Big Tech, the New Big Tobacco
Promo poster for USA’s hit series Mr Robot (2015)
Last August, in a newsletter (Reduce Risk—Trump vs Bezos) I warned that a backlash against Amazon and Big Tech was building. On December 20th, I stated that the backlash was upon us. With the latest news regarding the data breach at Facebook and how that data was exploited during the 2016 presidential campaign, I fear we could be approaching atipping point. Big Tech is becoming the new Big Tobacco. An Uber driverless vehicle killed a pedestrian in Arizona last week. New York Times calls Google’s YouTube, the GreatRadicalizer. Amazon put the nail in the coffin of Toys R Us, eliminating 30,000 jobs. Early Facebook investor Roger McNamee pleaded last month: How to Fix Facebook Before It Fixes Us. And as I suspected, there was simply too much hype regarding Apple's latest iPhone. Salesforce CEO Mark Benioff warns that social media is like tobacco: addictive, harmful, and should be regulated like cigarettes.
The global shakedown may be upon on us:
We’ve been reducing technology exposure this year and continue to do so. Our moves are not based solely on negative headlines but on analysis and valuation. The extraordinary run in the tech sector has caused it to represent too much of our portfolios. Hence the need to rebalance. The financial markets in the short run are driven by human emotion. The sentiment on Big Tech has been borderline euphoric but it is now turning decidedly negative. The spectacular profits these companies generate will not protect their stocks when the tide turns in earnest against them. The federal government’s antitrust case against Microsoft put its stock on ice for nearly a decade. Apple and Google fell 57% and 55% in the2008 recession (the S&P 500 fell 38%). When the next recession finally arrives, the biggest gainers may become the biggest losers. We believe that the technology sector is overheated and overcrowded. We’re reallocating proceeds to value investments: senior housing, telecom, beaten down healthcare, overseas. Boring, unloved and cheap, in our estimation. More importantly, trimming tech exposure is part of our disciplined, rebalancing strategy. We do this with any sector that has run up excessively.
Three years ago, I spoke of Big Tech’s dark side. Please scroll down below my signature to view ‘Big Data, Big Brother’ (3/24/2015)
Silicon Valley will certainly survive the backlash, but the cost of doing business is going higher, much higher due to fines, new regulations, taxes, and lobbying efforts. This will result in smaller profits. I’m not concerned about the long-term well-being of Big Tech, but the stocks are at risk in my humble opinion.
Inspired by the Florida teens that spear headed the March for Our Lives, my family participated in our neighborhood’s peaceful protest. Hamilton Wealth made a $1,000 donation to the March for Our Lives.
Please let me know if you have any questions.
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