Google gets sued
The Department of Justice (DOJ) sued Google for monopolizing digital advertising. This is in addition to an antitrust lawsuit filed in 2020 by the DOJ for monopolizing search and search advertising. Google has been under the government’s crosshairs for some time now. Regardless of the lawsuit's merit, this is likely to be a problem for the company for the foreseeable future. At the same time, Google’s search business is under pressure from ChatGPT. We have long been concerned about the anti-trust focus on Google being a source of distraction, potentially affecting near-to-medium-term performance. A parallel to this is when Microsoft was under the DOJ’s crosshairs in the early 2000s. As a reminder, Microsoft stock was dead money for over a decade.
Strong but speculative start for market
The stock market is off to one of the strongest starts to the year in over a decade, a welcome respite after a tough 2022. Statistically, a strong January generally leads to a strong year. We find ourselves a bit skeptical. Leadership so far seems to have come from some of last year’s worst-performing sectors, e.g., technology, consumer discretionary, and communications. Anecdotally, some of the most beat-up individual stocks have had some of the biggest moves higher. At least in some of these names and sectors, this feels a lot more like short covering and/or a bear-market rally than the beginning of a move back to prior highs.
Bitcoin takes another leg higher
Bitcoin took another leg higher this week, topping $23,000 for the first time since last summer. There were no obvious reasons for the move, except risk appetite in speculative stocks mentioned above and potentially a connection to China’s reopening. Sentiment in the crypto space reached new lows post the FTX collapse at the end of last year. It is not clear to us, outside of sentiment and China, what is driving the current rally. At the risk of repeating ourselves over and over, we believe bitcoin has the potential for significant value, and exposure to it should be sized as a highly speculative asset