💰 Big Tech is getting bigger

Last week, we saw the latest quarterly results for the (unfortunately named) FAAMG Big Tech companies.

For the uninitiated, that acronym is collectively worth $8T+:

• FB, Facebook ($923.6B)
• AAPL, Apple ($2.2T)
• AMZN, Amazon ($1.7T)
• MSFT, Microsoft ($1.9T)
• GOOGL, Alphabet ($1.6T)

The pandemic boosted Big Tech sales

The phrase “record growth” was a constant theme for Q1 2021 revenue: Apple sales were +54% YoY to $90B while Amazon jumped 44% YoY to $108.5B.

While growth was slower for the other behemoths, their Q1 sales numbers are still huge: Alphabet ($55B), Microsoft ($42B), Facebook, ($26B).

For perspective, here’s how much these companies made per minute in the first 3 months of the year:

• Amazon: $837k
• Apple: $691k
• Alphabet: $427k
• Microsoft: $322k
• Facebook: $202k

And it’s not just sales

As reported by The Wall Street Journal, here are some other notable Q1 stats:

• iPhone sales alone hit $47B, with the average retail price hitting $847
• Microsoft Teams has 145m daily users, more than 7x the figure from 1.5 years ago
• Amazon’s US employee count hit 950k, ~2x the same period last year
• YouTube revenue was +49% YoY (and its projected $29-$30B run rate for 2021 puts it on par with Netflix)
• Facebook apps (i.e., FB, Instagram, Messenger, WhatsApp) were used by 3.4B+ people at least once in the past month

Perhaps the most jarring number?

FAAMG now makes up ~25% of the total value of the S&P 500 — 2x the share from 5 years ago. Unfortunately for us, it looks like that ghastly acronym isn’t going anywhere.

Basecamp was a hot topic in tech last week.

And the chatter had nothing to do with the company’s project management software: It was the result of a controversial memo from CEO Jason Fried that banned “societal and political discussions” from internal work messaging apps.

Why was the memo written in the first place?

Over the years, Basecamp employees kept a list of customers — largely of Asian or African origin — with “funny names,” according to The Verge.

Management knew about the list but failed to take action.

To quell anger over the memo and its handling of the controversy, Basecamp offered buyouts…

… to any employee that wants to leave

The exit packages are quite generous: 6 months pay for employees with 3+ years of service (3 months severance if you were there for less than 3 years).

So far, ~⅓ of the company’s 57 employees have taken the offer, including Basecamp’s heads of design, marketing, and customer support.

In the original memo, Fried writes that politics and social discussions have become a “major distraction” for the company.

Whether or not Fried is right, Basecamp now has a much bigger problem to deal with.

President Biden’s new tax proposal is making waves:

• A new income tax rate of 39.6% for the top 1% of earners
• A new capital gains tax rate of 39.6% for the top 0.3% of taxpayers ($1m+ in annual earnings)
• An increase in IRS audits of those who earn $400k+

But another change would completely reshape real estate…

The tax loophole in question is known as ‘1031 exchanges’

As explained by The Wall Street Journal, this part of the tax code has existed since 1921 and allows investors to defer taxes on real estate gains, as long as the proceeds are revinested in other properties within 6 months.

In theory, property taxes could be deferred indefinitely. The majority of 1031 exchanges are done by wealthy individuals, often pooling funds together to purchase apartment buildings or commercial real estate.

How much is it worth?

Congress estimates that the loophole would save real estate investors $41B+ between 2020 and 2024.

The Biden proposal would eliminate 1031 exchanges

Supporters of the tax code say that deferred taxes are a source of funds for job creation and investment in local communities.

Organizations representing farms and Asian-American hotel owners are among those lobbying against Biden’s tax change, per the WSJ.

It’s too soon to tell how much of these tax proposals will become reality — but investors of all types are bracing for huge changes.