Fat ladies of Facebook and Co still not singing at the technology stocks party
● Tom Ognar isn’t used to having to explain his big bet on tech stocks like this.
After all, the portfolio manager of the $4.5-billion Wells Fargo Growth Fund beat 93% of peers over the past year by piling into Amazon.com and Google’s parent Alphabet.
But between Facebook’s privacy scandal and the back-to-back fatal crashes at Uber Technologies and Tesla, the tech-sector doubters are suddenly speaking out as one stock after another slides.
Ognar is unmoved: “We don’t think the party is over.” Nor do the bulk of his fundmanager peers, as it turns out.
Behind the ugly headline losses — including the FANG complex’s worst-ever day on Tuesday — there are data points that suggest many funds are a long way from abandoning the industry that has added more to the wealth of US stock investors over the past five years than any other.
What’s more, the Nasdaq 100 Index is actually the only major US stock benchmark still in the green this quarter.
“Think of things like your thermostat that used to be pretty basic and analogue. Now you can control them with your phone,” said Ognar from his office in San Francisco. “Your coffee machine, your coffeemaker — it’s a huge secular shift that hopefully will continue to put up sustainable growth.”
The stance on Wall Street strikes a discordant note with the backlash building up in Washington. While it’s too early to say whether Facebook’s woes will lead to meaningful losses in users and advertisers, the drumbeat for tighter regulation has some wondering whether it’s not a watershed moment for an industry that promised to change the world for the better.
“You have the darlings of growth stocks that are going through some tough times, and it’s not going to be a short and quick story,” said Jennifer Ellison, a principal of San Francisco-based Bingham, Osborn & Scarborough, which manages $4.2-billion. “This is a tip of that iceberg.”
Even Amazon, largely shielded until now, was hammered on Wednesday by talk of a tougher US government stance. Axios reported that President Donald Trump is contemplating ways to “go after” the e-commerce giant, including whether to wield tax or antitrust legislation.
Trump features again when it comes to Apple shares, which are more than 8% off their record high partly on concerns about the prospect of a trade war between the US and China. In a worst-case scenario, the US could impose a tariff that affects iPhones and other Chinese-manufactured electronics. And car accidents have roiled market darlings Tesla and Nvidia.
Not to worry, say analysts, who’ve flooded e-mail inboxes with reports reaffirming a bullish stance on the broader industry.
The bull case? Tech fundamentals remain strong and, for all the worry over privacy, fake news and tech power, the US giants are still cranking out products that people want to buy.
Facebook is sitting on a pile of cash so big that fines equalling the largest corporate penalties ever would amount to less than 7% of it.
Alongside Google, its online dominance is so complete that there are few alternatives for users or advertisers.
It’s been a bad week for Facebook. Although, given the origins of the past days’ fallout around the Cambridge Analytica saga, it’s really been a bad few years, largely of Facebook’s own making.
The social media giant knew all along what was happening, but chose to respond with hand-wringing only once the worst of the dirty washing came out to air.
A blog post this week by two vice-presidents — the company’s chief privacy officer for policy, Erin Egan, and deputy general counsel Ashlie Beringer — summed up both Facebook’s dilemma and why it is the architect of that dilemma.
The title of the post, “It’s Time to Make Our Privacy Tools Easier to Find”, goes to the heart of the culture of most of the tech giants that own the world’s personal data.
Users and the media have for years demanded greater transparency and simplicity in privacy settings. The time to make the tools easier to find was years ago.
The same applies to tools for reporting abusive content, misleading advertising, fake news and general misuse. The tools offered by Facebook, Twitter, Instagram and YouTube are blunt instruments that work as a bludgeon when one is required, but are useless in policing bullying, racism and nuanced abuse.
Must we wait for major tragedies before “it’s time” again?
The fact that bot armies can still be created to push a political agenda on Twitter — we saw it as recently as the ANC elective conference — and that individuals can still receive death threats on Facebook, as happened to a colleague this week, shows just how unintelligent their supposedly advanced algorithms are.
The fact that YouTube is a haven for the vilest of interest groups, that it offers succour to the liars and fools who punt absurd flat-earth conspiracy theories and dangerous urban legends about how aircraft contrails are really chemtrails used by governments to drug their citizens, tells us how badly it manages content.
When breastfeeding is regarded as more harmful to “community standards” than beheadings, you know there is something seriously wrong with the standards applied by these tech giants.
Content and abuse are just pieces of the puzzle, though.
Google should prepare for its own public relations disasters. Any owner of an Android phone — which is now in the vast majority of smartphones in use — has wrestled with forced permissions when installing a new app.
On older versions, for example, Facebook demands access to SMSes, contacts, calendar, camera, phone calls, location and even microphone.
When asked, it explains each of these away as being needed for specific situations, like sending confirmation codes via text.
If it earnestly believed in users’ privacy, however, Facebook would demand that access only when it needs to send such codes.
Google, for its part, should prevent developers from requiring blanket access to personal data in order for their apps to be used.
Those permissions should be requested only at the moment they are needed for an app to function.
Here Google utterly fails its users in favour of app developers. Much as Facebook did when it enabled Cambridge Analytica’s abuse of both its user data and of the world’s democracies.
Greater transparency and simplicity needed in privacy settings
✼ Goldstuck is the founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter @art2gee and on YouTube