Larry McDonald on the AI capital spending binge

Yesterday, we had an interesting chat where, it was a private conversation with a guy in the Valley [Silicon Valley] that is really good friends with all of the CFOs of the Mag 7.  He's been out to dinner with them hundreds of times, he's been in the Valley for over 30 years and he's run hedge fund money...  And we had another guy who's been trading semiconductors for 20 years professionally and they were having this conversation around artificial intelligence.  And the one thing they both said... it's like the Manhattan Project where if you're a CFO in the Valley and you're not doubling or tripling your capex the last year and a half in artificial intelligence, you're fired.  They're so terrified to be, two years from now, left on the outside.  So what's fascinating is... the capex has gone from like $30 billion a year to $160 billion a year with no visibility...  There's zero visibility on return on capital.  So this is capital expenditures just being deployed at a sick, aggressive, insane pace.  He called it a "Reagan-Gorbachev arms race" where the CFOs have a gun to their head.  They have to invest...  It's created these distortions where Wall Street analysts are falling all over themselves to upgrade Nvidia, but this capex trajectory is just not sustainable.  And the market's starting to figure it out now.

~ Larry McDonald, "Buy What Wall Street Hates," Stansberry Investor Hour, 26:40 mark, July 29, 2024

Fred Hickey on why Apple's stock is vulnerable

Apple's stock has rallied all year long (almost back to a record high) and certainly does not reflect the deterioration in the economy, the squeeze on consumers from tightened lending, declining consumer sentiment (remember - Apple sells to consumers - not corporations), the slide in the smartphone market - leading to an inventory overbuild and digestion period, falling revenues and earnings and a rising P/E ratio (twice as high as it normally runs at).  It also doesn't account for its heavy exposure to China (relations between the U.S. and that country continue to worsen), a difficult (and likely costly) transition from producing nearly all its products in China to places such as India, the likelihood that the Chinese government will kick Apple in the pants on the way out (I don't think China will forget how the U.S. government destroyed Huawei's smartphone business), the poor position of its product cycle and lack of innovation.

Of all today's Big Seven, Apple (and likely Tesla) appear to me to be in the most trouble (short-term and long-term) and once Apple's stock momentum inevitably turns downward again, investors may experience a Wile E. Coyote moment - over the cliff and with a long way to fall in the bear market.

~ Fred Hickey, "2000 Déjà vu," The High-Tech Strategist, June 1, 2023

Dan Niles on how big internet companies will not be able to avoid recession

If you look at '08-'09, advertising revenues went down 20%.  The internet, though, was only about 12% of total advertising dollars in '08-'09.  Now it's 66%, or two-thirds of the market.  So big ad-supported internet companies are not going to be able to avoid a recession.  They're going to see their businesses get hit pretty hard.

~ Dan Niles, CNBC interview, 3:00 mark, September 13, 2022

Rand Paul on Big Tech censorship

When the CEO of Twitter said the First Amendment doesn’t apply to them, he’s right.  But that doesn’t make him a laudable person or someone I want to associate with.  These are people who are narrow-minded and not ‘liberal’ in any way.  The impulse to censor people’s speech is actually illiberal.

~ Senator Rand Paul, "Interview: Rand Paul Slams Big Tech’s Crackdown on COVID ‘Misinformation’—And Offers His Solution," FEE.org, January 5, 2022

Roger McNamee on Facebook furthering authoritarianism

At some point we have to decide "Where do we want to live?" because the Facebook papers, among other things, have shown that Facebook in fact has - because of the design of its products - really furthered things like authoritarianism...  When you put 3 billion people on one network with no walls and then construct a business model that's designed to amplify the most extreme emotions of society, you're going to bring a lot of dangerous ideas from the fringes into the mainstream: white supremacy, anti-vax and the like.  And we're now seeing the cost of that.  And the question for investors is "Is it time to move on to something else?" because this company has shown that it is not going to take the public interest seriously.  And I think candidly that's a problem throughout Big Tech.

~ Roger McNamee, CNBC interview, 1:55 mark, October 25, 2021

Doug Casey on Big Tech

Frankly, these Big Tech companies have had their day in the sun.  They’re too big to be managed efficiently.  They’re arrogant and corrupt.  And, I suspect that even though everyone uses them, most people no longer like or trust them. 

There will be either a change in technology or a change in the public mood that will turn them into dinosaurs. I’m not interested in owning their ultra-expensive stock, and not just because I despise them and their editorial takes; they’re stooges for the State. 

The fact is the government still can’t directly censor things. It’s too hard because the First Amendment, at least in name, still exists. But as I said earlier, these media companies work hand in glove with the State. Big Government prefers to work with Big Tech companies like Facebook, Google, Microsoft, and the rest. There’s no law against Big Tech censoring somebody—nor should there be—because they’re a private business. You certainly don’t want to give the government even more power. 

