Zuck Blames the System

Plus: The billionaire next door has become a nepo baby. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 1, 2023

Read in Browser

Good morning.

Thank you for not smoking. And thanks, too, for gambling away your paycheck!

New Jersey lawmakers, casino workers, and anti-smoking groups are looking to ban lighting up in casinos, where tray-carrying cigarette girls once roamed freely. Smoking indoors is a thing of the past for much of the US, but some states still allow it in casinos. Sure, there are non-smoking areas, but employees say it's nearly impossible to not be exposed to second-hand smoke. Addictions — especially gambling and smoking — tend to play off each other, so while many Garden Staters support the ban, casino operators are worried it will hurt profits. State Senator Joe Vitale told The Wall Street Journal the current draft of the bill has enough votes to be enacted by the Senate. This time at least, the house might not win.

Morning Brief

•

Meta takes the FTC to court.

•

HOA fees are hitting new home sales.

•

The Great Wealth Transfer has already begun for billionaires.

Big Tech

Meta Files Lawsuit Arguing FTC's In-House Courts are Unconstitutional

Meta wants to put the system on trial.

In the latest chapter of an ongoing legal fight between Zuckerberg's empire and the Federal Trade Commission, Meta filed a lawsuit against the agency arguing its in-house trials are unconstitutional. Add it to the growing list of corporations pushing back on the legitimacy of US regulatory bodies.

A Few Good Metas

Way back in 2020, the FTC and then-Facebook agreed to a $5 billion settlement following an investigation into the social platform's laissez-faire approach to protecting user privacy. The FTC effectively reopened the case this past May, arguing that Meta repeatedly violated guarantees it had made in the agreement, and proposed a handful of new privacy restrictions, including a blanket ban on monetizing user data derived from minors. (The 2020 agreement itself came after the FTC found that Facebook had violated privacy policies from a previous agreement with the agency in 2012).

On Monday, a US district judge ruled the FTC could move forward with its push to revise the 2020 agreement. In response, Meta filed a lawsuit late Wednesday with a Washington federal court to halt the FTC's proceedings, arguing that the agency is operating as "prosecutor, judge, and jury in the same case" because of its in-house court system that violates the company's right to due process.

It's similar to arguments already being made by other corporations:

•

Earlier this year, gene-sequencing biotech giant Illumina scored a fast-track appeal of an FTC order to unwind its $7 billion acquisition of cancer detection startup Grail. Some see the case, currently being heard in the 5th Circuit Court, potentially going all the way to the Supreme Court — which could ultimately rule to blunt the FTC's authority.

•

On Wednesday, Elon Musk and Mark Cuban-backed hedge-fund manager George Jarkesy testified in front of the Supreme Court arguing that the Security Exchange Commission's reliance on in-house courts with no peer jury is also unconstitutional — an adverse ruling for the SEC could also ultimately blunt its authority.

Antibluster: Of course, where some see a bold stance against federal overreach, others see the type of anti-antitrust bluster typical of massive corporations. "Meta's lawsuit is a baseless attack on the FTC's authority, granted to it by Congress," Katherine Van Dyck, senior counsel at the anti-monopoly nonprofit the American Economic Liberties Project, wrote in a statement. "The Commission was established over a century ago to protect consumers from predatory, unfair, and anticompetitive businesses that erode our democracy when left unchecked."

- Brian Boyle

Real Estate

HOA Fees Are Adding to the Housing Affordability Problem

That gated community doesn't lock itself.

Prospective homebuyers face limited supply and historically high mortgage rates, plus something they didn't see coming: homeowners association (HOA) fees. In a recent The Big Take podcast, Bloomberg reported that 80% of new homes for sale are in neighborhoods with HOAs.

How Do You Live?

HOAs and similar systems are often found in condominiums and enclosed neighborhoods, but roughly one-quarter of the country lives in some kind of HOA-style setup. The goal is to maintain a clean and cohesive look that keeps property values up. But for a long time, even in some cases today, the result perpetuated racial, ethnic, religious, and income segregation.

HOA residents make regular payments on top of their mortgages to cover costs for shared spaces or other community assets like landscaping, trash removal, tennis courts, and more. Payments can range from a few hundred dollars a month to more than $1,000, as well as possible fines for not following the upkeep rules. For those shopping for a new home, the fees and fines can be overwhelming:

•

One resident told Bloomberg that her HOA fined her for a litany of arguably petty violations like oil stains in her driveway, a dying tree on the property, and garage doors that weren't the same color. When combined with late and legal fees, the resident eventually owed the HOA more than $6,000. When she couldn't pay that, the HOA sold her house.

