Playing Field Might Be Leveling For Silicon Valley Giants

December 15, 9:00 pm EST

Last week we had the merger of Fox and Disney, and the repeal of the Net Neutrality rule.  And the tax bill continues to inch toward the finish line.

That said, this would typically be the time of year when markets go quiet as money managers close the books on the year, decision makers at companies go on holiday and politicians do the same.

But that wasn’t the case last year, as President-elect Trump was holding meetings in Trump towers and telegraphing policy changes.  And it may not be the case this year, as the tax plan may be approved before year end.  The final votes are said to come next week, and the bill is tracking to be on the President’s desk by Christmas.

With that, and with the lack of market liquidity into the year end, we may get a further melt-up in last trading days of the year.

Yesterday we talked about the other side of the Net Neutrality story that doesn’t get much acknowledgement in the press.  In short, the tech giants that have emerged over the past decade, to dominate, have done so because of regulatory favor. This favor has decimated industries and has dangerously consolidated power into the hands of few.  The repeal of this rule is turning that regulatory tide.

It looks like the playing field might be leveling.  That means a higher cost of doing business may be coming for Silicon Valley, with fewer advantages and more competition from the old-economy brands that have been investing to compete online. That means potentially slower earnings growth for the big internet giants, for those that are making money, and an even more uncertain future for those that aren’t (e.g. Tesla).

With this in mind, at the moment Amazon is valued at twice the size of Walmart.  Uber is valued at almost 40 times the size of Hertz.  And Tesla, which has lost $2.5 billion over the past five years is valued the same as General Motors, which has made $43 billion over the same period.

Next year could be the year these valuation anomalies correct.

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