With G.E. Exit, Dow Index Has None of Original Firms

(p. B2) General Electric, the last original member of the Dow Jones industrial average, was dropped from the blue-chip index late Tuesday [June 19, 2019] and replaced by the Walgreens Boots Alliance drugstore chain.

. . .

The removal of G.E., which will formally occur June 26, reflects a shift in the economic composition of the United States, which long ago tilted away from heavy industry and toward services, such as technology, finance and health care.

And it also amounted to a milestone for General Electric. It was the last remaining original member of the index, when the stock market measure was introduced in 1896.

For the full story, see:

Matt Phillips. “G.E. Is Dropped From Dow; Was Last Original Member.” The New York Times (Wednesday, June 20, 2018): B2.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date June 19, 2018, and has the title “G.E. Dropped From the Dow After More Than a Century.”)

Google Is Vulnerable to Competition

(p. A1) Google’s once-untouchable online-advertising operation took a body blow, hurt by mounting competition and struggles within its increasingly high-profile YouTube unit.

Google parent Alphabet Inc. in the first quarter posted its slowest revenue growth since 2015. The poor results highlight the risks for one of Silicon Valley’s biggest names in effectively leaning on one massive, if lucrative, business.

For all its myriad arms and efforts to diversify, Google remains essentially an old-fashioned billboard operation with a high-tech gloss—and it now faces more rivals.

. . .

(p. A4) Rivals like Amazon, once content to play in their own corners of the Silicon Valley sandbox, are making big plays at online advertising. In a potentially existential threat to Mountain View, Calif.-based Google, more online shoppers now begin their searches directly on Amazon than on search engines.

For the full story, see:

Rob Copeland. “Google Shows Its First Cracks in Years.” The Wall Street Journal (Tuesday, April 30, 2019): A15.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 29, 2019, and has the title “Google Shows First Cracks in Years.”)

Largest U.S. Firm Now Has 3% of U.S. Market Capitalization; In 1930s through 1990s the Largest U.S. Firm Had About 6%

(p. B5) . . . , consider the history of all the companies that have ranked No. 1 by market size. It’s full of surprises.

. . .

Hendrik Bessembinder and Goeun Choi, finance researchers at Arizona State University, calculate that the largest company in the U.S. clung to that spot for an average of 20 months from the late 1920s through the late 1950s—although it was nearly always either AT&T or GM.

From the 1960s through the end of the 1990s, the top company held the No. 1 position for an average of 12 months. From 2000 through mid-2018, the average tenure at the top was 15 months.

Over the past month, Apple, Microsoft and Amazon, all with market values of $700 billion or more, have each been No. 1 for several days at a time.

. . .

The single largest stock has made up about 3% of total U.S. market capitalization for the past 20 years, according to Savina Rizova, co-head of research at Dimensional Fund Advisors, an investment firm in Austin, Texas, that manages $517 billion. That’s down from the earlier average, since the late 1920s, of nearly 6%.

. . .

All in all, Amazon’s ascendancy is a reminder not of how new this era is but how old the dominance by big companies is. In some ways, these are the good old days: The top stocks account for less of the total market, and the giants don’t appear to be much easier—or harder—to topple than they used to be.

For the full commentary, see:

Jason Zweig. “Don’t Get Too Comfy At the Top, Amazon.” The Wall Street Journal (Saturday, January 12, 2019): B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Jan. 11, 2019, and has the title ” THE INTELLIGENT INVESTOR; What Amazon’s Rise to No. 1 Says About the Stock Market.”)

