'Big Tech' Is in the Government's Crosshairs
'Big Tech' is in the government's crosshairs... Amazon, Apple, Alphabet, and Facebook could soon face tougher regulation... China targets FedEx... And officially blames the U.S...
It was a tough weekend for 'Big Tech'...
The tech-heavy Nasdaq Composite Index led U.S. markets lower today following reports that several top firms are suddenly in the government's regulatory "crosshairs."
It all began on Friday, when the Wall Street Journal reported the U.S. Department of Justice ("DOJ") was preparing a probe of Alphabet's (GOOGL) Google. According to the report, the government is planning to investigate whether the search giant's business practices violate antitrust laws.
On Saturday, the Washington Post reported that the Federal Trade Commission ("FTC") was preparing a similar probe of online-retail titan Amazon (AMZN).
What's more, the newspaper said the government's top two antitrust enforcers had actually agreed to "divvy up" oversight of these two firms. As the Post noted, this type of arrangement is often an ominous sign...
The FTC's plans for Amazon and the Justice Department's interest in Google are not immediately clear.
But the kind of arrangement brokered between the Justice Department and the FTC typically presages more serious antitrust scrutiny, the likes of which many Democrats and Republicans on Capitol Hill have sought out of fear that tech companies have become too big and powerful.
Sure enough, there was more to the story...
This morning, we learned that the FTC would also be leading a potential antitrust investigation into social media behemoth Facebook (FB). As the Wall Street Journal reported...
The FTC secured the rights to begin a potential investigation of Facebook and whether it has engaged in unlawful monopolistic practices as part of an agreement that allowed the Justice Department to take the reins in a Google probe, according to people familiar with the matter...
The FTC already has spent more than a year investigating Facebook on privacy issues related to how it handles users' data. That probe, however, doesn't focus on antitrust questions of whether Facebook is stifling competition in the digital realm. The fact that the commission formally secured jurisdiction on those issues suggests it is considering even more rigorous scrutiny of the social media giant.
And just this afternoon, we learned that consumer-electronics giant Apple (AAPL) is drawing scrutiny from the DOJ as part of the agreement, as well.
It's not yet clear if the government's moves 'have teeth'...
But investors didn't wait around to find out. Shares of the four tech giants plunged on the news...
Facebook fell more than 8%, followed by Alphabet (down 6.5%) and Amazon (down 5%). Apple, which had been trading higher following positive news from today's annual Worldwide Developers Conference, closed down "just" 2%.
Stay tuned... We'll dig into the potential implications for Big Tech in a futureDigest. In the meantime, expect the volatility to continue as additional details come to light. And if you own shares of any of these firms, be sure to keep an eye on your stops.
Elsewhere, tensions between the U.S. and Chinese governments continue to rise...
On Friday, we noted that China had responded to the latest round of U.S. trade threats with a threat of its own. In particular, it warned that it would create an "unreliable entity list" of foreign companies that harm Chinese businesses. This weekend, it went even further...
On Saturday, China announced that it was formally investigating U.S.-based shipping giant FedEx (FDX) for "damaging the interest" of Chinese customers. This followed reports last week that FedEx had mishandled packages for Chinese telecom giant Huawei Technologies. Of course, this just so happens to be the same company recently "blacklisted" by the U.S. government.
Then, on Sunday, China released a white paper officially blaming the U.S. for the trade war. As financial news network CNBC reported...
The paper argues that trade disruptions – which the document claims were launched by the United States – negatively affect the world. It claims that the United States is an untrustworthy negotiator and that the Chinese government wants talks that are equal, mutually beneficial and trustworthy.
U.S. media outlets have reported that Beijing backed out from basically all negotiating points during talks with the United States several weeks ago. At a press conference Sunday, Vice Commerce Minister Wang Shouwen said U.S. actions in the past month are the primary reason for the lack of progress in negotiations.
"During the consultations, China has overcome many difficulties and put forward pragmatic solutions. However, the U.S. has backtracked, and when you give them an inch, they want a yard," Wang said.
There's no telling just how far this trade war could go...
But you can count our colleague Steve Sjuggerud among those who remain optimistic for now. If you tuned into his emergency briefing last Thursday, you know he still believes the U.S. and China will reach an amicable solution, sooner rather than later.
However, should "push come to shove," his research also suggests that the Chinese economy could actually come out ahead. In other words, even if he's wrong about the trade war, Steve believes it's unlikely to derail his long-term bullish thesis on Chinese stocks.
Better yet, he has identified a brand-new catalyst that could cause a select group of Chinese stocks to soar triple digits in the months ahead, starting as early as June 15. He says it's one of the best opportunities to double or triple your money that he has seen in his entire career.
Now, if you're like many readers we've heard from, you've probably never invested in China...
It may seem too risky... or even un-American. We certainly won't try to tell you you're wrong. Investing in Chinese stocks may simply not be right for you.
But we would urge you to set aside your preconceived notions for just a few moments and watch Steve's presentation for yourself. You just might be surprised by what you see.
New 52-week highs (as of 5/31/19): Hershey (HSY), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), MarketAxess (MKTX), and Vanguard Inflation-Protected Securities Fund (VIPSX).
In today's mailbag, readers weigh in on last week's China briefing and Steve's feature-length movie: New Money. As always, send your comments and questions to feedback@stansberryresearch.com.
"Dr. Sjuggerud did an excellent job with his presentation Thursday night. Since I have been reading his work for some time I had already read about his three reasons for Chinese stocks to soar but seeing them all together made for a very compelling argument. He receives another 'A' from me." – Paid-up subscriber Roberta W.
"I was absolutely mesmerized by what I saw [in your New Money film], and blown away by the China I thought I knew. The news media does not fairly portray the REAL China. This was a real eye opener, and my husband and I will be participating in the chance to own stocks in the very near future.
"Thank you, Steve, for this movie... It's sad that the average person has no clue how this great country has become in such a short time...
"Steve you are spot on when you talk about our perceptions vs. the reality when speaking of our knowledge of China. I am only one person and I certainly was completely taken aback by how very wrong my thinking was." – Paid-up subscriber Marcia H.
Regards,
Justin Brill
Baltimore, Maryland
June 3, 2019