By Paul Farrell Aug. 10, 2018 8:00 p.m. ET Rise of the Megacaps
by Cressett Wealth Advisors
Aug. 7: By omission or design, public policy has enabled the biggest companies to envelop their respective industries. That’s evident in banking and technology, but it is apparent in other industries, as well: Almost half of all assets in America’s financial system are now controlled by just five banks; over the past decade, the six largest airlines consolidated into three; and 98% of the U.S. wireless market is now controlled by four companies.
The government regulations that have been enacted have tended to favor an industry’s largest players, owing to their economies of scale. Sarbanes-Oxley, or the Public Company Accounting Reform and Investor Protection Act, signed into law in 2002, imposed an onerous set of standards on the management and boards of all public companies, regardless of size. Thanks to Dodd-Frank and Basel equity capital standards, the capital commitment and load of paperwork associated with starting a new bank or brokerage firm is mind-numbing. And though our corporate behemoths protest, in fact, the staggering load of regulations serves very effectively as an operational moat protecting them from competition.
Is the Fed Too Easy to Blame?
Aug. 6: Jerome Powell was sworn in as the 16th chairman of the Federal Reserve on Feb. 5, 2018. Like all government appointees, he has been under constant scrutiny. Aug. 5 marked his sixth month in office. How has he done? The stock market appears to approve, as the Dow Jones Industrial Average rose 4.6% since Feb. 5, versus the average six-month gain of only 0.9% for all Fed chairs.