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The stock market and tech world has taken a beating since the beginning of the week. Much of this is due to a scandal at the social media giant Facebook and one of its platform users Cambridge Analytica. The tech industry has brought many Dow Jones Industrial investors to reconsider their tech stock and other investments as well. The Dow has experienced significant losses in tech stocks since Monday.
With the recent news that Cambridge Analytica had blatantly violated user policy on Facebook the company is facing massive backlash. On Saturday, it was revealed the company via their access to Facebook illegally harvested 50 million user’s private information. This information has caused both Facebook and Cambridge Analytica to come under intense scrutiny in both the U.K and the United States.
As of Tuesday, the company suspended the current CEO Alexander Nix effective immediately. It is believed the information was sought to gauge user personalities so they could influence their behavior for voting or marketing purposes.
The company further went on to say that behavior that CEO Alexander Nix had illustrated was not representative of the company’s values or approach to their business platform. He has been replaced by Dr. Alexander Tayler. The company has also set up an investigation into any breaches of protocol for using Facebook. However, in the meantime, Facebook suspended the company’s ability to use its platform in any capacity.
Both The European Commission and the U.S., the Federal Trade Commission have begun investigating Facebook’s data methods. Other people with knowledge on the matter have sighted the fact that other users had been able to gather data “en masse” from Facebook as well. This calls into question what safeguards have been lacking in the media giant’s social platform. In Europe, Julian Malins, who is a British lawyer who practices international commercial and corporate law, is going to lead an investigation into this vast act of violation of privacy.
Facebook came under scrutiny several months ago for not being able to monitor who was advertising on their platform. In the fall, it came to light that the Russian Government had used Facebook to promote “Fake News” as propaganda for the elections in several countries including the 2016 presidential election. This news started a firestorm against Facebook’s leniency in advertising policies. Mark Zuckerberg is now working with company officials to address these concerns.
Shervin Pishevar decided to take his Twitter followers by surprise one day by sending out 50 tweets, all numbered, within the span of 21 hours. In this time, he called out five monopolies in the United States: Apple, Alphabet, Amazon, Microsoft, and Facebook. These are the biggest, most powerful companies and the investor explains why we should be worried.
They’re Too Powerful
Shervin Pishevar explains that these five monopolies have too much power. There are more powerful than Ma Bell ever was, and that telephone companies still lives on in history as being a dangerous monopoly for the United States. Consider how much information Amazon, Facebook, and the other monopolies have on us. They have more data and more access to data than even sovereigns have.
They are growing in power, too. The government doesn’t want to take them down. Further, there are cities across the United States crying out to receive Amazon warehouses.
They Don’t Have Competitors
If you take a look, there are no competitors for any of the monopolies, not really. As Shervin Pishevar points out, the monopolies are buying up all of these startups before they have a chance to become competition. He refers to them as silent assassinations. Although startups are constantly entering the marketplace, they are bought before they have a chance to do anything exciting. Entrepreneurs make the mistake that they are getting a great deal because they are being paid for their innovation. However, they are handing their innovation to the enemy.
What will happen?
If the government doesn’t intervene to take the monopolies down soon, they will continue to grow in size. Shervin Pishevar identifies that it would be best for consumers if there is more competition. He makes the comparison to Ma Bell once again.
It’s possible that there may not be another impressive startup like Uber or Airbnb for at least 10 years unless these monopolies are taken down. Although Shervin Pishevar doesn’t have suggestions on how to take them down, he is identifying the problem so that more people are aware.
If you are watching the stock market and feeling that familiar anxiety creeping in, don’t panic just yet. The stock market has been something of a yo-yo lately, after months of soaring to record highs it is suddenly bouncing up and down from day to day. It seems scary, but it’s likely that there is nothing to panic about. The culprit that started the yo-yo market was a consumer price report which was released by the Department of Labor. The report was actually really good for the country, consumer prices were only up half a percent in the first month of 2018 and are on a predicted path to 201 percent for the year. That rate is, according to the Federal Reserve, the healthiest for the economy overall.
