To Our Investors and Friends,
The S&P 500 ended the second quarter up 3.9%, again driven by a concentrated group of mega cap technology stocks. The 10-year Treasury Bond increased slightly in the quarter to 4.36%, a 16-basis point increase from last quarter as inflation moderated. The 2-year Treasury ended the quarter 12 basis points higher to end at 4.71%. Oil remains in a fairly tight range, ending the quarter down almost 2% to $82 a barrel. The Russell 1000 Growth Index advanced 8.3% (driven by a handful of powerful movers), while the rest of the market declined. The Russell 1000 Value Index decreased 2.2%, the Russell 2000 Growth Index fell 2.9%, and the Russell 2000 Value Index declined 3.6% for the full quarter.
One of this year’s best stock winners has been Meta Platforms (META), formerly known as Facebook. It is up 42% year to date, which has far exceeded the performance of the S&P 500, that is up 14% YTD. We have not owned this stock at Kingsland Investments because we believe their products have become detrimental to society and are especially harmful to teenage girls. Burn Book author Kara Swisher explains, “social media has a scary ability to generate anxiety and rage and it is addictive…in the new paradigm, engagement equals enragement. This is made worse by the people who run these companies for whom anticipation of consequences is lacking and whose first instinct is to let it all through the gate regardless of potential damage or danger. It is all private with no accountability.”
As can be seen in the chart below, ever since the widespread adoption of smartphones by teenagers beginning in 2010, depression and anxiety have significantly increased. According to author Jonathan Haidt’s The Anxious Generation, “we know that Facebook intentionally hooked teens using behaviorist techniques thanks to the Facebook files, a trove of internal documents and screenshots and presentations brought out by the whistle blower Frances Hogan in 2021.” He further explains that “social media platforms can ping you continually throughout the day urging you to check out what everyone is saying and doing. This kind of connectivity offers few of the benefits of talking directly with friends. In fact, for many young people, it is poisonous.” The result, Haidt explains, is that when attending college “the previous exuberant culture of Millennial students in discover mode gave way to a more anxious culture of Gen Z students in defend mode. Books, words, speakers, and ideas that caused little or no controversy in 2010 were by 2015 said to be harmful, dangerous, or traumatizing.”
At Kingsland Investments, we spend our time examining every investment for the impact it is having on its customers, community, and employees. Those that significantly benefit all three are most likely to grow to a much larger size in time, while those that are inherently detrimental to society will experience a decline in their businesses as society moves away from the negative effects their products or services are creating. We would not be surprised if the recent school smart phone ban becomes national policy, and as the addiction breaks, Meta Platform’s advertising business materially suffers.
All the best to you,
Arthur K. Weise, CFA