•

About 20 states give HOAs "super-lien" priority, meaning the HOA can claim ownership of a property, even outranking a bank, if residents don't pay up, Bloomberg reported. Some state and local governments are beginning to regulate HOAs, but there's not much federal oversight.

Back to '80s: The US housing market is the least affordable it's been in roughly four decades. The average sale price of homes in the US was $513,400 in this year's third quarter, a near 60% jump from a decade ago. As a result, pending home sales have dropped to record lows, even worse than during the Great Recession, according to the National Association of Realtors. However, Zillow just predicted a little more breathing room in the new year, with more homes hitting the market, slowing price growth. Plus, by the second half of 2024, the Fed might be in the position to start slashing rates. We're all crossing our fingers.

- Griffin Kelly

SPONSORED BY THE MOTLEY FOOL

Can We Trust You With A Secret?

There's a little-known piece of AI that's quietly gaining speed in the tech world.

•

Jeff Bezos said its impact is "hard to overstate"

•

Wired calls it the "rocket fuel of AI"

•

And the ARK Investments CEO thinks it could hit $17 trillion in value

$17 trillion, the equivalent of 11 Amazons. What's more, Jeff Bezos even said it may be the key to Amazon's future success.

And while the world spins oblivious to this tech, The Motley Fool found a company that's cornered it, and they think it could moonshot in value.

Ya know, just like Amazon after they recommended it in 2002 at $0.77/share (a +19,000% return today).

Read the exclusive report and see for yourself–before the secret gets out.

Wealth

Billionaires Inherit More Wealth Than They Make

(Photo by Quan Nguyen via Unsplash)

They just don't make billionaires like they used to.

On Thursday, UBS published its Billionaire Ambitions Report, and for the first time in the report's nine-year history, newly minted billionaires got more of their money from inheritance than, well, making money. The bank said this shows that the dragon-like hoards of wealth held by Baby Boomer billionaires are starting to work their way down the generations.

Boomer Billionaire Babies

UBS' report dovetails with the idea of the "Great Wealth Transfer." The New York Times reported in May that US family wealth has tripled in real terms since 1989 and that the Baby Boomer generation (people born between 1946 and 1964) holds 50% of that wealth. Not everyone is convinced that the collective Boomer pot o' gold will trickle down to their descendants: finance writer Ann C. Logue argued that accumulated wealth for most Boomers will get eaten away by healthcare, housing, and end-of-life care costs.

For the billionaire class, though, there should be a few shekels to spare after sorting out a nice care home. According to UBS, a total of 137 new billionaires sprang onto this scene this year. The majority of those are what UBS terms "self-made," i.e. they didn't inherit their billions. However, in terms of total wealth and average net worth, the inheritance billies had the edge:

•

The amassed wealth of new inheritance billionaires added up to $150.8 billion, whereas self-made billionaires locked in at a mere $140.7 billion.

•

The average wealth of an individual dynastic billionaire was $2.8 billion, while a self-made billionaire had an average vault worth just $1.7 billion.

A Flash in The Gold-Plated Pan? To be totally fair to this new cohort, it hasn't been the easiest year for wealth generation. High-interest rates and general economic wibbly-wobbliness haven't made super fertile ground for entrepreneurship. Nonetheless, UBS sees the emergence of multi-generational billionaires as a long-term trend. "That's a theme we expect to see more of over the next 20 to 30 years, as more than 1,000 billionaires pass an estimated $5.2tn to their children," Benjamin Cavalli, UBS' head of global wealth management strategic clients said in the report.

- Isobel Asher Hamilton

Extra Upside

•

Vinegar, not honey: X CEO Yaccarino backs Musk after he curses out fleeing advertisers.

•

Activist investor: Nelson Peltz is at it again, seeking more than two seats on Disney board.

•

What do PhD's, MD's, and CPA's have in common? They start their mornings with Chartr — the premiere data visualization newsletter. Trusted by 450,000 readers, Chartr breaks down complex economic trends in the form of polished, insightful, and visually stunning graphics. Don't take our word for it — subscribe for free here.*

*Partner.