Government Monopoly Monsters

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Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst and trader Chris Markowski.

Speaker 2 (00:16):
Government monopoly monsters. This is important people, as part of
our series about what's wrong with capitalism, why it's more
difficult to get ahead here in this country. And again,
it's something that we've been talking about for some time
and it's just gotten completely out of control. There's something

(00:36):
I've talked about when it comes to investing. Warren Buffett
has discussed it. I have discussed it as well. It's
a way of almost insulating portfolios with certain companies because
certain companies are protected. It's called regulatory capture. Regulatory capture

(01:00):
means well, just that a certain company is protected by
the actual regulations that are written by whatever it be
an acronym agency or whether it be by Congress, that
actually entrench their power. Ask how is that possible? How?

(01:20):
I mean, how regulations are supposed to control big business.
They're supposed to keep big business in check. Yeah, that's
a lie. Okay, again that that's conventional wisdom, and what
do we tell you about conventional wisdom. Conventional wisdom more
often not quite frankly, is bullshit. Okay, all of these

(01:42):
big regulations, let's go back, let's go back. You know
what we'll do with my wheelhouse. We'll do financial regulations.
We'll do after the dot com collapse we had here
we come to say today this a Bush administration. Spitzer,
we had global settlement. Armain's Oxley is written, I got
to remind you Clinton on his way out the door,

(02:06):
we signed the Glass Stego Act, which worked fine. It
was about thirty seven pages of financial regulation. They got
rid of that and they replaced it a couple of
years later with thousands of pages of regulation. Now, anybody
remember all of the investment banks and banking institutions that

(02:29):
were around back in the nineteen nineties. There was a
lot of It was a competitive field. You know. It
was also great about the nineteen nineties as well. Oh yeah,
if you had a great idea, or you thought you
had a great idea, because not all the ideas were great,
that's for darn sure. You could go to an investment
bank and you know, hey, we'll fund this now. No, no, no, no,

(02:55):
you got to go to private equity. You got to
go to private act we got to go to venture
cap and they've got to ladder that thing up over
ten years. Mean what general public doesn't get a taste
of any of this until you know, after it's way
overvalued more often than not, was in the case. Okay,
youngsters out there, yeah, yeah, yeah, yeah, you know. You

(03:16):
take a look at when Google went public, Apple, all
of these companies back in the day. Okay, they weren't
laddered up for twenty years, ten, fifteen, twenty years, they
could get in at a low level. Now that's all changed.
We also had the financial crisis, right, and then what
do we get? We got Dodd Frank. Now we got

(03:39):
the advent of the two big defail banks. Look at
that and listen, I'm talking about banks. But this applies
to any industry. This is one of the greatest myths,
one of the biggest lies out there when it comes
to corporate America in business is that they hate regular relations. No,

(04:02):
I don't regulations help big business. It makes it more
expensive for new entrance to come into that industry. Now,
I know I have told this story in the past.
We started Markowski Investments thirty years ago, plus the regulatory

(04:28):
climate was much different then than it is today now.
One would think it would be easier today with all
of the technology that we have and electronic filing and
less paperwork, the ability to track trades, I mean for
crying out loud. Back then, you're still using paper tickets
for crying out loud when you were doing buy orders.

(04:50):
It hasn't. The costs have gone through the roof and
they keep going higher. Where again, I go back and
I think about it, with the amount of money that
we had when we started Markowski Investments, would I be
able to do it today adjusted for inflation? Now? Answers No,

(05:13):
I mean, I don't know what would happen. I don't know.
I come have to find money elsewhere, beg borrow steel,
I don't know. Okay, but it's much different meaning what
meaning what you've created in essence a wall? Think of
a walled in city. Okay. People have been to the

(05:35):
island of Rhodes in Greece. Unlet's they got the old
city in roads and there's a wall around it. But
there's a moat before the wall. Who can enter that business? Now?
This this is because of politicians. This is because of
the business of lobby and this is the business of Washington, DC. Again,

(06:01):
you go to Washington, d C. It's got it's bad areas,
there's no doubt. But hey, you go on the outskirts
there bethesday outside in Virginia, very very wealthy. What do
those people do? Those people either working for the government
or they are lobbying the government. So if you you're

(06:24):
a business, you're a business, and you know you say
to yourself, hell, well, you know what I want to
influence regulation? Okay, let them write regulation. They can pat
themselves on the back and do that. But again, this
regulation can be great. It can be great because guess
what it will keep my competition at bay? Is that right?

