Source: Bloomberg

Once upon a time the United States had tech companies with disruptive new technologies. They traded with double or triple the volatility of the overall index because they offered enormous upside as well as the uncertainty that attends new products.

Today the volatility of the technology subsector of the S&P 500 is the same as that of the overall market — actually, a bit lower. The implied volatility of options on XLK, the tech sector ETF, is actually lower than that of options on XLU, the utilities ETF. Tech trades more like utilities than the utilities themselves. Given that the utilities are highly leveraged and the tech companies are sitting on a mountain of cash, that is not surprising. Utilities, at least, are sensitive to interest rates.

The tech companies don’t care. Like the utilities, they are monopolies, except that they are unregulated monopolies. No-one is going to challenge Google in the search and advertising business. Facebook will get challengers in social media but only for niche markets. No-one will break Microsoft’s hold on PC software, and Apple will hold on to its design franchise. The heroic era of American startups is over: thresholds for entry against the tech giants are too high.

Source: Bloomberg