One Strike on Technology
Among other negative tweets this week, President Trump took a shot at Amazon and Jeff Bezos.
The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying internet taxes (which they should) is FAKE NEWS! — Donald J. Trump (@realDonaldTrump) June 28, 2017
As everyone has figured out by now, President Trumps tends to go on the attack in order to distract the media from the real news. The real news this week was that the Republicans were unable to pass major healthcare reform. They need to pass this legislative before they can turn their focus on infrastructure spending and tax reform.
The attack on twitter left many wondering what President Trump meant by ‘internet tax’. There is no such thing as a ‘internet tax’. Amazon does collect sales taxes in every state that has a sales tax. The shot across the bow of Amazon was aimed at its founder Jeff Bezos, who owns the Washington Post. Amazon doesn’t directly own the Washington Post, but Jeff Bezos bought the company for $250mm in 2013. The Washington Post has broken many stories against Trump. This tweet was most likely inspired by the Post‘s recent story about a fake TIME magazine cover featuring Trump hanging in some of the president’s clubs.
Last week, I wrote how the advances in artificial intelligent were beginning to displace jobs across every industry. More and more white collar and blue collar workers alike are beginning to lose sleep over how their jobs can be replaced by technology. President Trump has continued to promise 3-4% GDP growth. I don’t expect him to meet this ambitious growth target unless he can either stop the disinflationary effects of technology or pass legislation for infrastructure spending and tax reform. My concern is that if President Trump is unable to accomplish this legislative agenda then he will be forced to attack technology companies. President Trump has influenced some manufacturing to return back to the U.S., but more companies are saving on labor by automating their plants. Amazon has been the biggest disruptor as it has displaced hundreds of thousands of retail jobs. A look inside an Amazon warehouse would reveal more robots than humans. The same goes for new automotive plants.
The European Union is one step ahead of President Trump. This week they slapped a $2.7 billion record fine on Google over charges the company unfairly elevated its Google shopping business over competitors’ advertisements. The statement from the European Commission was as follows:
“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”
The attacks on Google, Amazon, and failure to pass healthcare reform caused the NASDAQ to drop -2.55% this week (QQQ ETF). I consider major technology companies such as Google, Amazon, Facebook, Netflix, Tesla, Microsoft, Intel, and Apple as emerging monopolies. It just so happens that these companies comprise a large part of the S&P 500 index, and are largely responsible for the above average investment returns over the last year.
These same companies will also benefit the most from any major tax reform. I expect the technology sector to remain volatile as investors weigh the odds of President Trump achieving major legislation vs. the chance that other governments will begin to reach into the pockets of cash rich monopolist technology companies with record fines.
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