(06:48):
Is that fair? Is that capitalism? No? No, The thing
is is that money lenders, private equity, they understand this.
They understand this. You could come into you go into

(07:09):
an investment bank, whatever it may be, and you may
have a great idea, great idea, great invention, whatever it
may be, and you know they'll just say no, no,
you're just you know, you're not going to be able
to compete because of the regulations or you know, the
government has decided that they're going in this direction. And
that's one of the things that's not supposed to happen

(07:29):
here in this country. The government's not supposed to decide
what direction we're going in. This is an interesting story.
I'm going to give you an example, Okay, Josh Holly.
Josh Holly is upset about the beef industry. Here in
the United States, anti trust laws such as the eighteen

(07:49):
ninety Sherman Act and the nineteen fourteen Clayton Act have
a clear purpose. According to the Justice Department, they prohibit
anti competitive conduct and mergers that deprive America consumers, taxpayers,
and workers of the benefits of competition. This means that
domination of the market for a particular product or service
by one or a handful of firms should be of

(08:10):
no particular concern to the government. Only when a business
dominates because of anti competitive practices or uses its power
to prevent competitors from emerging, should the government get involved. Now,
on its face, on its face, these companies companies are

(08:30):
not preventing companies from emerging or competing, but they're most
certainly doing it behind the scenes via lobbying. Without a doubt, Now,
I came down hard on Lena Khan. And she was
the head of the Federal Trade Commission under Biden, and

(08:55):
she had this idea that it's her job to essentially
put the brakes when certain industries become hyper concentrated, more powerful,
even though consumers are not complaining, they might be bringing
costs down. She talks about concentrations of economic power. Maybe

(09:16):
I was a little too hard on Lena in my
criticism in the way I handle maybe again, she's not
not that she's not onto something. She is just barking
up the wrong tree. If you will, you need to
be going after regulations. In fact, you need to have

(09:38):
the American economy needs to have an ease an ease
of use. You need to be able to get involved
without having to go through layers and layers and layers
of bureaucratic bs. I go. I wrote a column about
this years ago entitled red Tape Nation, and I always

(10:00):
quote that was an interview that Steve Jobs did back
in the day making fun of the original word processing
software program from the nineteen eighties. It was called word Star.
It was awful. It was awful, and all sorts of
you know, certain prompts you had to use. The instruction
manual was like four or five hundred pages. And he's like, yeah, right,

(10:23):
like people are going to read a novel to write
a novel. Now, I don't think so. And he wasn't wrong,
wasn't wrong. Well, anyway, you know, Holly, right now he's
he's going after you know, monopolies. He thinks that these
are you know, not working. And he's talking about the well,

(10:45):
he's talking about the beef industry, and he complained that
four companies Tyson Foods, JBS, Cargill, the National Beef together
control eighty percent of the US beef market. That's a
modern day monopoly. This characterization. Quite frankly, it's not there.
They're not a monopoly. Okay, they are. They are protected,

(11:13):
they are protected. It's one of the problems we have
with agriculture and wire food costs are so high here
in this country. Just look to the FDA, look to
the rules that farmers have to go through. Here you go,
you go, try to go to you know, private neat process,
try to open one up. They'll get the rules and
regulations and the hoops that you have to jump through

(11:38):
to go through all this. And again, if you don't
have the right amount of money. You got to make
sure you're paying off the right inspectors at the right time,
have the right expeditors. I mean, come on, people, a
sense you want to call it. And it's not a
monopoly monopoly manned person. But this is this is allowed

(12:03):
by the government. The government creates these entrenched powers via
a regulatory capture. Competition, Competition breeds excellence, it does it
does you know? It's in anything quite frankly, and anything

(12:27):
and that they're talking about this right now and kind
of going getting off the beat track quickly here with baseball,
and the president of Baseball wants to talk about having
salary caps in baseball because fans are getting tired of
the anti competitive balance. And then you know, you do
a compare and contrast to the NFL and the popularity

(12:48):
that the NFL has, where yeah, I mean, yeah, you
got a draft, right, but at least you can you
know your draft right, you can be competitive quickly. In
this country, regulations are keeping out the upstarts. Regulations are
are keeping out the ones that can knock down some

(13:09):
of the big companies. And there's nothing wrong with big
companies getting knocked down. That is creative destruction. We want
to encourage innovators. We want to encourage innovators. We don't
want people out there innovating and then saying throwing their
hands up in the air, saying we're not going to
be able to get through this. We're gonna have to
sell out to Facebook, We're gonna have to sell to Google.

(13:34):
Now that we don't want. That doesn't that doesn't make
for a dynamic economy. Get the government out of the way,
get rid of red tape Nation, and bring capitalism back.
Watchdog on Wall Street dot Com