Sunday Links

• Ultimately, policy makers must restore a financially repressive environment. Allowing inflation to stay at persistently higher levels for longer remains the path of least resistance to deleverage the extreme debt-to-GDP overhang. This macro scenario will likely create one of the greatest setups in history to favor tangible assets over still-overvalued stocks, bonds, and passive investment strategies that dominated in the last cycle. The golden era for value and macro investing has returned. [Tavi Costa]
• "I think the time is now to start talking about stepping down. The time is now to start planning for stepping down," said San Francisco Fed President Mary Daly during a talk at the University of California, Berkeley on Friday. [Nick Timiraos]
• Daly said the Fed is moving to a second phase in policy tightening that should be "thoughtful" and "incredibly data-dependent." [Reuters]
• Bank of America strategists predict Treasury could launch its program in May 2023, though they acknowledged that the timing could be sped up in the event of “intense Treasury market functioning issues.” [Washington Post]
• Pottsville is famous as being the hometown of celebrated American novelist John O’Hara, who changed the name of his birthplace to Gibbsville, most notably in the book Appointment in Samarra (1934). It is also the home of the Yuengling Brewery, America’s oldest brewer. From its peak of 24,530 people in 1940 its population has declined to around 13,000 today. Ned told us that two-thirds of the students are on free or reduced-price meal programs. Its decline mirrors that of vast tracts of the country, although its former wealth can be seen in impressive limestone and granite buildings downtown and mansions on the hillside. If gentrification ever arrives, the gentrifiers will find great structural bones. [Curated Carlos]
  
• The Methodist church in our town shut its doors earlier this year, and I've just learned that the Methodist church in the town just north of us (across the state line in Mass.) has now closed as well. Both congregations were over 200 years old. Also, our town's two Congregational churches (First Church aka North Church, and Second Church aka South Church) have announced they are merging, and will close one of their two historic buildings (which one is not yet decided). All of this is happening at the same time. An old world is passing away and no one seems to care. I'm reminded of when about 15 years ago Yale University quietly severed its vestigial ties with the Congregational Church (UCC) after 300 years. I was a grad student then and thought it should have been headline news. I haven't read John Wesley so I can't comment on Methodist theology, but in sociological terms early Methodism in particular had a sort of working man's self-improvement/temperance emphasis that seems dated now. Has its cultural relevance passed away? [Philip M Marshall]
• If Roosevelt had to face a serious Republican opponent, then it would be a challenge. If the Republicans nominated anybody but Willkie, that would be challenging. If Willkie was to be the nominee, you had to have control of the arrangements committee. If you needed control of the arrangements committee, Ralph Williams stood squarely in your way. The challenge standing in the way of war was Ralph Williams. The goal was to get America into the war. There were people who had the connections to make it happen. We get to see, even now 82 years later, little glimmers of their various connections and interests. But there was a plan in place to get America into the war on the side of Britain. Ralph Williams stood in the way of that plan. [Benjamin Wetmore]
• Yes, FDR was taking active steps to lead America into war, using lies and pretenses. No, FDR was not seeking a diplomatic solution to the crisis with Japan. Yes, FDR knew that an attack was coming, when it was coming, and where it was likely to hit. [Benjamin Wetmore]
  
