Antitrust and Big Tech – What to Buy, When, and Why
I can only shake my head.
Government regulators and the attorney generals (“AGs”) from more than a dozen states are apparently circling big-tech like a pack of wild dogs circles their prey according to a report in the Wall Street Journal.
Only it’s the regulators and AGs who will go hungry.
Yesterday’s antitrust regulation cannot be used to rein in big-tech.
Government regulators are simply amazing.
They’ll never waste a crisis.
They’ll never be “on time” for anything requiring real action.
And they’re great at shutting the proverbial barn door long after the horses have gone.
Take Microsoft Corp. (NasdaqGS:MSFT), for example.
Very few people today remember this, but the government went after Microsoft for bundling Internet Explorer with Windows in 1990. Then the Department of Justice piled on in 1998.
Only to settle the case in in 2002, a full 12 years and hundreds of millions of dollars later – perhaps even billions – in fees spent during the investigation. All to effectively “prove” nothing.
The settlement itself speaks volumes, if only regulators would pay attention instead of repeating history.
Microsoft agreed to give identical access to all computer manufacturers at a point in time when the company controlled 90% of the browser market and, in doing so, actually increased already competitive access!
Or, how about the “Baby Bells?”
The Department of Justice broke up AT&T in 1984, intending to create more competition by establishing seven regional operating companies.
Like that was going to work!!??
I remember doing a business school presentation at the time suggesting that the markets would reform every single one of ’em and that all the hullabaloo was for naught. My business professor, Dr. Andrew Maxwell, told me that he thought I was spot on which, then as now, was an unpopular position in academic circles.
Starting in 1997, Southwestern Bell merged with Pacific Telesis. Then, two years later, it bought Ameritech. That’s 3 of the 9 Baby Bells down for the count in only a few years.
Then Southwestern Bell purchased “Ma Bell” – its former parent company – in 2005 while renaming itself AT&T in the process. A year later it purchased BellSouth raising the count to 5 of 9.
In 2006, AT&T purchased Cingular Wireless, the company that had been jointly run by AT&T Wireless in 2004 after Southwestern Bell and BellSouth had acquired it in 2004. Cingular became AT&T Mobility. Then in short order, we’re talking 7 of 9.
As of 2016, all that looked like this even as so-called alternative media led by Time and Warner Communications emerged. Even that wouldn’t last for long with AT&T completing the acquisition of Time Warner in June 2018.
More recently, T-Mobile and Sprint are making headlines as the two companies move closer to a proposed $26.5 billion merger at the center of which is Dish Network which gets to acquire Sprint’s pre-paid business for $5 billion and access to T-Mobile’s network after the DOJ blessed the deal last month.
Got all that?
If not, don’t worry.
Regulators fail to grasp what’s happening in every sense of the word. The real disruptors are not big companies like many people think, but the technology itself that they’re unleashing on the rest of us.
Antitrust laws are intended to protect customers from reprehensible behavior by companies involved in industries that might otherwise harm them. Not those where the consumer has benefitted immensely.
Take Amazon.com Inc. (NasdaqGS:AMZN), for instance.
Team Bezos has resulted in lower prices, faster delivery, better quality, and more. Which means that yesterday’s laws don’t apply, at least as currently written and enforced.
Here’s something else.
Despite rising populist sentiment, antitrust laws are not intended to boost the fortunes of competitors who failed to stand up to change or who have done themselves in.
That said, if companies like Amazon have taken positions deliberately to harm the competition, then that’s another thing entirely. But that’s very, very hard to prove.
We already have laws on the books for this stuff.
Social sentiment is not an excuse for greater regulation no matter how many people would like to think so for reasons that seem to be entirely in their own self-interest.
Unregulated start-ups are already doing that job.
Last time I checked, Netflix Inc. (NasdaqGS:NFLX) has 2X the number of subscribers that the next two paid TV providers combined. YouTube, according to Forbes, now racks up more than a billion viewing hours a month.
What’s more, Internet streaming companies like Hulu and SlingTV are creating skinny bundles that directly challenge long-thought assumptions about who watches what and for how much.
Facebook Inc. (NasdaqGS:FB), Apple Inc. (NasdaqGS:AAPL), The Walt Disney Co. (NYSE:DIS), and Google’s parent company, Alphabet Inc. (NasdaqGS:GOOG) are creating original programming that now account for more than one-third of all Emmy nominations and may account for more than 50% shortly.
The solution is not more regulation.
So now what?
Big tech has spent billions on lawyers that have helped them thread the hopelessly outdated code that constitutes today’s antitrust law. And, by implication, that means they are well prepared to get around anything the government throws at them.
Traders know this and, in fact, are counting on it.
Every new headline will be a chance to accumulate shares as they dip predictably in reaction to legions of earnest looking leaders wringing their hands at Capitol Hill press conferences and on the campaign trail into 2020 elections.
The best way to play that is also one of my favorite Total Wealth Tactics, the LowBall Order.
For lack of a better term, Lowball Orders are like a “profit-trap” you lay in advance. They’ll let you conquer market madness and profit at your leisure.
If you’ve never heard the term before, a “Lowball Order” is one of the simplest, yet most powerful orders available today, especially in volatile market conditions like we have right now.
LowBall Orders are great for at least three powerful reasons:
- You can place them in advance
- You don’t have to be at your computer to actively manage your money
- You control your risk by waiting to make your move until the stock you want to buy meets YOUR risk reward criteria.
I’m thinking about Apple at $174.52 a share, Amazon at $1,586.00 or even Google at $1,073.45 a share… all of which are obviously at huge discounts to where they are trading today.
My point is that you pick a price – to the penny – that matches your individual risk tolerance, your investment objectives, and your belief about what the company is really worth.
While there is no hard-and-fast rule here, many traders find being within 10% and 15% of the most recent annual low is fertile hunting in choppy markets. Sometimes you can even get 20% or more if you play our cards right. Then, you place your order to buy “XYZ at $50 per share or less, GTC” – meaning good till cancelled.
You can also tack on special instructions if you like.
Most commonly, that’s things like the “GTC,” which stands for “good till cancelled” that I’ve already mentioned. Others include “GTD” which means “good to a specific date” you pick, or “AON” which means “all or none” as in the trader have to fill all the shares requested in a single trade.
What you’re doing here is laying a “profit-trap” in advance of conditions that you know favor your money rather than the institutional traders who would otherwise take it from you.
Or, regulators and AGs who think they know better.
Until next time,