So how is it that such a great report could cause the Dow Jones to plummet five hundred points in seconds? The answer is pretty simple. Overall, most people believe that the stock market is over valued. Generally, the stock market does not run at a correct value, but when people believe that the prices are too high, they begin to panic, which is what began this whole market mess. The market has been on a constant uptick since the beginning of 2009, prices have tripled in most cases if not more, and the election of Donald Trump cause a euphoric wave from traders who expected deregulation and tax cuts. This, along with consistent low interest rates from the Federal Reserve, has kept the market booming. The improvement in job numbers as well as the central bank raising rates generally causes a depression in the value of stocks. People who trade for a living know this and are looking to sell stocks before their value drops. This likely caused the bouncing in the stock market.
That said, the inflation report that was released should not have been such a big deal. In fact, it showed the country to be at almost perfect price levels in the economy, but traders have concern that inflation will become a problem down the road and began a freak-out because in their opinion the market is too high.
With Republicans in office, it is hard to say how the next few years will go and if they will be handled correctly. There is a delicate balance between interest rates and taxes, but Republicans are based on the idea of lower taxes which means they will do little to control certain aspects of the economy. The Federal Reserve still has plenty of tools to help fight inflation if it becomes a big problem, they could raise interest rates which will reign in bank loans, that said, it often has negative effects like forcing companies out of business which leads to unemployment, but that unemployment puts pressure on workers wages which will help keep prices in line. It isn’t an ideal solution, but one that works. That said, none of these are pressing issues today, the market is bouncing and having many good days, enjoy investing now and making money, but be aware of the signs when it is time to pull out. If you would like more detailed information, head to Huffington Post.
During 2017 the stock market in the United States had one of the best years that it had in a long time. The stock market was influenced by a variety of factors that included tax law regulation changes, improvements in jobs data, and great earnings from many different companies. While 2017 was a good year, 2018 has been far more volatile.
The start of 2018 was just as good as 2017. The Dow Jones Industrial Average increased to its highest point of all time by hitting 26,000 points. While January was great, the month of February has been far different. During February a few piece of negative information hit Wall Street and it sparked a panic sell. During the week of February 5-9, the US stock market had its two worst days on record ever.
While the stock market appeared to be in free fall during the first week of February, it now appears that the declines have stabilized and values are beginning to get back to where they were a couple of months ago (https://www.marketwatch.com/story/dow-on-pace-for-4th-win-in-a-row-as-market-braces-for-inflation-data-2018-02-14). Just a couple of days after the markets declined considerably, all of the major indices are back up several percent during the second week of February.
The increase in values in the US stock market is attributed to a range of different factors. One of the main reasons is that there have been very good earnings results released. Over the past few weeks many different US companies, including those in the tech, auto, and other industries have reported earnings that were far greater than estimates. This has helped to fuel optimism over future growth for many companies.
Another reason that people are buying back into the market is that it appears that the stock market drop could have provided a lot of value. Many notable companies, including some of the top tech firms in the world, saw that their stock values had declined by more than ten percent over just a couple of weeks. While this makes some people jittery, those that are looking for value found those stocks to be great target options.
While the stock market has increased in value, there is still plenty of concern over the future. There are several upcoming factors that could lead to a rise in volatility.
The stock market has not strung together two losing days in a row in a while. Not just two losing days, but two triple digit losing days at that. The worst of the days happens to be how things are shaping up in the markets today. The Dow Jones Industrial Average has fallen by as much as four-hundred points throughout the day. This is the kind of move that we have not seen since June of 2016 says CNBC.
Naturally, alarm bells have been going off for some people who are afraid that perhaps this market got a little too far out over its skis. It is definitely something that is a possibility as price to earnings (PE) ratios have climbed to levels that are much too high for normal markets. While a typical PE ratio for the whole market might be in the high teens, lately it has climbed to over thirty.
When the market gets overinflated like this, and prices are just climbing through the roof, it is easy for people to want to put their own money in the market as well. There is the classic fear of missing out (FOMO) feeling that can overcome some people. As soon as those characters start to put their money in the market, you know that the rally has almost come to an end. They are always the ones who are left holding the bag while everyone else who has already made their money carries on their way.
It is far too early to say that we are definitely in some kind of decline at this point. There are other possibilities that could come into play here. Already, some are getting defensive about this move and say that it makes for a great opportunity to purchase more. It sort of depends on where you think the market is headed in the long-term.
A lot of people have already made their money, and they might go ahead and make a quiet exit from the market. When they start to pull their funds, declines like this become all the more possible. Make sure that you have some guts of steel if you are ready to dive in head first into a market that has fallen as much as it has at this point.