Mega Merger: Good or Bad?

While we wait for tomorrow’s S&P 500 Housing Report, and we suffer through a bunch of Fed-Speak speeches between now and then, there is really only one major story pressing the marketing higher this morning.

That’s the proposed merger of Time Warner with AT&T.

In a CNBC interview, AT&T chairman Randall Stephenson argues the point that the proposed merger should be OK because he says it is a pure “vertical integration.”

When reading this kind of story, it is helpful to understand a fair bit about vertical and horizontal in business lingo.

A vertical integration is when you own the whole production process. You might mine raw materials at the left side of your corporate flow chart. Then the ore might get on your transportation subsidiary to get to the smelter and mill. Which you also own, by the way.

From there you have a fleet of trucks that brings is to your manufacturing plant (where you make paperweights, by the way). Last, but not least, you have another fleet of trucks that take the goods to “Schmoe’s Paperweight Stores” located around the country.

The specifics of how the vertical integration takes place are not critical. You can engineer in one city – say Cupertino, California. Ship your bill of materials to China for assembly. Then move the finished goods to your stores in the USA and the EU. And, in pseudo-cleverness, route most of your sales through Ireland in order to avoid tax. Here, have an apple and think about it.

A horizontal combination is a different animal. That’s where you pick one of the aspects of the vertical, say mining, and buy up all the mines in the world.

This is particularly fun because globalism doesn’t really have all the analogs of domestic free markets, though they spew to the great unwashed in this regard.

But let’s say you bought up every lithium mining operation in the world, such that you could more or less set the price of lithium, and in turn batteries, well that’s the essence of a horizontal combination. Or, you could do the same thing with garbage trucks.

The thing to do – which can make you a tidy profit both as an employee/key contributor and as an investor, is to find a company or nichey set of vertical markets. I went through such an experience in the late 1990’s in the DC Power Systems field.

There were a bunch of DC power companies and some very, very bright people found an AMEX listed company that was essentially a “shell.” They had minimal income, but on their books they had boatloads of accumulated tax credits. So they went after DC power products.

They not only bought the company I was with, which was DC power instrumentation, but they bought a number of inverter companies, and some DC power cables and accessory companies and you can find all these things in your local marine supply stores.
As this process went along, you could see both horizontal aspects (buying several inverter manufacturers) on the one hand, and vertical aspects by picking up everything that would be needed for marine DC wiring. The wire, the breaker panels, the lighting systems, the fuse holders, the inverters, and the DC power and control instrumentation.

As a real stroke of genius, this outfit also bought up a EU-based company, which then provided distribution into Europe plus a “local European” outfit to achieve C.E. markings for most of the product line.

Like I said, these ol’ boys were smart and in the end the company which had been publicly traded was taken private and I lost interest in it about there.

But that’s how vertical integration and horizontal combinations work. Done right, you can get this past regulators if you sort of stay “in a consumer vertical” which in my experience was marine and mobile DC power.

About here we get to the point of this longish: At what point does the “box” of vertical and horizontal get too big and become subject to anti-trust action?

Sadly, there is a public answer and a private answer.

The public one is relatively straight-forward: If the resulting company has too much pricing power in a consumer market, then it can be disallowed on a “public interest” basis.

AT&T was, you’ll recall, busted up years and years ago because they had become what was essentially the “only phone system in the country” which is where the Baby Bells, or regional Bell operating companies (RBOC’s) came from.

The Time-Warner / AT&T deal becomes a long discussion of merits, none of which will matter because of the other part of anti-trust decisions: The political part.

The political part is interesting because there are plenty of places where you have been hearing bad things about the proposed merger from the middle to right of the political spectrum. A couple of examples include (oddly) Time Magazine which worries the move could hurt consumers. Similarly, GOP hopeful “Donald Trump rips into possible AT&T-Time Warner deal.”

Now we get to the political part and this is what matters most, I think.