This type of “private” censorship is a clever way to get around the Constitution. The fact is that these companies have become unofficial arms of the government—that’s part of what the “Deep State” is all about. The good news is that this will eventually cause them to cut their own throats. They’ll be superseded by changes in technology and the public mood. Many people—including myself—already deny them support in any way possible.

~ Doug Casey, "Doug Casey on the Real Reason Why the Mainstream Media is Dialing Up the Fear," Doug Casey's International Man, September 8, 2021

Andy Kessler on the anti-Big Tech Biden appointees

President Biden appointed three tech-hating progressive pillars of piety to prominent government positions: Lina Khan at the Federal Trade Commission, who wants to break up Amazon ; Tim Wu at the National Economic Council, who has a book denouncing bigness; and Justice Department antitrust nominee Jonathan Kanter, who has represented Yelp and Microsoft accusing Google of anticompetitive behavior.  I don’t think even the Communist Party could stack the deck so well.

~ Andy Kessler, "A Chinese Warning for U.S. Tech," The Wall Street Journal, August 15, 2021

George Gilder on Google, Facebook and the limits of their free model

Q: In your book Life After Google, you discuss some of the tech giants' flawed business models today may not allow them to survive.  Can you elaborate on that?

A: I think companies like Google and Facebook that collect almost all their revenues from advertising and don't have any real liabilities to their customers - no real responsibilities to their customers - they aggregate viewers and sell advertisements, ads that we all know are minuses; people don't want to see their ads, particularily on their smartphones where pop-up ads of various kinds comprise 36% of bandwidth costs for your smartphone and you only intentionally click on the ads 0.03% of the time.  It's a failing model and it's worth recognizing that all the Chinese companies that are really competing with our companies (with three times the population) get 10% or something of their revenues from advertising.  They really have figured out how to collect money from customers.  That's their advantage and we better be alert to this.

Q: It sounds like these companies are starting to become dated...

A: Their free model is debauching them.  Free is not capitalism.  They really don't know how to deal with customers and whenever they have to make a decision, they decide in the end, "ah, it's easier just to give it away for free and collect more data and sell it to advertisers."  This model is reaching the end of the line and we're moving into life after Google!

~ George Gilder, Stansberry Research interview, 5:20 mark, October 11, 2019

Doug Casey on the fall of Big Tech

Q: What do you think the role of Big Tech companies will be? 

Doug Casey: Trends in motion tend to stay in motion until they reach a climax, a crisis, at which point anything can happen. 

We’re headed for a gigantic world crisis. My guess is that the long-standing trend towards Big Tech getting bigger and more powerful won’t continue—in other words, Big Tech is in the same position that Big Oil was in 1980. It looked like they were going to take over the world. Oil stocks were over 30% of the S&P 500, but today, they’re under 3%. 

Big business in general, and now Big Tech in particular, have always had a very cozy relationship with big government—and big government likes that. The two of them fit together like a hand in glove. Big government funnels contracts to Big Tech, and Big Tech acts as the State’s handmaiden. 

It’s part of why the average guy has lost faith in government, corporations, and our institutions. They’re now losing faith in the money as inflation rises. When the stock market crashes, they’re going to lose faith in the financial markets. 

Massive societal change is looming. But that doesn’t mean the cultures of either Big Tech companies or the government are going to change. Why? Because throughout society, the elite are overwhelmingly statist and collectivist oriented. They’re quite comfortable and don’t want to rock the boat. 

The Big Tech companies all started small, founded by entrepreneurial geniuses. Now, however, they’re gigantic and mostly run by managers, “suits,” who have no skin in the game other than shares they get through option grants. They’re so large that they resemble dinosaurs at the end of the Cretaceous. After a certain point, however, the bigger a company gets, the less efficient it becomes. It can’t be managed properly, and it falls apart. 

As the crisis unfolds, I think these companies are going to fall apart. Their share prices certainly will.

~ Doug Casey, "Doug Casey's Next 5 Shocking Predictions...," International Man, July 22, 2021

Markose Chenthitta on Big Tech censorship

As difficult as it is a pill to swallow, I find comfort in the actions of the censors because, let's face it, they must be afraid of the truth. In other words, we're winning. Censorship is a losing game. We know that from history. So it is just a matter of time before this all explodes in Facebook, Google, Apple's and Twitter's faces.

~ Markose Chenthitta, Facebook post, January 14, 2021

Eric Schmidt on Big Tech and privacy

We know where you are.  We know where you've been.  We can more or less know what you're thinking about.

~ Eric Schmidt, Google CEO, 2001-2011

The Economist on Big Tech censorship

The first reaction of many people was one of relief.  On January 6th, with 14 days remaining of his term, the social-media president was suspended from Twitter after years of pumping abuse, lies and nonsense into the public sphere.  Soon after, many of his cronies and supporters were shut down online by Silicon Valley, too.  The end of their cacophony was blissful.  But the peace belies a limiting of free speech that is chilling for America—and all democracies.

