September 9, 2018
Remember a few editions ago when I wrote in celebration of the cross-aisle cooperation between Senator Elizabeth Warren and President Donald Trump with respect to the re-engineering of the equity complex? After all, it was only a month ago. However, for those who fail this recall test, the gist of it was as follows. Senator Warren introduced a bill to regulate large corporations in a manner that de-emphasizes profits as a corporate objective, and the President sought to soften the blow by suggesting a reduction in the frequency at which company chieftains would be required to announce the certain-to-be bad news to the investing public.
At the time, I was deeply touched by the prospect of narrowing the gap between two schools of economic thought -- so deeply at odds with one another, to such deep annoyance and detriment to the well-being of the masses. However, I feared it was a “one-off”.
So it brings me great pleasure to report upon the happy news that the divide continues to close. As my readers are probably aware, everyone’s favorite Socialist Senior Citizen Senator: Bernie Sanders, took to the airwaves this past week to denounce the evils of what by many accounts is everyone’s favorite publicly traded corporation. In live television interviews, and, of course, on Twitter, Bro Bernie entered into a full-throated denouncement of Amazon, going so far as to include a series of ad-hominem attacks on its fabulously infallible founder: one Jeff Bezos.
In doing so, Sen. Sanders joins a critical chorus led by the President, who for months has been throwing shade at the erstwhile bookseller that would take over the world. Bernie is passionately (if questionably) upset about the unfair treatment of Amazon workers. Trump is presumably most peeved at the temerity of Bezos at having taken ownership/control over the Washington Post. But both agree on one thing: the great unwashed are getting a raw deal with respect to the business arrangement between the Company and the
U.S. Postal Service.
I’ve looked into these matters, and objectively as I can determine, this is not an open and shut case against Amazon. Yes, they’re getting a government (and therefore a taxpayer) subsidy, but they are arguably performing services that would be difficult and more expensive for the post office to undertake without them – rain, sleet, snow and gloom of night notwithstanding.
Meanwhile, to their everlasting credit, both Amazon and its shareholders reacted to the rhetorical pummeling with characteristic equanimity:
It’s not as though they didn’t feel the sting a bit, and here, the sentimental can be forgiven if they lament the timing. Sharp-eyed observers will note a slight down-tick in the price at the more immediate, right end portion of the graph. This reversal is all the more unfortunate because on Tuesday, the day after our traditional holiday celebrating the working class, the Company’s valuation joined that of Apple’s as the only business enterprise ever to surpass the lofty and heretofore unimaginable $1T threshold.
But that was then; as of Friday’s close, Amazon’s market capitalization fell to the beggarly-by- comparison level of $952B.
It says here that Amzonians of every stripe should keep that stiff upper lip demeanor at the ready, as I suspect they may face a string of challenges before the inevitable happens, and the Company achieves full global hegemony.
Because, while the following edict did not make the cut on my “10 Commandments of Risk Management”, it probably should have: any enterprise that has found itself in the cross-hairs of both Trump and Bernie has reason to worry.
And if Amazon is staring into the face of a political spit storm, so, too, perhaps, are those other lovable Tech Titans whose stock performance have so deeply enriched us in the post-crash era. Consider, if you will, the recent pricing action of a couple of other tech darlings: Facebook and Twitter, linked not only by the social media stranglehold they collectively command, but also by the fact that each company sent one of their gods down from their heavenly Silicon Valley Olympus, to earthly Washington, where each faced full-on Capitol Hill roasting:
Now, this is a Dickensian Tale of Two Stocks if ever there was one. With Zuck presumably hiding under his desk, Sheryl Sandberg taking the Congressional heat this round. In the wake of all that, Facebook managed to breach the lows registered after its historic July tanking of earnings, and is knocking on the door of breaking the bottoms recorded when Zuck had to explain away to hostile legislatures the pimping out of user data to sketchy organizations like Cambridge Analytica. By contrast, the long-besieged Twitter, which had been on an improbable profit upswing of late, managed to give back all and then-some in the wake of Jack Dorsey’s Capitol Hill Star Chamber Inquisition.
Anybody notice a pattern here? Well, for me, what we’re witnessing is the early innings of what I expect to be a slowly unfolding, populist/political undermining of the flower of the American Tech industry. Now, I don’t expect anything overly nasty to transpire in the short term; more likely than not, the garroting of Silicon Valley high-flyers will be a multi-year proposition. Rather, I suspect that the TMT/big dogs of the NDX will more than likely reach new highs – perhaps material ones – before they face the prospect of careening, Icarus-like, to terra firma.
But if the prevailing tone – taking place as it is under a presumably business-friendly political paradigm -- is any indication, I shudder to think about what happens when the progressive elements re-assert their mojo and take hold of the control panel. And trust me, they will: if not immediately then eventually.
Of course, one cannot help but admire the way that West Coast Tech monsters – from San Diego to Seattle – have anticipated this, and attempted, and with some success, to brand themselves as torch carriers for the progressive mindset. I believe is that this will work for a while, but not into perpetuity. Eventually, they will be unmasked and vilified as the filthy, profit-seeking capitalists that they are.
And here, perhaps, is the main (if most obvious) point: as Tech goes, so goes the stock market. I don’t have the exact figures handy, but I can assure you that if you review index gains over the last, say, five years, and remove the contribution of Apple, Amazon, Facebook, Microsoft and Google from the equation, you’re looking at a chart that, best case, is flat as a pancake. As such, I don’t think that the unfolding Madam Defarge (villainess of Tale of Two Cities, known most prominently for knitting at the guillotine) dynamic that I fear may be emerging in Tech-land is much cause for celebration.
The shortened week brought a small taste of the look and feel of the new-age vibe that awaits us. Equity indices retreated, but only modestly, and in manner that failed to capture the carnage that lies beneath. I may be connecting dots too far flung to merit they’re linkage, but it is not lost on me that all of the above transpired against the backdrop of a deteriorating geopolitical sneaker fire (Nike?). I won’t waste much space here, but between the editorial stylings of Anonymous, the absolute (if unsuccessful) effort to turn the Kavanaugh hearings into a pig circus, the breathless anticipation of another Bob Woodward political workover, and the unfortunate ramping up of trade skirmishes, it’s hard not to look at the world with a glaze in one’s eyes and a growing pit in one’s stomach.
But of course and as always the news by no means all bad. The Jobs Report pretty much checks every bling box, so much so that slumbering holders of longer-term U.S. debt, and sold down some of their holdings. Factset is projecting another boffo quarter at about ~+20%.
Equities, though, remain a quandary nonetheless (as do Commodities), but my hunch is that the indices will gather themselves a bit over the next few sessions, before breaking everyone’s heart – yet again -- later in the month. Moreover, if the months-long pattern holds (Trump offsetting domestic political bludgeons with accretive policy actions), I would expect some happy noise from the front of the trade wars over the next several days. There’d better be, because the long knives are out against the current administration, and the only defensive weapon at their disposal is one that involves playing offense on the economy.
I’m more than willing to do my share, so, as I sign off, know that I’m logging into my Amazon Prime account to purchase a holy document called “The Art of the Deal”, along with “Our Revolution: A Future to Believe In”, written by one Bernie Sanders, and released on November 15, 2016, exactly one week after the author of the former book, against all odds, won the presidential election.
Who knows? Maybe Donnie and Bernie have more common ground than they realize, and if I find anything of this sort, I’ll be sure to pass it along – to them, and, of course, to you.
This post is brought to you by General Risk Advisors, a full service risk solutions group. For more information, visit genriskadvisors.com.