Section 230 of the Communications Decency Act; The American Economy Was Hit by a Bus; Struggling Rental Market Could Usher in Next American Housing Crisis; U.S. States Face Biggest Cash Crisis Since the Great Depression; State trooper dates Cuomo's daughter, gets transferred close to Canada

1) Following up on Friday's e-mail about the incredible performance of the tech giants: one thing that could dampen their growth is the increasing scrutiny they're under for their content moderation (or lack thereof).

Therefore, it's important for investors to understand Section 230 of the Communications Decency Act, which governs this area. There are many myths about it, which are addressed in this blog post: Hello! You've Been Referred Here Because You're Wrong About Section 230 of the Communications Decency Act. It debunks all of the following statements:

• Because of Section 230, websites have no incentive to moderate!
• Section 230 is a massive gift to big tech!
• A site that has political bias is not neutral, and thus loses its Section 230 protections
• Section 230 requires all moderation to be in "good faith" and this moderation is "biased" so you don't get 230 protections
• Section 230 is why there's hate speech online...
• Section 230 means these companies can never be sued!
• Section 230 is a get out of jail card for websites!
• Section 230 is why there's piracy online
• Section 230 gives websites blanket immunity!
• Section 230 is why big internet companies are so big!
• Section 230 was designed to encourage websites to be neutral common carriers
• If all this stuff is actually protected by the 1st Amendment, then we can just get rid of Section 230

2) Investors must be careful not to think that because the tech sector is booming, the rest of the economy must be as well. Far from it...

Last week, the federal government reported third-quarter economic figures. These showed a strong rebound from the lockdowns of the prior quarter, but we're still in a big hole, as this New York Times article highlights: The American Economy Was Hit by a Bus. It's Healing, but Slowly. Excerpt:

The entire period, July through September, represents a time when you are healing. Gone are the days when you were confined to a hospital bed; you can move around a little bit, regain some strength in atrophied limbs, cut back on pain medication.

Your average health reading would show remarkable improvement over the second quarter – probably the steepest rate of improvement you had ever experienced – yet you might still be in profound pain and a considerably less healthy person than you were before the accident.

And so it is with the United States economy. On Thursday, the third-quarter number showed the sharpest improvement on record (a 7.4% rise in GDP, when you skip the convention of using annualized numbers that generate misleading results in a year like 2020). But it also left economic output 3.5% below where it was in the last pre-pandemic quarter, equivalent to a severe recession but not a complete collapse in activity.

More so than those headline numbers, though, the details of the new GDP numbers show the shifting composition of the pandemic-era economy, and give hints of where the damage remains severe, and what it might take to regain full health.

3) Between 30 million and 40 million American families could soon face eviction unless the government takes action to protect them, according to this Wall Street Journal article: Struggling Rental Market Could Usher in Next American Housing Crisis. Except:

Fallout from missed rent payments is threatening a swath of the U.S. population, as the expiration of eviction bans draws near.

A large number of renters have been unable to pay some or even all of their rent since March, when the pandemic temporarily shut down most businesses. Many businesses remain closed or only partially open, pushing renters into unemployment and draining their savings.

Federal and local eviction moratoriums have protected many of them from losing their homes if they missed payments during the pandemic. But the national eviction ban and some state and city protections are set to expire by January or sooner. Renters then will be on the hook for months of missed payments, which even those who have jobs could struggle to pay...

Mounting rental debt could also impede the path to a U.S. economic recovery, when 30 million to 40 million people from New York City to San Francisco face potential eviction once moratoriums expire, according to estimates cited by federal government officials.

4) The pandemic has also crushed state budgets: U.S. States Face Biggest Cash Crisis Since the Great Depression. Excerpt:

Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody's Analytics, the economic analysis arm of Moody's Corp. The estimates assume no additional fiscal stimulus from Washington, further coronavirus-fueled restrictions on business and travel, and extra costs for Medicaid amid high unemployment.

That's greater than the 2019 K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure, according to the National Association of State Budget Officers.

Deficits have already prompted tax hikes and cuts to education, corrections and parks. State workers are being laid off and are taking pay cuts, and the retirement benefits for police, firefighters, teachers and other government workers are under more pressure.

Even after rainy day funds are used, Moody's Analytics projects 46 states coming up short, with Nevada, Louisiana and Florida having the greatest gaps as a percentage of their 2019 budgets. Louisiana said it didn't expect its shortfall to be as large as Moody's projected.

"There is no real model for a crisis like this," said New Jersey Treasurer Elizabeth Maher Muoio. "It's going to be tough for the next couple years."

5) Europe is in even worse shape than we are: Eurozone Economy Soars but COVID-19 Resurgence Leaves It the Global Weak Spot. Excerpt:

The eurozone economy grew at a record pace in the third quarter, but has already stalled in the face of a resurgence of coronavirus infections and tough new restrictions, leaving Europe lagging behind the U.S. and Asia in its recovery from the crisis.

Figures released by the European Union's statistics agency Friday showed the combined gross domestic product of the eurozone's 19 members was 12.7% higher in the three months through September than in the previous quarter, having declined 11.8% in the three months through June.

Growth during the third quarter was stronger than in the U.S. That largely reflected the fact that the second-quarter lockdown was more stringent and longer-lasting in Europe, leading to an especially large rebound after the restrictions were lifted.

However, that rebound has already been stalling this fall, as infections have risen again and consumers avoided eating out, traveling and in-person entertainment, while businesses have become more cautious. Policy makers throughout Europe have steadily reined in social and economic activities.

After Germany and France, Europe's two biggest economies, imposed new restrictions this week to contain the virus, the eurozone is now expected to shrink again this quarter.

"Expect the dreaded double-dip," said Bert Colijn, an economist at ING Bank.

Some economists now expect the German economy – which has withstood the pandemic better than its neighbors because of its close trading ties with a resurgent China – to contract in the fourth quarter.

France, though, may be hit hardest by the second wave. Economists at Berenberg Bank estimate the French economy could shrink between 3% and 4% this quarter, thought that would be a much smaller contraction than the 13.8% recorded in the three months through June.

6) As the father of three daughters (ages 24, 21, and 18), this story from the front page of the New York Post last week cracked me up! State trooper dates Cuomo's daughter, gets transferred close to Canada. Excerpt:

He was transferred to keep him away from the daughter because the governor didn't like whatever they were doing...

Best regards,

Whitney