While it’s true that Donald Trump has been clearly anti-merger, Hillary Clinton has, as usual, been less clear, offering only political-speak of non-substance. All I can find is a NY Times description of her view which says “…Hillary Clinton, meanwhile, has promised to be tough on corporate megapowers and consolidation.”   Blah, blah, double-speak.

What that really means is that after a certain amount of song and dance, Clinton will approve it

And that gets us down to the real importance of all the “show hearings” and monotonous days of hopelessly clueless bullsh*t to follow.

America, you see, has been taken over by a corporate-government combination..

In the old days anti-trust meant something almost akin to separation of powers between Church and State: You had the corporations over there and the state off yonder.

Now, however, lawyers of useless lawyering have perverted the once “clean” separation. The U.S. government, for example, allows increasingly callous corporations to warehouse money untaxed offshore. All made possible because corporations know money spent in Washington DC on lobbying has anywhere from a 1:100 to a 1:1,000,000,000 return ratio. Oh, yeah, that’s how corporations avoid tax.

The reality of it is that the underlings on both sides will meet and over the course of this talk and that, government control or influence overs the public manipulation aspects of the deal will be sealed.

This works very much in the favor of government, which is becoming more and more socialistic in nature; giving government more control over media. Yet at the same time, it will give corporations the kind of efficiency they want in order to squash upstarts and competition. What that should lead to is a further series of roll-up in the data/media space and that we will take as a slow-motion pincers movement to stifle competition and oh, yeah: free speech.

In the days of an America founded on hence competition and separation of government and corporate interests, such a mega move would die on the vine.

In the socialist wet-dream of the coming Clinton administration, approval after much play –acting and woe-is-us drama, will be approved because it gives the runaway executive branch even more power over the stupid masses.

Power which if used properly could inspire and make America (dare I say it?) great again. Used as we’re headed?

Another nail in the coffin of once-free and sovereign people.

At least that’s how it looks this morning.

Rigged Election Worries

With things all tied up, we see how Concern Grows over Soros-Linked Voting Machines.

Did BREXIT Stop an Invasion?

We note that Eviction of up to 10K migrants begins at makeshift camp.

The French, being victims of political correctness disease and open borders, gave the illegals (a term not used in the news covered, but it’s a general fact of the people there when you read deeply on it) a choice of either staying in France or going back to their country or origin.

See what I mean “stupid?”

Except, as you can see from the equally brain-dead Germans, and even our American experience, immigration is a short-term engine of growth and since the world is desperate for that, immigration and open borders are social suicide in order to keep the economic patient, on life support already judging by the debt figures, alive just a little while longer…

Damn fools. But the world’s full of ‘em.

About the Russian Fleet

I don’t like it when a story goes cold. We are only slightly reassured by the 3-day old report that the “British Royal Navy monitors as Russian war ships pass through English Channel.” Smart bet is they aren’t bringing the pizza.

Deeper Military Affairs

From our ex-oak leaf fellow warhammer:

“Happy Monday, sir!

The old Strategic Air Command went “dust in the wind” back in the early 90s, split into multiple commands for training, then cutting over to Strategic Command (note the dropping of ‘air’ but it is in charge of all nuke forces, to include the navy during times of heightened tensions). The USAF decided that might’ve been a poor idea when all sorts of nuke problems made the headline news due primarily to poor training and handling of nukes.

This article primarily highlights some ICBM measures since taken to rectify the bad training issue.

http://www.afgsc.af.mil/News/ArticleDisplay/tabid/2612/Article/980448/team-minot-validates-deterrent-capability.aspx

You’ve done Ure a fair share of marketing. Any thoughts on the name Global Strike Command? I have my own thoughts but would be interested in Ure’s.

If we were an honest country, and if we were more nationalist than globalist, we would never use such a term. It would be the “Global Peace Command.”

So from a marketing perspective, it is the government/corporate merger’s first-strike group. While that may be something of a stretch for normal people, remember this is a totally unique marketing effort with a total audience size of two.

The president of Russia and the head of China. We are trying to tell them we have the biggest, meanest pit-bull out there.

Yet Russia keeps breeding more Rottweiler’s.

