I flew back from New York last Friday night, and as I gazed out the window of the plane, I was amazed at the number of small towns, surrounded by blackness, where the lit-up stadiums made it so obvious that high school football rules the town.
Seeing these flyover places from 35,000 feet made it possible to understand some of the friction we currently see across our society. These communities, surrounded by hundreds of miles of pure and utter darkness, are bound to see things differently than people in an area like Southern California where one town bleeds into the next, where Santa Barbara merges with Ventura which merges with Oxnard which merges with Los Angeles which merges with Long Beach which merges with Orange County. These places are so connected that the Anaheim Angels just said screw it and call themselves the Los Angeles Angels. …Which is probably fine, since nobody east of Palm Springs even know the difference.
That geographic separation may be why the events of the last couple of weeks are being interpreted so differently in places like Silicon Valley than in, say, Loudon, Tennessee. The continued upward trajectory of food prices, the flattening of the yield curve, the change of Facebook’s company name, the “tokenization” of Tesla by its billionaire founder, the election of Glenn Youngkin in Virginia (or rather, the defeat of Terry McAuliffe)-- some people “get” these recent events, and some people don’t.
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To me, some of the most interesting recent news was Facebook’s name change. I was fascinated that a company that has generated so much ill will would basically confront their antagonists with their middle fingers in the air.
According to Wikipedia:
Metadata is "data that provides information about other data", but not the content of the data, such as the text of a message or the image itself. There are many distinct types of metadata, including:
Descriptive metadata — the descriptive information about a resource. It is used for discovery and identification. It includes elements such as title, abstract, author, and keywords.
Structural metadata — metadata about containers of data and indicates how compound objects are put together, for example, how pages are ordered to form chapters. It describes the types, versions, relationships and other characteristics of digital materials.
Administrative metadata— the information to help manage a resource, like resource type, permissions, and when and how it was created.
Reference metadata — the information about the contents and quality of statistical data.
Statistical metadata, also called process data, may describe processes that collect, process, or produce statistical data.
Legal metadata — provides information about the creator, copyright holder, and public licensing, if provided.
A 2015 study suggested that more than 60% of Facebook users are entirely unaware that the content they see on Facebook is curated, believing instead that every single story from their friends and followed pages appears in their news feed.
In reality, the vast majority of content to which users subscribe never appears in front of them. Instead, Facebook shows an algorithmic selection, based on a number of factors, most importantly whether anyone has paid Facebook to promote the post but also how you have interacted with similar posts in the past (by liking, commenting or sharing them) and how much other people have done the same.
When early Facebook investor Roger McNamee came to certain realizations about Facebook that ultimately led to his revelatory and seminal book, “Zucked,” long-time Facebook executive Andrew “Boz” Bosworth tweeted, “I’ve worked at Facebook for 12 years and I have to ask: who the f*** is Roger McNamee?”
That’s significant because Boz is currently the head of the company’s hardware division and will be promoted to the role of chief technology officer in 2022 as announced a few weeks ago. So, if anybody thought any of Facebook’s recent criticism was going to affect in-house change at all, well, the promotion of Boz proves them to be 100% wrong. Facebook monetizes metadata, and by God, they’re going to keep doing it.
The facts are that Facebook has implemented algorithmic filters that lack a human value system, and algorithms don’t act in a socially responsible way on their own. For years, users have thought they were seeing a balance of content when in fact they were trapped in their own little bubbles created and enforced by algorithms. Giving algorithms this power to curate the elements of our environment-- to essentially play gatekeeper with the information provided to us-- without requiring civic responsibility has led to extremely negative consequences. Just ask anybody who lives in a Friday Night Lights town.
Photo tagging and News Feed (for which Bosworth led the development) expand the social reach of content. The Like button delivers data on emotional triggers. Connect tracks users wherever they go on the web. The value is not really in the photos and links posted by users. Oh, no, the real value resides in the metadata-- the data about data-- which is the data that describes where users were when they posted, what they were doing, with whom they were doing it, alternatives they considered and more. When collected on Facebook’s scale, metadata has unimaginable value, and we all know it. This all leads to a very interesting question: Did Facebook change its name to Meta simply as a means to tell us all to kick rocks?
I think so. My daughter recently asked if she could take a class to learn to code. I said, sure, as long as she realizes it’s just a hobby. Artificial intelligence will render code writers obsolete. That’s where we are now: Facebook has so much metadata that it doesn’t even need to collect more-- the algos are programming themselves. One might think of that as the robots taking over the world, but it’s actually the billionaires taking over the world with their robots.
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Yields on government securities maturing in the short term have gotten notably higher relative to longer-dated ones over the last couple of weeks, even after the-weak auction of $25 billion of 30 year debt on Wednesday.
Conventional wisdom informs us that when the yield curve flattens, growth will weaken, and the yield curve flattened massively over the last couple of weeks. The short-end of the curve is most heavily influenced by monetary policy while the long-end is most heavily influenced by growth and inflation expectations. In other words, the sort of recent moves in the yield curve indicate that the market is factoring in a couple of rate hikes this year but that growth (and pricing power) may struggle over the longer term.
And that is why we continue to believe that radical strategies for investing in inflationary environments are not what’s called for at this time. That lies at the core of our economic understanding and investment rationale. We continue to favor financials and energy, but let’s face it-- the fear of missing out (FOMO) has taken such deep roots in our economy that it almost deserves its own metric. Spurring FOMO that leads to rash decision making that embraces any and all change has turned into a new kind of sport.
Ergo the performance of certain stocks, let alone entire asset classes, has become subject to such geniuses as Elon Musk, who conducts the stock market like Gustavo Dudamel conducts the Los Angeles Philharmonic. Musk unloaded $7 billion of Tesla stock last week in his first sales since 2016. He sold $1.1 billion on Monday and kept it up over the next few days. …All after his bizarre weekend Twitter poll, which happened to get posted the day after his brother sold $125 million of his own Tesla stock.
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In the current environment, we recommend diversification above all else. As mentioned, we continue to favor financials and energy-- and our call on big box retailers has been absolutely lit-- but we eschew various stock market pundits’ calls to sell all of one’s growth stocks, especially the biggest ones, which have the strongest balance sheets in our whole economy. The yield curve currently advises that a protracted period of inflation is unlikely, so we recommend sticking to your financial plan, making only modest refinements to your overall asset allocation, and staying the course.
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