• Because of the accuracy of these ads (especially Facebook ads), many small businesses, such as e-commerce shops on Shopify, would use Facebook ads to drive traffic. These ads were extremely effective for generating high conversion rates at low costs, making them a primary marketing method for online businesses. Before 14.5, iPhone users could technically opt out of API tracking, but you had to dig deep into your settings for the switch. Since the release of 14.5, you have seen this pop-up window anytime an app wants access to your information. This change, which Apple calls App Tracking Transparency (ATT), has been quite effective. Now, only ~20% of users opt-in to 3rd-party tracking. Facebook was, of course, furious. Mark Zuckerberg launched a massive PR campaign saying that Apple was attacking the "free internet", and small businesses could see a 60% reduction in sales per dollar spent on social media ads. [Young Money]
• Apple executed its privacy marketing campaign beautifully. In the name of consumer privacy, it was able to box out competitors from using its first party device data, giving itself exclusive access to better target ads (Facebook, etc can still do this, its just harder). As of Q4 2020, Apple had over 1 billion active iPhones and 1.65 billion total active devices, which are generally used by higher income consumers (don't get mad green bubbles, this is especially true outside the US). Apple is setting the stage to build all the same products it kneecapped: marketing tools for the long-tail of SMBs. [The Split]
• Some years ago I spoke with a mathematician who earned a Ph.D. at Florida State University and went on to become a professor at Vanderbilt. “At FSU,” she said, “I taught calculus and about a third of the students didn’t do the homework, didn’t learn any calculus, expected to fail the class, and did fail the class.” No surprise considering the football obsession of FSU! (And when are they going to change the name of the team to something other than “Seminoles”? The only way to show that one is not prejudiced against Native Americans is to erase all references to Native Americans.) [Phil G]
• I entered into inflation swaps trades in early 2008. My (wrong expectation) was that inflation was going to rise as crisis unwound. My recollection is that European pension funds were naturally on the other side of the trade. The amazing thing was that the vol priced into the swaps was so low it seemed crazy to me. (A basket of 30 one-year inflation difference swaps struck at 2% with a vol <20bps. I said to a friend at the time "the sidewalk in front of our building has more vol than that.") Of course what I didn't realize was that the crisis would be so bad that our counterparties would refuse to re-price, and in fact marked the vol against us, demanding more collateral as everything was hitting the fan. They "generously" offered to let us out of the trades at par instead. Robbery. All this to say, I agree that way back when, the swaps market was more liquid than the repo market...until the swaps market became a criminal enterprise. [MR]
• David Simon, creator of the TV series The Wire, is extremely unhappy that anybody is noticing the big increase in murders during the “racial reckoning". Simon long ago blocked me on Twitter for being better-informed about crime statistics than he is, so I can’t really tell what he’s saying, but it appears he is headed toward a psychic meltdown over the fear that citizens will hold him and his friends to a reckoning over their “racial reckoning” of 2020. [Sailer]
• Democrats had a golden summer. The Dobbs decision led to a surge of voter registrations. Voters handed Democrats a string of sweet victories in unlikely places — Alaska and Kansas, and good news in upstate New York. The momentum didn’t survive the fall. Over the past month or so, there has been a rumbling across the land, and the news is not good for Team Blue. In the latest New York Times/Siena College poll, 49% of likely voters said they planned to vote for a Republican for Congress, and 45% said they planned to vote for a Democrat. Democrats held a 1-point lead last month. The poll contained some eye-popping numbers. Democrats were counting on abortion rights to be a big issue, gaining them broad support among female voters. It doesn’t seem to be working. Over the past month, the gender gap, which used to favor Democrats, has evaporated. In September, women who identified as independent voters favored Democrats by 14 percentage points. Now, they favor Republicans by 18 points. [David Brooks]
• “If Ron DeSantis wins the Latino vote in Florida, which has been a GOP project now for the past decade," said Democrat Devon Murphy Anderson, co-founder of the voter registration organization Mi Vecino, "Ron DeSantis is going to go directly to his donors and say, 'I can win the presidential nomination and I can beat the Democratic nominee in 2024 because I can win the Latino vote.'" [NBC]
• The Free State of Florida became a mythical place where you could party at a beachside bar while the rest of the country was at home ordering takeout. Manhattanites with the means flocked there during lockdown. While states like New York and California bled jobs and residents, Florida’s economy suffered less damage and recovered more quickly. Beyond the numbers, it also gained an aura as the place to be, America’s new wonderland. Surely, sceptics fretted, all those unmasked spring-breakers would soon fall ill, and then kill their grandparents? But they didn’t, at least not notably more than in other states. [FT]