Never underestimate the gift of context that studying history can give you in life.
Particularly if that history is the 18.6-year real estate cycle.
It’s why I have little doubt about the outcome of this.
Source: Financial Times
The above article alludes to the ongoing case by the Federal Trade Commission (FTC) and its antitrust lawsuits against the absolute giants of the tech world like Google and Amazon.
Nowhere is this more in evidence than in the FTC’s case against Amazon. It has come to light, for example, that Amazon had used a secret algorithm, code-named “Project Nessie,” to improve its profits on items across shopping categories, reportedly to the tune of $1bn. Amazon, which controls 40 per cent of all ecommerce in the US, was able to raise prices in entire product categories simply by boosting its own price. Competitors would simply follow what the ecommerce giant did, and customers would thus be charged more.
If Jeff Bezos asked every one of these company’s CEOs to jump off a cliff, would they simply nod their heads and jump? If this article is any guide, it’s a resounding “yes”!
The biggest issue with this case, however, is the lack of facts on the ground. So large and encompassing is the lawsuit against Google and Amazon that most of the publicly available documents stating the case against these two tech giants are 90% redacted.
Hence, there is a vacuum of information and less media scrutiny.
But if you have been a reader of mine here for a while, you’ll be aware that I often use my knowledge of the real estate cycle to properly contextualize the news in the mass media.
I am also aware that most of the folks reading this today who invest in the stock market may be very worried about what damage this case may cause if, indeed, you hold a lot of stock in these and similar companies.
What I can say to you right now is this.
We have all been here before.
Look Into My “Window”
In January 2003, Microsoft announced to the share market that it was to pay its first ever dividend, worth 16 cents per share, to shareholders.
A historic announcement in the history of that company. But something else was at play here.
In 1990, the FTC investigated Microsoft over fears it was trading as a monopoly in the PC market.
At the heart of the issue was the fact that the company made both Windows as the operating system and Internet Explorer that allowed users to surf the web.
This meant consumers who didn’t wish to use Internet Explorer had to spend extra to buy and download competitors like Netscape or Java. It was also alleged that Microsoft modified software in its operating system that favored Internet Explorer over these competitors.
By June 2000, judgment was handed down – Microsoft was to be broken up into two separate entities. One that made the operating system, and the other that wrote the software that the operating system used.
But it never happened. Here’s why.
George W. Bush was elected president in 2000. Behind Phillip Morris as Bush’s second-most important sponsor was… Microsoft.
Bang – case effectively dropped. As Bush got ready to be re-elected in December 2002, he announced his plan to revive the stock market by untaxing dividends. Remind me again what Microsoft did in January 2003.
That’s right… the dividend.
In other words, Microsoft found a way to get its government-granted license, designed to protect it and crush any competition to its dominance.
And to this day, Microsoft remains dominant and monopolistic in its actions. And it has the U.S. government to thank.
And this is why we are witnessing history repeating, amazingly at the same time as the last completed real estate cycle 20 years ago.
Recent events shed light on the likely outcome of today’s FTC actions. The bolded text is my own.
Source – The Register
The article says:
US District Court judge Daniel Calabretta of California’s eastern district wrote… that the RNC’s claims “fail as a matter of law”… because Google is protected by section 230 of the Communications Decency Act, which protects internet companies from liability for content generated by their users.
Seems Google has read the Microsoft playbook.
I’ll make a prediction: by the 2024 U.S. Presidential election, this suit against Amazon and Co. will quietly and quickly disappear.
And reinforce, once again, my stance that investors need to find quality companies who have their own “moat”… like a government-granted license that protects them and their shareholders from any sort of viable competition to their earnings.
This behavior is, in fact, a critical tenet in the repeating nature of the timing of the 18.6-year real estate cycle.
The cycle simply couldn’t continue if it wasn’t for precisely this type of behavior.
And it’s that knowledge of the history and the timing of the cycle that places you above 99% of market participants.
As you see, it gives me the advantage of knowing what’s to come next.
And know that there is nothing new under the sun.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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