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2022-05-19 07:00 by Karl Denninger
in Technology , 661 references
[Comments enabled]  

The Twitter tale now gets rather.... interesting.

If you recall one of the things I've written on in the past is whether or not so-called "user counts" have any sort of actual relationship to reality.  I've never been convinced they do.

Now in theory that which is filed in public company reports is true.  I say in theory because despite Sarbanes-Oxley I've never seen anyone go to prison for lying and yet we know many firms have in fact lied.  For example during the lead-up to the 2008 crash there were multiple financial firms that claimed to have some sort of value on their assets -- and then the FDIC came in, closed them, handed them off to another firm and somehow, magically, a third of that alleged "value" magically disappeared when they had just filed their quarterly report a few weeks prior.

Twitter claims that "less than 5% of the users on their system are bots/spam/fake."  Ok, that's testable.  It's also very material to the value of the company.  Indeed its the entire reason someone buys advertising on these sites and thus forms the basis of the entire firm's value; if the entire site is full of bots and not people then the value of said "advertising" and thus the company's value is zero.

So Musk asked (in public, natch) for the evidence that the "less than 5% bot" claim was true.

Twitter's CEO refused to provide said evidence, claiming that it would require disclosing "non-public" information.

Well, once you have an agreement to acquire something you get to look.  It's no different than a house; if you think there might be something wrong with the foundation you can have it inspected.  Your purchase contract allows you to perform diligence to your satisfaction and further, if the seller is aware of a material falsehood that is part of the representations made he's required to disclose it.

As someone who has sold a company anything you represent as true is certainly fair game for the buyer to ask to see in evidence and that absolutely includes anything you publicly claimed to be true under penalty of perjury in a 10Q or 10K.

The argument that its "non-public" information that is used to prove this is crap; the entire purpose of the NDA that you sign when you enter into such a transaction and perform your diligence is that you get to look under the Kimono to your satisfaction.

So.... what's really going on here?

Never mind this report -- that basically half of Biden's "follows" are fake.  Worse, 70% of Musk's are too according to that article.

Would you mind explaining to me how "less than 5% of the accounts are bots" when half of the President of the United States' accounts and 70% of Elon Musk's are, by audit, fake?

More to the point: What percentage of "people" ("Daily Average Users" and "Monthly Average Users") allegedly on these social media sites are actually..... people?

Is there any actual value in these "social media" firms at all or are they all ENRON on steroids?

And if the latter what makes you believe this is limited to a few tech companies?  When was the last time you saw an executive frog-marched for committing fraud, even if people are financially destroyed or die as a result?  It has been the explicit policy of the Federal Government to not charge or try corporations for felonies since Arthur Anderson, so why would you believe that every one of them isn't committing them, on a daily basis, by the score?

Virtually everything wrong with our American business and financial system comes down to one fact: Nobody goes to prison when they break the law in corporate America, even if the law clearly states that conduct is a criminal offense and carries prison time as a penalty or how badly it screws people -- even if that "screwing" comes in the form of human lives.

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.... or watch the economy literally burn to the ground.

At the same time all inhibitions on energy production here in the US must be lifted immediately.  All of them.  All coal plants shut down but still operational and those intended to be retired must have those orders rescinded immediately.  Further, all refined product exports must be banned.

If you didn't get the hint from WalMart and Target's earnings announcements you're deaf, blind, stupid and might be starving and homeless within months.  Fuel prices continue to ramp, in no small part not because of oil but because we're exporting products to other nations, specifically Europe.  This must end now.

There is no instant solution but if we do not put a stop to the transportation cost and fertilizer problems now by this fall and winter the lower 50% of the economic strata in this nation will be hard-pressed to both feed their families and heat their homes.  That is the combination that leads to riots and worse.  Witness Sri Lanka where its already happening and politician homes are being set on fire.

Stocks?  Who cares.  The entire ramp from roughly 2011 onward likely will and should come back off.  If you believed that said price advances of roughly a triple over that period of time were reasonable you're nuts.  If you predicated your future or present on it there's nothing we can do to help you at this point; you ridiculously overpromised to yourself and overspent behind that.

Ditto for real estate.  There's nothing to be done other than let prices go back to where they should be.  They will, by the way.

We must neuter the medical monopolists.  Look to the right, there's an article on it.  That must happen.  Now.  If it doesn't in another couple of years CMS will be bankrupt.  For real.  If you're reliant on that, and millions of Americans are, you're not going to get it if this isn't fixed immediately and the only thing that will keep those people from rioting is that they'll be too badly-hosed medically to do it.

The mealy-mouthed nonsense coming out of the Biden Administration and the "fine people" at CNBC, along with all the pointing of fingers at Joe himself is all bone-headed stupid.  Trump was just as responsible if not more-so for the profligacy but neither side of the aisle has been willing to put a cork in this nonsense for the last ten years.

I've warned where this is heading, and you can read the link to the right on the medical side along with (at the bottom of that article) an implementation plan and its impact on spending for the last many years.  In fact it goes back to nearly the inception of this blog.

Nobody has wanted to hear it and everyone makes excuses, including among those who read these pages.

Time's up folks.  We do it now "or else."

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2022-05-17 09:00 by Karl Denninger
in POTD , 203 references


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2022-05-17 08:48 by Karl Denninger
in Macro Factors , 423 references
[Comments enabled]  

I refer to the Monthly Retail Sales Report as MARTS (as does the link, if you follow it), and this month's (April data) is interesting.

Advance estimates of U.S. retail and food services sales for April 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $677.7 billion, an increase of 0.9 percent (±0.5 percent) from the previous month, and 8.2 percent (±0.7 percent) above April 2021.

Note: But not price changes.

Uh huh.

So let's have a look at the unadjusted numbers, since April is a fairly normal month (you know, not one with a holiday like... oh.... Christmas in it.)

