Momentum Monday – Rotation…Rotation!

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Last week I called the market sneaky good.

This week I would say that it has been sneaky bad.

Ivanhoff and I did our weekly tour of the markets to explain. You can watch/listen here.

Why sneaky bad?

The enterprise and software leaders of the last few years are being battered. No party lasts forever and the rising tide that lifted all enterprise and software boats is now receding.

There is still plenty of technology leadership including semiconductor stocks, Google, Apple and Microsoft.

Last week it seemed like every Attorney General came after Google, but the stock finished the week strong.

How?

I liked this piece by Andy Kessler titled ‘Antitrust Can’t Catch Big Tech‘ which explains.

So has Big Tech squashed competition? Hmmm, let’s see. From 2014-18, global venture-capital funding has tripled to almost $360 billion. More than 40,000 startups launched in 2018. There are almost 12 million technology jobs in the U.S. while Apple , Amazon, Google and Facebook combined employ fewer than a million, world-wide.

So here’s what’s going to happen. Big Tech is going to order the omelet—slow things down, obfuscate, hire lobbyists and hope like hell they can come up with new business models and move on from most of their current business in case the regulators in Washington speed things up.

Instead of spinning off Instagram and WhatsApp, as Facebook critics including founder Chris Hughes seem to demand, the social-media giant is trying to become the ultimate service for private communications and payments. It won’t be easy, but it’s certainly worth a try.

Google should stop running its own ads ahead of its customers’; that’s just dumb. But they should also stop running ads on YouTube and instead turn it into a legitimate cord-cutting Netflix-competing streaming service with a monthly fee. Apple should also stop favoring its own apps over companies in its ecosystem—again, just dumb. And Amazon should probably sell Whole Foods to Safeway and declare victory. Don’t be surprised if, on its own, it spins off its web-hosting business someday.

Technology’s relentless advance means markets sort things out over time. Note the irony of Amazon creating New York office space in the building abandoned by former retail powerhouse Lord & Taylor. And though IBM never did get broken up, it ended 2017 with its 22nd consecutive down quarter. It downsized all by itself.

I tend to agree with Andy’s analysis as usual.

Have a great week.

PS – this made me laugh…today’s episode of ‘NOT Jewish