WASHINGTON. Friday gifts us with a very chaotic market. Traders and investors – and even, it seems, the machines – find themselves completely baffled about whether or even how to invest going forward in 2019. But at least somereasonably positive news hit the wires this afternoon. The Department of Justice (DOJ) announced it has finally given the go ahead for a pair of also-ran telecoms – T-Mobile (trading symbol: TMUS) and Sprint (S) – to go ahead and merge in a $26 billion deal, as noted by CNBC. The T-Mobile-Sprint merger could eventually prove a really big deal.
Both T-Mobile-Sprint merger partners are up nicely as we write today’s column, with TMUS celebrating a lot harder than S.
Details on the T-Mobile-Sprint merger approval by DOJ
“As part of the agreement, Sprint will divest its Boost Mobile, Virgin Mobile and Sprint prepaid phone businesses. Sprint and T-Mobile will divest some of their wireless spectrum to Dish Network and make at least 20,000 cell sites and hundreds of retail stores available to the company. Dish will also be able to access T-Mobile’s network for seven years.
“Makan Delrahim, head of the DOJ’s antitrust division, said without these remedies, the merger would “substantially harm competition.”
“Separately, Dish announced it struck an agreement with the Federal Communications Commission to establish a 5G broadband network covering 70% of the U.S. population by June 2023. If it doesn’t meet that deadline, it will pay the U.S. Treasury as much as $2.2 billion.”
But there’s a catch…
That’s all good news. But, as with everything that gets trapped in America’s Swamp, it ain’t over ‘til it’s over. Too bad for the T-Mobile-Sprint merger party. As usual, a number of pesky state attorneys general are fighting over the entrails of this deal.
“State attorneys general from Nebraska, Kansas, Ohio, Oklahoma and South Dakota have signed onto the agreement. However, T-Mobile and Sprint still face an ongoing lawsuit from 13 state attorneys general and the District of Columbia seeking to block the deal on anti-competitive grounds.
“The merger cannot be finalized until after that case is resolved. The trial is set to begin on Oct. 7, but that date could be pushed back until Dec. 9, given the structural changes to the merger announced today.”
So who knows when this ruinous wrangling will end? As a former English professor, one English novel that particularly intrigued me was Charles Dickens’ gloomy, fatalistic Bleak House. Its main plot revolves around a never-ending family estate lawsuit.
(Spoiler Alert.) After what seems like a million pages, the suit is finally resolved. There is no more money in the estate. After years and years of hearings and wrangling, the attorneys and government officials got it all.
That novel appeared in the 19thcentury. But it appears that in the 21st, absolutely nothing has changed. Imagine how efficient and prosperous our country would be if every damned thing didn’t end up in court, a place where most disputes don’t really belong anyway. But a bunch of state AGs think the court system is exactly where the T-Mobile-Sprint merger belongs.
Mr. Market loses his way in weird Friday trading action
Back to the trials and tribulations of Mr. Market, aside from this provisionally good news on the telecom and communications front, stocks are a mixed bag today. All three major averages are moderately up, although the Dow keeps flirting with red ink.
Our favorite barometer, the McClellan Oscillator provides a pretty good picture of recent market action. Mr. Market keeps trying to break out from recent record tops in the averages. But he gets beaten back every time. See the recent action in the oscillator, circled on the chart and to the right of the graph. Indecision personified. Not good enough to take off into the stratosphere. Not bad enough to go short.
There’s no conviction here. And it looks like the pros are fearing what we often see around this time of year: a late-summer, early autumn shellacking. Just because.
A number of potentially worrisome items apparently keep Mr. Market from partying with true abandon these days.
It’s tariff time again
With regard to tariff time, it’s clear to most at this point that due to Chinese intransigence, there’s close to a zero chance of some kind of deal in 2019. China still wants to be King of the World, which is why it keeps stealing all our good technology. Just to keep the ball rolling on that front, the administration announced this morning that Apple (trading symbol: AAPL) would get no tariff waivers or any relief at all for Mac Pro parts made in China. Payback is rough, eh, Tim Cook?
Trouble in the oil patch
Oil and oil stocks also remain in a rut, though the oil majors remain quite profitable. In other industry sectors, Q2 2019 earnings season continues to offer many pleasant surprises. At this point, some 75 percent of announced Q2 corporate earnings continue to exceed expectations, despite all the naysaying in pundit land. The industrial sector remains weak. Financials are wobbly, and techs are more volatile than ever.
Amazon.com takes a header
Bucking the T-Mobile-Sprint merger action, consider Amazon.com (AMZN). We own a small position. AMZN reported earnings Thursday after the closing bell. They were great, too. But Wall Street remains “What have you done for me lately?” territory. Earnings were lower than expected, largely due to a big corporate outlay to implement overnight free shipping as an automatic Amazon Prime perk. So while Amazon’s numbers were great, they weren’t great enough, and a massive sell-a-thon began Thursday afternoon. (Since insiders already know the numbers in advance, which is illegal.)
The punishment continued in after-hours trading, and persists as we type this around 1 p.m. Friday afternoon. Having briefly ticked the $2,000 per share mark early Thursday, we find AMZN shares remains in swan-dive mode, currently trading at about $1940 and change per share. That’s a pretty big fall from that $2K Thursday intermediate top.
We slightly increased our position close to this morning’s trading bottom (but not quite AT the bottom).It’s worth commenting that investing in these shares was a rational, not an emotional decision for us. Investing, as always, needs to be conducted based on earnings and stock performance charts, not pure emotion. Jeff Bezos, brilliant and highly successful in his apparent aim to beat the Chinese and become King of the World himself, is, in truth, another of those despicable West Coast robber barons who seriously need some good-old Teddy Roosevelt-style trust-busting to help them see the light.
Investing is a dish best served cold…
But in the meantime, Bezos continually still proves, daily, that he knows how to coin real money. And so, we buy in to AMZN shares remembering that useful old adage, “If you can’t beat ‘em, join ‘em.” I’ve used the same rationale for years to buy utility stocks and enjoy their usually outsized dividends. “If you can’t beat ‘em, join ‘em.”
In fact, that goes double for your hometown electric and/or gas utility company. You have no choice but to send them plenty of your hard-earned money every month to keep the lights on and the frozen food from thawing. (Unless you manage to live entirely off the grid.) So why not invest in their shares and get a decent chunk of your annual utility bill put right back in your bank account?
That’s our cynical thought for the day, anyway. After all, it’s nearly the weekend. So let’s wrap up our final trades and enjoy two blessed days away from Mr. Market’s increasingly strange and nearly inscrutable game. And let’s see how long that T-Mobil-Sprint merger can drag on in the “Bleak House” of the US court system.
—Headline image: Telephones past and present. (Composite by T Ponick).