Antitrust — Trading Ideas on TradingView

Meta: Is the Plunge Inevitable?Despite its vast reach and market presence, Meta Platforms faces significant and compounding challenges that suggest a potentially turbulent future. While appearing dominant, the company is increasingly vulnerable to external pressures stemming from legal, regulatory, and competitive fronts. These growing headwinds threaten to erode its financial stability and alter its fundamental business model. A critical area of concern involves the human cost of content moderation. Meta faces multiple lawsuits in Africa, alleging severe psychological harm to moderators exposed to disturbing content. These legal actions, particularly in Ghana and Kenya, argue that Meta bears responsibility for the well-being of these outsourced workers, citing inadequate support and exploitative conditions. A loss in these cases could set costly precedents, forcing Meta to significantly invest in or restructure its global content moderation operations and potentially face substantial liabilities. Simultaneously, Meta confronts escalating regulatory action, particularly in Europe. Recent significant fines from the EU under the Digital Markets Act highlight regulatory intent to control how tech giants handle user data and maintain market dominance. These penalties, including a substantial fine over its "consent or pay" model and a previous one for unfair trading practices, signal a global trend towards stricter oversight that could constrain Meta's core advertising business model. Adding to this pressure is the ongoing US FTC antitrust trial, which seeks to unwind Meta's key acquisitions of Instagram and WhatsApp, citing anti-competitive practices. The potential forced divestiture of these highly lucrative platforms represents an existential threat, as Instagram alone accounts for a significant portion of Meta's advertising revenue. These intertwined legal and regulatory battles, combined with intense competition in the digital landscape and the uncertain return on large investments like the Metaverse, create a challenging outlook for Meta. The cumulative effect of these pressures could significantly impact the company's profitability, market share, and public perception. Navigating this complex environment requires Meta to address these fundamental issues effectively, or face the increasing likelihood of a substantial downturn.

When Does a $433.5 Million Settlement Become a Victory for Both In the complex landscape of corporate litigation, Alibaba's recent settlement presents a fascinating case study of modern business strategy. While the Chinese e-commerce giant agrees to pay $433.5 million to settle shareholder allegations, this decision might paradoxically represent a win-win scenario for both the company and its investors. The settlement, ranking among the top 50 largest securities class actions in U.S. history, raises intriguing questions about the balance between corporate governance and strategic business decisions. What makes this case particularly compelling is the mathematics of risk management. When faced with potential damages of $11.63 billion, Alibaba's decision to settle for $433.5 million reveals a sophisticated calculation of risk versus reward. This settlement, representing less than 4% of the maximum potential damages, demonstrates how modern corporations can transform legal challenges into strategic opportunities for resolution and renewal. The implications of this settlement extend far beyond Alibaba's balance sheet. As global markets increasingly scrutinize tech giants' practices, this case sets a precedent for how international corporations might navigate the complex intersection of antitrust regulations, shareholder rights, and market competition. The resolution suggests that in today's business environment, the true measure of corporate success might lie not in avoiding challenges, but in transforming them into opportunities for organizational evolution and stakeholder alignment.