Big Firms Can Benefit Consumers

(p. A15) Mr. Wu writes with elegance, conviction, knowledge–and certitude. But he goes over the top in his effort to slay the dragon of the so-called Chicago School of antitrust analysis, which finds its clearest expression in the late Robert Bork’s influential 1978 book, “The Antitrust Paradox.” Bork and the Chicago School insist that “consumer welfare” should be the sole standard for antitrust law. Nothing else matters.
. . .
The deeper source of philosophical disagreement, however, lies in Mr. Wu’s self-proclaimed “neo-Brandeisian” attack on Bork’s underlying worldview. First, Mr. Wu claims that Bork’s consumer-welfare theory shows too little solicitude toward the small businessman, who can be steamrolled by larger businesses with greater economic power. Second, Mr. Wu claims that Bork’s thesis ignores the perverse influence that dominant firms exercise on the overall political system.
Against both challenges, Bork’s position holds up reasonably well. As to the first, the protection of the small businessman comes at a high price. It forces consumers to do business with small firms that may well have a local geographical monopoly, which would be undercut by a larger firm offering better goods at lower prices.
. . .
Similarly, both Brandeis and Mr. Wu have an oversimplified vision of political markets, for economic dominance need not translate into political dominance. Companies like Google and Facebook today enjoy dominant positions with their search engines or social-media platforms, but they face massive political opposition, not only from regulatory authorities but also from skilled political operatives–activist groups, litigation centers, unions, trade associations–who can make their lives a public-relations nightmare.
. . .
Finally, Mr. Wu’s Brandeis fixation blinds him to the distinctive features of modern antitrust litigation, which must contend with often complicated economic arrangements and effects. When American Express tried to prevent its merchants from steering their customers to credit-card companies that charge lower fees to retailers, it was hit with an antitrust lawsuit. But the Supreme Court this year upheld the policy, claiming that it didn’t result in an abuse of market power but was pro-competitive because of indirect effects that improved the benefits to Amex card holders. With his over-concern with bigness per se, Brandeis had nothing to say about these novel issues, and neither, alas, does Mr. Wu.

For the full review, see:
Richard A. Epstein. “BOOKSHELF; Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?” The Wall Street Journal (Monday, Dec. 3, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date Dec. 2, 2018, and has the title “BOOKSHELF; ‘The Curse of Bigness’ Review: Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?”)

The book under review, is:
Wu, Tim. The Curse of Bigness: Antitrust in the New Gilded Age. New York: Columbia Global Reports, 2018.

The Bork book mentioned in the review, is:
Bork, Robert H. The Antitrust Paradox: A Policy at War with Itself. New York: The Free Press, 1993 [first published 1978].

Regulations to Keep Herds Small May Destroy Reindeer Herding

(p. A6) Jovsset Ante Sara, a boyish-looking 26-year-old, knows his section of the tundra as if it were a city grid, every hill and valley familiar, the land acquired over generations through the meticulous work of his ancestors.
He can tell his reindeer from any others by their unique earmark. And he and his family need them to live and preserve their claim to the land as well as their traditions.
That’s why, Mr. Sara says, he has refused to abide by Norwegian laws, passed more than a decade ago, that limit the size of reindeer herds. The measure was taken, the government says, to prevent overgrazing.
Mr. Sara’s herd was capped at 75. So every year, if the herd grows, he must pare it down. At least, those are the rules. He has refused to cull his 350 to 400 reindeer, and took the government to court.
. . .
For decades, the Norwegian government has designated reindeer herding as an exclusively Sami activity, providing herding licenses tied to ancestral lands.
The regulations limiting herd sizes were passed in 2007, forcing Sami to eliminate 30 percent of their reindeer at the time.
Mr. Sara said the limits have been devastating. If he obeyed the limit, he said, he would make only $4,700 to $6,000 a year.
“Clearly it’s not possible to make a living as the job has become quite expensive, requiring snowmobiles and all the equipment that goes along with that,” he said.
The law also states that any herders who are no longer profitable can lose their license. But that is not all Mr. Sara said he would lose.
“I would lose everything my ancestors worked their entire lives to create for us today,” he said. “I will lose the land.”

For the full story, see:
Nadia Shira Cohen. “The Hinterlands Where Reindeer Are a Way of Life.” The New York Times (Monday, Dec. 17, 2018): A6.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date Dec. 16, 2018, and has the title “NORWAY DISPATCH; Where Reindeer Are a Way of Life.”)

Low Interest Rates Increased Zombie Firms After Economic Crisis of 2008

ZombieFirmsIncreaseGraph2018-10-03.png

Source of graph: online version of the WSJ article quoted and cited below.

