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Fred Dunkley

Fred Dunkley

Writer, Safehaven.com

Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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Trump Targets Amazon As Tech-Sell Off Continues

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President Trump has never shied away from making public his deep-seated antipathy towards Amazon, and now he’s upping the stakes in his battle against what he views as unfair tax practices and antitrust violation.

And his Thursday-morning tweet managed to shave another 2 percent off Amazon’s share price in the pre-market, when it’s already lost tens of billions in market value as a result of Trump’s offensive.

(Click to enlarge)

Amazon stock has now joined a group of beleaguered FANG stocks in the ongoing tech sell-off, all thanks to fears that the president might be about to fire new shots at the company.

Amazon stock has lost more than $53 billion in market value after reports that the president is ''obsessed'' with clipping the company's wings, though of course it's unlikely that the latest sell-off is what he had in mind. This is not, however, an administration obsessed with consequences.

Amazon's sell-off perhaps represents the biggest loss in value by any single stock that can be directly pinned on Trump's words or actions.

Defense contractor Lockheed Martin (NYSE:LMT) famously lost $4 billion in 2016 after Trump tweeted that the company's F-35 program was too expensive.

Destroying small retailers

According to political news site Axios, the president's beef with Amazon is informed by what he sees as the company's role in putting small retailers out of business, as well as the preferential treatment it has been receiving from the UPS.

The report says that Trump has been exploring various ways that his administration can use anti-trust or competition laws to limit Amazon's dominance. Related: Elon Musk’s $2.6 Billion Tesla Challenge

His overall logic might be flawed, but there is an elephant in this room.  

Amazon has perfected the art of aggressive pricing--something that has literally sucked the life out of competing physical retailers.

There's ample evidence to show that Amazon has in fact been growing at the expense of brick-and-mortar retailers. Big-box retailers such as Wal-Mart, Best Buy, Home Depot, Target and even Costco have seen their growth shrink in categories where they compete directly with Amazon.

Meanwhile, Amazon's share of the retail pie has been steadily expanding.

(Click to enlarge)

Source: CNBC

FANG stocks vs. Capitol Hill

Investors have also been using Facebook as a punching bag lately, bidding down the company's shares 17% over the past 30 days. Amazon and Facebook belong to the famous FANG stocks along with Netflix and Google.

Once seen as a monolith of performance, FANG stocks have lately undergone various degrees of decoupling and have been underperforming the broader tech sector.

FANG ETF vs (XLK) Tech Sector ETF YTD Returns

(Click to enlarge)

Source: CNN Money

All this boils down to fears that Capitol Hill will increasingly clamp down hard on these tech giants by introducing tough regulations that will affect the way they do business in the future.

In the case of Amazon, Congress might pass new laws that will force all online companies to collect sales taxes. The online retail giant already does that in all states, though it still remains vulnerable to new laws because in most states it doesn’t collect sales taxes on sales of goods sold by third parties on its platform, according to the New York Times.

Where it concerns Amazon's dominance, there just isn't too much room for the government to maneuver because anti-trust laws have shifted dramatically since the 1980s when they were primarily meant to breakup huge companies like Amazon.

Modern anti-trust laws tend to focus more on consumer welfare than sheer company size. A case could be made on Amazon's price discrimination and predatory pricing practices; but the fact that low prices have made things easier for its customers would be hard to argue against.

By Fred Dunkley for Safehaven.com

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