Small caps testing a critical support level Since 2005, the IWM/SPY ratio has held this key support level 6 times. This support failed only once, in the midst of the Covid-19 pandemic. Now we find out whether the pandemic was the exception that proves the rule, or whether the pandemic structurally changed something about the relationship between small caps and large caps. Small cap valuations look better than large caps Check out page two of the latest Yardeni report titled "Selected P/E Ratios." They've got forward P/E charts for large caps, mid caps, and small caps, showing that forward P/E for large caps is still extended well above its historical range, whereas forward P/E for small caps has corrected sharply down back into its normal range of the last 20 years. In fact, we're well below the price multiple that small caps traded at throughout 2017. www.yardeni.com Large caps just touched a strong resistance level The Nasdaq index, heavily weighted toward large-cap tech stocks like Apple and Facebook, just touched 15,000 and seemingly got rejected from that level. Large cap tech has benefited from soaring bond prices, but bonds seem to be meeting some resistance after this month's large inflation surprises. The Fed is doing its best to support bond prices with a "jawboning" campaign, but they've got a tough row to hoe after those inflation reports. Large cap tech also faces a bipartisan push in Congress for antitrust legislation. Facebook, Apple, Amazon, Google, and Microsoft are among the names that may be affected if such legislation goes through. Of course, Tesla is also getting some bad press from the Solar City trial. So it's possible we will see the beginning of a real Nasdaq/S&P 500 correction here. How I'm playing it When I say I think small caps will hold this support, I don't necessarily mean that small caps will make gains. Only that they will make relative gains. That could happen by large caps and small caps selling off together, but small caps selling off more slowly. Or it could happen by small caps trading sideways as large caps sell off. In general, small caps have made their largest gains when large caps are going up, not when large caps are going down. So one way to play this support level is with a two-tailed bet: long small caps, short large caps. Personally I am long a few select small cap names. I like Allison Transmission because of soaring car prices, and I like the KRE regional banking ETF because bonds look like they may have hit a ceiling, and because small lending banks tend to trade inversely with bonds. To hedge my rate bet, I'm also long on small cap gold miners, which should benefit if bonds continue to go up. (I'm also long on homebuilders KB Home and MDC Holdings, although the homebuilder sector is struggling a bit due to backlogs, labor shortages, materials costs, buyer reluctance, and rising rates on 5/1 ARMs. I love the valuations on these two stocks, but I won't be surprised if that trade continues to go against me here.) For the large cap short, I'm trying to be a little careful, because the big tech companies' earnings are coming up. I think I may wait to see what the results are before I take that leg of the bet. It would be easy to get wiped out by a big tech earnings beat. For now I've just grabbed some UVXY shares. As always, this is just an idea and not investing advice. Good luck!

Facebook Antitrust Concerns As antitrust concerns grow, Facebook could potentiale make a bigger correction at this point. This setup is still highly speculative and too early to get involved in, however as long as we don't see any new highs it could be in play. At the moment a trigger point is still missing, looking at the daily chart this trigger could happen as a potential head and shoulders formation would break to the downside. Its still early on this one but should be kept on the WL. Further if it plays out on the other hand there would be nice long-swing opportunity in the future around the 100 price level.

Antitrust debate Tech Giants Google, Facebook and Amazon Intensify Antitrust Debate The backlash against Silicon Valley comes amid a broader movement to rethink antitrust in general and marks the scrambling of the old left-right divide over government intervention in the market.

AMZN: Short it here, antitrust law discussion might affect it I think it's a good time to revisit the idea of shorting bubbly large caps, in particular ones with a good fundamental backdrop, to both profit from the decline in them, if it comes to pass, and hedge our risk in other long positions we hold in our portfolio. I'm focusing on $AMZN here, which has the lowest risk from my perspective. For a great breadown on it, check out Tim West's post in related ideas. The weekly upside is exhausted and implies a slow period, either a correction or consolidation for a few more weeks still. The recent run up, on the back of dovish comments from Janet Yellen, give us ample opportunity here. So, in general, I don't advocate shorting stocks, mostly because of sentiment, and the bullish signals and valuations of many companies, but other stocks do justify the concern, to name a few, $NFLX, $AMZN, $AAPL, $GOOG, $MSFT, $NVDA, $WYNN, $WST, $HD, $BBY, $MU...The recent talk of net neutrality, and now antitrust laws, might stifle some volatility in internet related stocks, and specially big behemoths like $AMZN. As a counter argument to this, sentiment remains negative for the most part, which could imply further upside to be tapped soon, according to the AAII sentiment survey data: www.aaii.com The government and the fed can pull the plug though, ultimately, and if $AMZN does trigger a reformulation of the antitrust laws, it is in for a heck of a drop. In the long run, we will have losers, but it's always good to take a valid trade opportunity, as scary as it may seem, specially if it helps balance our portfolio risk, and help bring us down into reality again after being right in most things. Best of luck, Ivan Labrie.