The ex vehicles and gasoline is indeed up -- which is interesting, considering the ramping price of fuel (which skews everything if you don't exclude it.)  This is more than absorbed, however, by the consumer credit numbers in the revolving category, which tells you "how"; everyone charged it, basically.  That won't last.

Furniture, electronics, Health and personal care were all down on the month.

Building materials were up (as expected; this is the start of construction season) and clothing was up a bit.

Food and beverage was down on the month; is inflation hitting pocketbooks in the grocery store?  Hmmmm...

Sporting goods were down -- this is usually the start of "outdoor activity" season too, so that's not so good.

Non-store (Spamazon) was up, as were food and drinking places.  The latter is interesting, given what's not.

I'd call this a bit better than expected, I suppose -- especially considering the inflation numbers.

We'll see if it continues into the traditional summer months -- and whether the way its happening is wild-eyed "charge it!" consumerism.

One interesting point: WalMart reported earnings this morning and is out behind the woodshed getting it good, hard and dry.  It's hard to reconcile a "cheery" MARTS report with that, isn't it?

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2022-05-13 07:00 by Karl Denninger
in Macro Factors , 993 references
[Comments enabled]  

All around the news media the latest problem is infant formula.

There are four (count 'em -- four!) factories that make infant formula in the United States.  A few months ago one of them was shut down after it was suspected (but not traced) that they had contaminated some of their batches and two infants died.  That was in February; today it is May and the plant remains offline.

Abbott, for its part, states that while yes, those kids were using that formula and admits that in non-processing areas of the building there was contamination, they deny it was in the formula.   I don't know if that's correct or not, but it doesn't matter because now one plant going offline has resulted in shortages across the United States.

One plant folks.  Think about that for a minute.

Then contemplate two other points: First, that we became so dependent on this in the first place that one plant could threaten the survival of children in this nation and then that the Biden Administration is shipping pallets of formula to the border for illegal immigrants who cross with young children -- and who need food.

Now granted -- babies are babies, and its would be monstrous to deliberately starve them no matter how they got here.  But when supplies are short who gets what they need first?  American citizens and their children or those who deliberately broke the law entering the US illegally and, on top of it, expected the United States to provide for the feeding of their infants?

Clearly the answer isn't American citizens and their children.

At the core of this is our government's belief that "supply chains are ok when stretched all over the place" with no capacity to be self-reliant, and then on top of it we let corporations put people into a situation where they prefer to feed formula instead of the way it has worked to feed babies since the first mammals showed up on this rock.  Certainly there are many women who can't breastfeed for one reason or another but it is also true that a huge percentage of said mothers use formula for convenience and both doctors and mothers are heavily marketed toward with the very intent of making new mothers dependent on said formula.  That crap was going on in the 1990s -- my kid was literally sent home after being born with a "free" sample of formula!

Once that choice is made for a given infant there's not a lot you can do to change it after the fact -- you're stuck with the decision to use formula quite rapidly, as a mother who doesn't breastfeed will soon have no milk to feed with at all.  Of course this suits Abbott and the other makers of formula just fine.

Would you mind explaining to me how this isn't worse than deliberately addicting someone to opiates?  In that case the victim (harmed individual) is the person addicted and as an adult they have agency.  In this case the harmed individual is an infant who most-certainly does not.  How is that not felonious?

There are no simple answers -- especially now.  But this is not the only example; we are, at present, exporting diesel fuel.  What, you might ask?  Yes, and we've been doing it for years.  It used to be that in the summer months diesel was cheaper than gasoline; the reason is that diesel is also heating oil (same thing) and of course you don't use any in the middle of summer.  Never mind that summer months are slower for truck deliveries, at least until we get into fall and the winter stock-up begins for Christmas.  Since a barrel of oil "cracks" to a relatively-fixed mixture of gasoline, diesel, lubricating oil and other components if the demand for diesel is lower then so is price and of course leisure travel by gas-powered cars rises with summer vacations.

But for the last decade or so this relationship, which was very reliable, has disappeared.  Why?  Because we're exporting the diesel.  Now, with the Russia/Ukraine war on those exports are into a bidding frenzy environment over in Europe.  Rather than keep our diesel here and keep its price under control which in turn would suppress inflation we claim there's nothing we can do -- at the same time we cancel leases for new drilling and otherwise obstruct those who would produce oil, driving up their costs.

All of this is intentional policy -- it is not an accident.

The solution to high prices is often high prices; high prices destroy demand.  But how much of that demand is inelastic and can't be destroyed?  There is no elasticity of note in baby formula; that infant needs food, and if you have started them on formula you really have little choice but to find some or else, never mind that switching to a different brand or type can be a problem too due to differences in the ingredients.

The same is true to a significant degree for diesel fuel that powers the last mile of delivery for virtually everything.  Whatever it costs, it costs -- and is reflected immediately into the price on the shelf.  If the trucking becomes uneconomic because firms have contracts and they simply can't operate without going out of business then they go out of business and the products don't get delivered at all.

Again this all comes back to a false promise we've had made to us by politicians and businesses: It's great -- and safe -- to offshore supply chains and not be self-sufficient -- that is, to eschew autarky.  Nothing bad will happen by being dependent on foreign oil, four factories that produce basically all of our infant formula, potash from other nations for fertilizer and similar.

How's that all working out and how do you feel about it when we have both a President and Congress who are willing to sit back and let it all happen, particularly when it comes to energy supplies?

This didn't happen in a week, a month or a year.  It happened over decades but government on both sides of the aisle has not only cheered it on so have you in the form of higher stock prices.  After all if it can be sold here for $4/gal or overseas for $5 then $5 it is even though that will cause the price to be $5 here too.

How wise was that, America?

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