(p. A1) Italian clothing maker and retailer Stefanel SpA became famous for its knitted coats and cardigans.

Many economists, investors and bankers know Stefanel as something starkly different: a zombie company. It has posted an annual loss for nine of the last 10 years and restructured its bank debt at least six times, including several grace periods when Stefanel only had to pay interest on what it owed.
After booming during Italy’s post-World War II expansion, Stefanel and its lumbering factories were overwhelmed by Spanish fast-fashion giant Zara and then battered by the economic slowdown that hit Italy in 2008.
Stefanel is still alive but staggering. So are hundreds of other chronically unprofitable, highly indebted companies being kept afloat with new infusions from lenders and shareholders, especially in Southern Europe.
Economists and central bankers say zombies undercut prices charged by healthier competitors, create artificial barriers to entry and prevent the flushing out of (p. A10) weak companies and bad loans that typically happens after downturns.
Now that the European economy is in growth mode, those zombies and their related debt problems could become a drag on the entire continent.
“The zombification of the corporate sector and banks [is] a risk for future living standards,” Klaas Knot, a European Central Bank governor and the head of the Dutch central bank, said in an interview.
. . .
In some ways, zombie firms are an unintended side effect of years of easy money from the ECB, which rolled out aggressive stimulus policies, including negative interest rates, to support lending and growth. Those policies have been sharply criticized in some richer eurozone countries for making it easier for banks to keep struggling corporate borrowers alive.

For the full story, see:
Eric Sylvers and Tom Fairless. “Zombie Companies Haunt Europe’s Economic Recovery.” The Wall Street Journal (Thursday, November 16, 2017): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the article has the date Nov. 15, 2017, and the title “A Specter Is Haunting Europe’s Recovery: Zombie Companies.”)

Wrecking Ball for Bureaucracy That “Is Killing the Country”

(p. B4) America’s big tech companies are facing some of their toughest political challenges as they flirt with or surpass trillion-dollar valuations. Before lawmakers try to rein them in, Reid Hoffman argues government officials better be careful what they wish for.
Mr. Hoffman was chief operating officer of PayPal while it was still a small payments startup before he co-founded the professional social-network LinkedIn.
. . .
WSJ: You’re vociferously opposed to President Trump and even commissioned an anti-Trump card game. Does Silicon Valley have a problem with liberal bias?
Mr. Hoffman: I do think that there is a reflexive bias to liberalism that causes discomfort. I think you have that kind of left bias within the Silicon Valley culture, too, which is, “I’m so convinced that’s idiotic, I’m not listening to anything about it.” And that’s the problem. The problem is not actively listening. But that’s human. It’s not only here. Part of the reason [for strong negative reactions] to Trump is the flat-out lies.
WSJ: When you talk politics with Peter Thiel, PayPal’s co-founder and a well-known Trump supporter, what are those conversations like?
Mr. Hoffman: He’s a friend of mine, but we’ve disagreed about politics since we were college undergraduates. One thing we argue about is how much does Trump lie? I’ve been trying to advance him the case that there’s always been some lying around politicians, but Trump is one or two orders of magnitude worse than ever before. He says Obama is a bigger liar than Trump–based on, for example, the claim that under Obamacare you’d be able to spend as much time with your primary doctor as you did before Obamacare.
Peter thinks that the bureaucracy is killing the country and that you need a wrecking ball to shake it up, and maybe Trump is the only wrecking ball you get. His pro-Trump arguments are that someone needed to stand up to China. Trump at least is, [while] everyone else gave it lip service.

For the full interview, see:
Rolfe Winkler, interviewer. “A Silicon Valley Warning.” The Wall Street Journal (Thursday, Sept. 27, 2018): B4.
(Note: ellipsis added; bolded and bracketed words in original.)
(Note: the online version of the interview has the date Sept. 26, 2018, and the title “LinkedIn’s Co-Founder Warns of Perils in Regulating Big Tech.” The last question and answer quoted above, is included in the online, but not the print, version of the interview.)