This week’s links: 23/6/19

Tech and Anti-Trust – Stratechery. Focuses on potential outcomes of anti-trust scrutiny of big tech. FTC defines “monopolization” via two key characteristics: market share (usually 50%+, but obviously contingent upon the definition of the particular “market”), and durability of market power.

Starting with monopoly allegations: 1990s Microsoft was deemed a monopoly on personal computing operating systems given its market share and the lock-in it had due to network effects between Windows API and users. Apple, even in the US (its best market), only has 45% of share with the iPhone. However, in its app store, it charges 30% commission on subscriptions sold on apps, imposing an economic disadvantage upon apps that compete with those offered by Apple, including Spotify. As for Google and Facebook, it seems difficult to define the addressable market for digital advertising; the total advertising inventory on the internet is virtually boundless. Amazon plays in the retail and ecommerce spaces, and does not command 50%+ of either gross merchandise volume.

Where to invest in the next 10/20/30 years – 13D Research: the late-mover advantage suggests emerging markets will be tremendous growth opportunities, highlighting drivers that include demographics, fintech and solar power advancements, improving trust in governance and an undervalued emerging markets index relative to the U.S.

AQR on how pension funds and endowments should think about portfolio allocation to equities. Key thesis: Warren Buffett often recommends investing in low-cost index funds and sit tight while your returns compound. AQR notes, however, that endowments and pension funds have periodic payment obligations that consume most of the returns, specifically for pension funds who’s growing benefit payments are an even larger burden in drawdown years. Conclusion: diversification from pure-equity strategies is necessary to protect the sustainability of these periodic obligations.

Beyond Meat Valuation – Aswath Damodaran.

How Aldi’s Beating Walmart at its Own Price Game – CNN

Amazon seeks to revive its faltering loans business – FT. You’d think with all their transaction, inventory and cash flow data on their SMBs sellers, Amazon would have great data to assess their creditworthiness and generate a smart lending business. But growth has been challenging, jobs have been cut and they’ve stopped issuing loans in some countries. FT notes that new ‘open banking’ rules in the UK and the Payment Services Directive in the EU allow tech companies greater access to banks’ customer data (through a larger initiative to increase European competition in the payments industry), if consumers consent. This could give Amazon repayment information and income data of sellers from other marketplaces, effectively giving them greater access to bank data while retaining their own seller data in private, extending an advantage.

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