoly is the government because it’s the only entity capable of using force to intervene in otherwise free markets.

Businesses cannot force consumers to do anything in truly free markets.

Should You Still Invest in Alphabet?

Now, let me get off my soapbox and talk about how you make money in a situation like this. That is, after all, why we’re all here.

Without hesitation – you should be buying shares of Alphabet Inc. even if you have to do it one share at a time and even if it’s flirting with all-time highs.

Alphabet is the ultimate digital equivalent of completely free choice – and customers love it because it’s innovative, efficient, and profitable.

But you have to buy it ahead of time – meaning before the government push to break it up gathers momentum. (Or risk getting left far behind.)

At the end of the day, it’s not Alphabet that the regulators find so threatening but the innovation driving it. That’s why the company is far more valuable than they’ll ever understand.

Investors simply cannot afford to miss the boat.

The company is also one of the top five holdings in what I like to call the “Blue Chip Hall of Famer” program. It’s just one of several my team dug up, and belongs to a special class of investments you can get in on today. I call them “26(f) Programs.” They give investors the opportunity to earn aggressive monthly income combined with huge lump-sum payouts.

You can potentially get paid $2,000… $5,000… even more… every month for the rest of your life.

And on top of that, there are 26(f) Programs that can operate as 100% legal tax havens.

Best regards for great investing,

Keith

One Response to Breaking Up Google Will Rob Your Retirement of Billions

  1. Maria A Palo says:

    Hi Keith.

    My name is Maria. I am on very limited income due to my disabilities hence having great difficulties making ends meet. So, I’m wondering if I would qualify for the “…26(f) Programs that can operate as 100% legal tax havens…?” I will be 63 in August, so I don’t have much time till retirement or my passing – which ever comes first. I have a tiny 491K portfolio that tanked recently and would appreciate any help you can offer. Please let me know. Thank you!

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