~ The Economist, "Big tech and censorship," The Economist, January 16, 2021

Jeff Deist on the future of free, decentralized communications

The underlying ideology, the impulse towards freedom which includes free communications and speech, is not so easily quashed.  And for that reason, I'm actually quite optimistic about a highly decentralized future where we don't have these huge gatekeepers like Google search, or Amazon Web Services, or Facebook and Twitter and Instagram as the only big 800 lb. gorillas in social media.  So I'm actually quite optimistic.

~ Jeff Deist, "Dealing With Big Tech Censorship - With Jeff Deist," 22:30 mark, Ron Paul Liberty Report, January 14, 2021

Stephan Kinsella on regulating Big Tech over political censorship

No, the evil state should not be unleashed on the tech giants just because they are air headed liberal idiots.  No, they should not be subject to antitrust law.  No, they are not "part of the state."  No, their CDA §230 and DMCA copyright safe harbors should not be abolished... 

It's pathetic that these companies are acting so... illiberally.  They probably have more market power than they otherwise would, but for state interventions (like IP law).  But the only just solution is to shame them and build alternatives.

~ Stephan Kinsella, Facebook post, January 14, 2021

Ron Paul on how Big Tech helped the U.S. government fight the War on Terror

Those who continue to argue that the social media companies are purely private ventures acting independent of US government interests are ignoring reality.  The corporatist merger of “private” US social media companies with US government foreign policy goals has a long history and is deeply steeped in the hyper-interventionism of the Obama/Biden era. 

“Big Tech” long ago partnered with the Obama/Biden/Clinton State Department to lend their tools to US “soft power” goals overseas.  Whether it was ongoing regime change attempts against Iran, the 2009 coup in Honduras, the disastrous US-led coup in Ukraine, “Arab Spring,” the destruction of Syria and Libya, and so many more, the big US tech firms were happy to partner up with the State Department and US intelligence to provide the tools to empower those the US wanted to seize power and to silence those out of favor. 

In short, US government elites have been partnering with “Big Tech” overseas for years to decide who has the right to speak and who must be silenced. What has changed now is that this deployment of “soft power” in the service of Washington’s hard power has come home to roost.

~ Ron Paul, "The 'War on Terror' Comes Home," LewRockwell.com, January 12, 2021

Ron Paul on Big Tech censorship

Last week’s massive social media purges – starting with President Trump’s permanent ban from Twitter and other outlets – was shocking and chilling, particularly to those of us who value free expression and the free exchange of ideas.  The justifications given for the silencing of wide swaths of public opinion made no sense and the process was anything but transparent.  Nowhere in President Trump’s two “offending”  Tweets, for example, was a call for violence expressed explicitly or implicitly.  It was a classic example of sentence first, verdict later.

~ Ron Paul, "The 'War on Terror' Comes Home," LewRockwell.com, January 12, 2021

Kevin Duffy: Could Big Tech censorship pop the everything bubble?

We’ve gone full Orwell.  Twitter, Facebook and Google stocks -6.4%, -4.0% and -2.3% respectively today after their Kristallnacht of weekend censorship.  Investors are whistling past a graveyard.  These companies will destroy themselves from within, starting the great unwind.  T-bonds are another pin to the everything bubble. 

This is starting to feel like Nazi Germany, except the Nazis went after less than 1% of the population.   Their American counterparts on the Left have targeted at least one-third of the population for extinction.

~ Kevin Duffy, January 11, 2021

Evan Lorenz on competition heating up in Big Tech

On Oct. 20, the U.S. Department of Justice filed a suit against Alphabet [parent company of Google], alleging that the search giants payments to Apple, Inc. to make Google the default search engine contravenes U.S. law. To put the Department's suit in perspective, Alphabet pays Apple an estimated $8 billion to $12 billion per year, a sum equal to between 12% and 18% of Cupertino's operating income. Nearly half of all Google searches originate from Apple devices. This is not a parking ticket. However, there appear to be contigency plans. Two-and-a-half years ago, Apple hired John Giannandrea, Google's head of search.  An Oct. 28 report by the Financial Times found that iOS 14, the latest iPhone operating system, used Apple's home-grown search engine for certain user suggestions.

[...]

As we go to press, Apple trades at 35.6 times trailing earnings and Alphabet at 36.5 times.  The stocks seem priced for everything - except competition.

~ Evan Lorenz, "Comity in Washington," Grant's Interest Rate Observer, November 13, 2020

Ben Levisohn on the tech bull market (2020)

So can anything stop the runaway train that is the tech sector?  Probably not.

~ Ben Levisohn, "The Stock Market Is a Runaway Train Nothing Can Stop," Barron's, August 29, 2020

Dan Ferris on the mania for Big Tech

No one can imagine that Amazon isn't the greatest thing in the world.  No one can imagine that Facebook and Google and Apple... at a $2 trillion market cap.  People simply can't imagine that these aren't the greatest businesses now and forever.  I promise you, they will be disappointed.

~ Dan Ferris, "Kodak Crashes 85% from Recent Peak," Stansberry Investor Hour, 67:00 mark, August 13, 2020