Whitney Tilson’s email to investors discussing that Facebook is big but maybe not a monopoly; Biden weighs new executive order restraining big business; U.S. housing prices jump the most in more than three decades.
Q1 2021 hedge fund letters, conferences and more
Facebook Is Big But Maybe Not a Monopoly
1) Shares of social media giant Facebook (FB) popped on Monday when a U.S. federal judge dismissed two antitrust lawsuits against the company. Here's Bloomberg columnist Matt Levine's take: Facebook Is Big But Maybe Not a Monopoly. Excerpt:
The government's position is not crazy, it's just not fleshed out, so the judge dismissed the complaint but suggested that the FTC [Federal Trade Commission] should try again with a bit more specificity. Perhaps the FTC will re-file a complaint making clearer arguments that Facebook has market power, and then it can move on to debate whether Facebook abused that power by, for instance, excluding competitors. Here at Bloomberg Opinion, Tae Kim writes that "it shouldn't be difficult for the agency to come up with the required backup," and that "it's also likely any renewed legal action will be formidable."
But in some ways the most important sentence in the opinion is: "It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist." It seems totally plausible that:
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- Facebook might not have a monopoly in social networking in the traditional antitrust sense, in that it cannot unilaterally raise prices (from zero) for posting baby pictures online, but
- Facebook definitely has a monopoly in social networking in some colloquial but important sense, in that a ton of people spend a ton of time on Facebook products (Facebook, Instagram, WhatsApp) and that gives Facebook enormous political and social and economic power, and some government regulator of corporate bigness – some antitrust regulator – should have the ability to police that power.
It is striking that one immediate widespread reaction to the Facebook ruling is that, if Facebook isn't against the law, we need to change the law.
Facebook was one of five stocks we recommended in the inaugural issue of Empire Investment Report on April 17, 2019. Here's how those stocks have done since then:
| Facebook (FB) | 98% |
| Alphabet (GOOGL) | 97% |
| Lumber Liquidators (LL) | 92% |
| Amazon (AMZN) | 85% |
| Berkshire Hathaway (BRK-B) | 37% |
| Average | 82% |
| S&P 500 Index | 48% |
While we closed our position in Lumber Liquidators before the big move higher, the outperformance of these initial Empire Investment Report recommendations isn't an outlier... The average of our 39 recommendations since inception is 50% – more than double the 24% for the S&P 500.
To learn more about Empire Investment Report – including how to get 40% off the regular price for the first year – click here.
Biden Weighs New Executive Order Restraining Big Business
2) I'm going to be keeping a close eye on this, as the implications for investors are potentially significant: Biden Weighs New Executive Order Restraining Big Business. Excerpt:
The Biden administration is developing an executive order directing agencies to strengthen oversight of industries that they perceive to be dominated by a small number of companies, a wide-ranging attempt to rein in big business power across the economy, according to people familiar with the plans.
The executive order, which President Biden could sign as soon as next week, would direct regulators of industries from airlines to agriculture to rethink their rule-making process to inject more competition and to give consumers, workers and suppliers more rights to challenge large producers.
The goal is to broaden the way policy makers approach business concentration in the U.S., going beyond conventional antitrust enforcement focused on blocking big mergers. For example, companies in industries controlled by a small number of big firms might face new rules for disclosing fees to consumers or for their relationships with suppliers, the people familiar with the effort said.
Big business groups and some Republicans will likely protest any new Biden measures. Businesses and conservative legal groups could challenge the rules in court, as they already have with administration moves to limit oil and gas drilling on federal lands and to extend a pandemic-related moratorium on evicting renters. Regulatory opponents are hopeful that conservative judges appointed by former President Donald Trump will make it easier to challenge Biden administration rules.
It's not just Big Tech – a handful of large companies have come to dominate numerous industries, to the detriment of consumers. For example, Americans pay much more for the Internet than the rest of the world because "very few people in the U.S. have much of a choice when it comes to Internet providers," as this chart from BroadbandSearch shows:
The story is similar for cellphone service... And don't even get me started on airlines!
U.S. Housing Prices Jump the Most in More Than Three Decades
3) Shortly after I sent out the article in yesterday's e-mail about "runaway house prices" all around the world, this news broke: U.S. Housing Prices Jump the Most in More Than Three Decades. Excerpt:
U.S. home prices jumped the most in more than 30 years in April.
Nationally, the S&P CoreLogic Case-Shiller index of property values climbed 14.6% from a year earlier, according to a statement Tuesday, the biggest gain in data going back to 1988. That came after 13.2% increase in March, and was the 11th straight month that price gains accelerated.
Home prices in 20 U.S. cities, meanwhile, jumped 14.9%, beating the median estimate in a survey of Bloomberg economists and was the biggest gain since 2005.
"April's performance was truly extraordinary," said Craig J. Lazzara, global head of index investment strategy at S&P Dow Jones Indices. "We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes. April's data continue to be consistent with this hypothesis."
Best regards,
Whitney
