The Technology Stocks that Bind Us

It was a mixed week for markets this week. The large cap S&P 500 was down slightly, while the small cap Russell 2000 index enjoyed a nice bounce. This marks a fairly dramatic turn of events as large cap tech companies have by and large been carrying the market over the last 6 months, while small caps have lagged. Below is a graph showing the performance of the Nasdaq 100 Index measured against the Russell 2000. The recent runup in technology shares is clearly starting to resemble the late ‘90’s.

Back then, the ratio expanded as a result of the massive explosion in internet stocks. Today many analysts seem to be arguing that we may be seeing a shift in leadership; that smaller companies may start to carry the market which could propel stock indices to even higher levels. To this end I remain a little skeptical. Should these big tech stocks continue to falter as we have begun seeing recently, we would most likely see cap-weighted indices fall across the board.

In other news….

The bizarre struggle for control of the Chinese-owned TikTok seems to be reaching some sort of conclusion. For those unfamiliar with the story, back in July, President Trump announced that he would be investigating whether to ban Americans from downloading and using the TikTok app. For those further out of the loop on this story (which, if you don’t have pre-adolescent children, I don’t blame you), TikTok is a video sharing social medium. Picture Twitter meets Facebook meets YouTube, a sort of YouTube for a squirrel on Adderall.

Apparently, TikTok, like all social media apps has a tremendous algorithm for tracking users and data collection. The growing popularity among American youth has created a concern in the White House, leading to Trump declaring the company a threat to American security. A solution proposed by Trump as an alternative to an outright ban is that the Chinese firm sell its company to an American firm. Over the past month many companies have been jockeying to buy the company. Recently, read up until yesterday, it appeared likely that Oracle, in some sort of partnership with Walmart, was going to purchase a large share of the company. This deal, however, would still lead the Chinese holding company, ByteDance, in possession of the vital algorithm. This was not acceptable to the Trump administration, which this morning announced a ban on TikTok beginning Sunday.

This story raises so many questions on so many levels. One, it seems like we are entering some sort of Techno Cold War with Communist China. The bizarre stand-off, over what seems like an insignificant video sharing app, has somehow turned into the Cuban Missile Crisis. Before we were concerned about what nuclear weapons in the hands of the wrong operators would mean, now we are concerned about what data-collecting social media apps in the wrong hands could mean. Second, the question that seems to go unasked in the mainstream media is this: if there are such concerns for safety and privacy among these data collecting and data sharing apps, are we certain that these are even safe enough for an American firm to possess? It wouldn’t be 2020 if we weren’t left to question everything around us. When all the information we receive is either garbled, conflicting, or porous maybe the “Information Age” ain’t all it’s cracked up to be. The other night on a walk with my dog I thought about this TikTok saga and it made me want to drop my phone on the ground and quietly sneak away from it.

Thanks for reading,

Zach and Dave  

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