Bits & Bytes starts with Facebook which is less of a technical alarm than media suggests because consumers (unless they are advertisers) do not provide credit card or very private information. This impacted over 50 million accounts, writes Gene Inger over the weekend.

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It’s been my view that FB shares were appropriate for large partial sales earlier in 2018, about the time Peter Thiel (Zuckerberg’s first private holder incidentally, and eBay co-founder) liquidated around 70% of his shares.

It should be noted that ever since the dramatic July breakaway decline, FB never reestablished technical strength. Stocks rarely do after such shifts or at least not for a long time or absent some fundamental developments.

In this case look for Instagram to be more closely embedded, but FB really is a fairly mature stock with no particular investment attraction for now.

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For at least a couple months I’ve warned about Google (GOOG) just because it’s a key FANG stock, and that whole area looked vulnerable.

I also believed its inclusion in the new Communications ETF (XLC) would weaken its structure along with Facebook both of which were being shifted. The revelation by their officer Friday regarding trying to re-enter China possibly using a search engine with a backdoor for Beijing authorities, is news that I hinted at twice in the past two weeks. Despite their efforts to skirt the issue with emphasis that no decisions to deploy had been made just working on it, this move is controversial.  

Of course, Google is simply expensive and the share price came down as I outlined and is holding within $100 of the highs. However, it looks toppy at present, with most FANG+ types also in various stages of distribution or at lofty levels which should be viewed as concerning and not very attractive.

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Stalwart Apple (AAPL) has new products out, and more coming of course. To me it’s the enterprise sector that is most promising and least discussed.

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In that regard a Salesforce (CRM) deal for apps similar to efforts with IBM, clearly illustrates the direction Cupertino is taking Apple. The upcoming or rumored iPad Pro with sleeker styling (thin bezels) will aim at business customers, since most consumers are content with the new large semi-phablet, the iPhone XS Max.  

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Although everyone acknowledges the Apple ecosystem, longer-term it seems skeptical analysts about the company miss taking full measure of the symbiotic relationship this has with Apple customers, and how this can expand further over years to come.

Apple Music, their slow-to-start HomePod speaker and CarPlay are just part of this. Just the App Store and Music aspects make more revenue than most companies, and they are close to leading the sector.

Their Apple TV 4k is a sleeper that anyone with streaming television has come to appreciate more recently. I note most can set-up similar capabilities with Google Android systems (as they do). Generally, the view is that Apple has it down pat and generally recognized as more secure. (IOS is encrypted OSX is based on Unix.)

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I observe that Netflix (NFLX) remains pricey and in time may be challenged by a redesigned DirecTV Now, the AT&T (T) operation leveraging its HBO holdings. DirecTV Now carries local channels in most cities, and of course Netflix does not. As this gets refined (it’s better than at the start), DTVN could erode Netflix’s dominating position. Hulu too is a reason many of those other streamers are starting to consolidate.  

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And I must finish FANG+ by mentioning uber-expensive Amazon (AMZN). Sure, it opened a NYC retail storefront, and can acquire anything it wants. But now is not early-entry into this and there is antitrust risk here and in Europe.

It gets chatted about beyond market circles in that regard. Hence the risk is actually because Amazon is such an amazing adventure it can dominate a field if it wants to and even watch sales of popular products to see if they want to compete. (This itself is a concern from an antitrust view.) Hence this is an example of so much success that one should be wary.  

A footnote: I didn’t focus on Tesla (TSLA). It’s not FANG) but I warned about it for months from a competitive standpoint.

I believe Elon Musk mishandled things in a few cases that could have relieved tensions, but my concern was less on the regulatory front. My concern is more on the reality he did not have a deal with a conventional car manufacturer for a blended power vehicle or portfolio of cars, to bridge the gap towards wider acceptance.

If Tesla stumbles with Model 3, the risk will become lack of design funding and a dealer/service network that isn’t up to the likes of competitors. At this point this is starting to become more evident and relevant.  

Simply put: GM (GM) can sell plenty of Chevys to keep their dealers alive, with the Bolts and Volts not so essential or necessary to turn profits. Same with BMW (BMWYY), who can sell a few I-3s (and fewer supercar I-8s) and still monetize the rest of the lineup until you get to the point of longer-range electric(s).

I also note that Mercedes is bringing the A Series here for 2019. Modern as heck with one of the best technology packages anywhere and 40 mpg on top of it. It’s not electric, but very good economy and well-priced.

I saw it as well as the other end (like the Audi Q8 and new A7 and BMW 850i) in Berlin at IFA. All are impressive and will compete for buyers Tesla wants.

At some point perhaps, Tesla makes a deal or the competition eats them up. I do hope not but I’m just being realistic. I had a terrific chat with a young new manager for Tesla Germany; but they really act like it’s their sandbox.   

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