Useless News?

The AT&T deal has spurred the market futures higher. The odds of a rally through next Spring continue high, although we’d sure like a retest of 2,020 on the S&P first.

No drug testing on Wall St. today: Futures are up 90.

Comments

Mega Merger: Good or Bad? — 18 Comments

  1. “it gives the runaway executive branch even more power over the stupid masses.”

    You’vesaidit!@

  2. Tulsa County, where I live, has such a good voting method that it is cited as an example nationwide.

    The voter is given card stock weight paper ballots to fill in the box next to name with black marker. The voter then inserts the completed ballot into the tally machine. This method is similar to the aptitude tests and such I took in public school fifty plus years ago.

    The ballots and machines go back to the election board hq where the ballots are stored in boxes for some time in case a count is questioned.

    There is no perfect system, but this one seems to be pretty good.

  3. “If we were an honest country, and if we were more nationalist than globalist, we would never use such a term. It would be the “Global Peace Command.”

    That would fit right in with our U.S. Navy’s marketing efforts. “A Global Force for Good.”

    https://youtu.be/Gu_ANMsnOXs

  4. The only reason the Republicans are worried about election rigging is that they know it can be done. ie Bush vs Gore, dull the steel rule die check box for Gore that cuts the ballots in Florida. Then blame old people for not being able to punch the ballot, thus hanging chad. The final count gave the victory to Gore. The Republican fix is to limit people that wont vote for them ability to vote.

  5. George, can you find out if there is a way to remove the SumoMe (Subscribe to Peoplenomics ($40/year)) pop-up for folks that are already Peoplenomics subscribers?

    • It should only display once every xx days if you use cookies… they do have some uses.

  6. Hi George!

    Fraud with voting machines can simply be avoided by fitting all the voting machines with the option of a paper trail. Just like ATM´s that ask if you would like to print out a receipt after your withdrawal, any voter should have the option at least to have physical proof of his/her vote. That way if the candidate has doubts whether the voting machines were rigged (which I´m sure they are) he/she can simply request a recount based on the paper trail. My advise to all Americans is NOT to vote unless they can have physical proof of their vote.

    However, what worries me most is the question I keep asking myself which is: 300 million Americans and all they can come up with are these two whack jobs??

    We´re doomed!

  7. Well you know George when we met with Russia in Iceland Russia purposed to Reagan the destruction of all nuclear weapons with all the inspections we wanted, but of course the neo-cons with Reagan advised him to turn it down with no reason given so he did now we are back to that old worn out cry “the Russians are coming’.!!!

  8. “Rigged Election Worries

    With things all tied up, we see how Concern Grows over Soros-Linked Voting Machines. ”

    Read the biography of Sam Giancona and the part on how they controlled elections.

  9. “The old Strategic Air Command went “dust in the wind” back in the early 90s, split into multiple commands for training, then cutting over to Strategic Command (note the dropping of ‘air’ but it is in charge of all nuke forces, to include the navy during times of heightened tensions). The USAF decided that might’ve been a poor idea when all sorts of nuke problems made the headline news due primarily to poor training and handling of nukes.

    This article primarily highlights some ICBM measures since taken to rectify the bad training issue.”

    An interesting thought.. Years ago one of my jobs was making cargo drapes for the military. they assembled and looked like various companies the purpose was to be able to move cargo from one area to another without raising the concern of the people.

    Now to my interesting thought almost a month ago ( just before the Russian drills) I was running errands and on the freeway here comes a convoy.. we see them quite often usually the guard Heading out for training etc..
    what was different about this one.. was that it was a UN convoy and trailing in the middle of the group two vans with the drapes covered.
    My question is where I live.. what in the heck is there a UN convoy.. why the draped van’s. Is there something more aggressive going on.
    I quickly called a friend of mine that happens to live right next door to one of those facilities that house a great deal of people and asked him if there was any activities going on with the neighbors.

    Nothing yet its as quiet as a mouse not that if there was a scurry of activity that it would make any difference since I’m Not invited anyway. those invited are the important people.