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Reasons to feel great about tech stocks — despite Covid, China, Portland, and tanking employment

I started with the weekend thoroughly depressed. The virus was pushing a big spike in deaths. Washington was mishandling it, as usual.

There were many weekend news stories of gruesome suffering. This virus spans symptoms from ultra-mild to ultra-horrible, and everything in between. The total unpredictability of how it affects anyone scares me sh*tless.

Suddenly unemployment is also spiking, reversing its previous downtick. And the market dropped last week.

The administration, desperate for re-election,  continues to use the virus as a political tool — denying supplies to democratic towns, splaying nonsense about the virus’ benignness, while taking few practical steps — other than doling out magnificent beneficence to their friends and their companies.

Then there’s China. We have a signed trade pact with them. But Trump needs to enemize them. It’s part of creating enemies (like the terrorists in Portland). China sent us Kung Flu.

I thought all this would really tank the stock market.

But the Fed is still covering our back, buying bonds (junk and otherwise) and feeding money back into the stockmarket.

And of, course, there are the magnificent tech companies. Joel Ross of the Ross Rant newsletter writes this morning:

There is a vast amount of cash looking for a place to be, and the tech stocks is that place. It has become a very crowded trade. However, these companies continue to perform very well, they have huge cash balances to be able to survive anything, and they do not have big hard asset investments. Altering their product is done by some people sitting in a room with computers vs auto companies that must spend millions on factory changes to alter the look of a single model. It costs Amazon tens of millions to build a million sq ft distribution warehouse, but the product flowing through it is not theirs so they do not have to be concerned if the individual product is desired by consumers or not. They are just processors. Their cloud business costs a lot to build a server farm, but then volume just ramps up at little incremental cost to Amazon. The same goes for the other tech companies. They sell brain power and outsource any manufacturing and hard asset investment. Their margins on incremental revenue are huge because the marginal cost of an added customer is nil. Their costs are essentially mostly fixed once a new app or software product is created, or once a new server is added. The business model is great. The negative is it is very hard for a small start up to gain real traction. So often they sell out to the big guys who then have even more control of the social media, advertising, and cloud markets.

Today the market is up, especially in tech stocks.

The election is 99 days away.

That time goes quick. I played my 135th consecutive game of tennis this morning.

Yesterday the New York Times ran a piece:

The article quoted a July 20 BofA Global Research study. The article included these paragraphs:

+ “Biden’s more aggressive stance on Covid-19 is likely to improve medium-to longer-term U.S. growth prospects potentially at the expense of shorter term prospects, if restrictive policies are pursued,” the report said.

    And the trade conflicts, tariffs, restrictions on immigration and diminution of global institutions of the Trump era would be supplanted by a more internationalist approach — and one likely to yield substantial benefits, the report projected. In short, the authors said, a Democratic sweep of the presidency and both houses of Congress would be “growth positive.”

    + This isn’t the first time the stock market has shuddered at the thought of a Democratic presidency; in fact, I’ve written this kind of story before, about Wall Street’s misguided apprehensions about the impact of the Obama presidency.

    But the historical record shows that since 1900 the stock market has fared far better under Democratic presidents, with a 6.7 percent annualized return for the Dow Jones industrial average compared with just 3.5 percent under Republicans. (The results are similar when measured from Election Day to Election Day.) Data provided by Bespoke Investment Group shows that these are the best annualized returns under individual presidents:

  • 25.5 percent under Calvin Coolidge, a Republican, in the 1920s.

  • 15.9 percent under Bill Clinton, a Democrat.

  • 12.1 percent under Barack Obama, a Democrat.

    “Wall Street generally considers Republicans to be better for market returns but historically, that’s not true,” said Paul Hickey, co-founder of Bespoke. “Democratic presidents have generally had better returns versus Republicans.”

    The market under Mr. Trump has been fine — despite a calamitous drop in late February and early March — with a 9.2 percent annualized return through Wednesday.

    But despite all the hoopla about Mr. Trump’s undoubtedly pro-business policies, the stock market performance under Mr. Trump doesn’t match up well against Mr. Clinton or Mr. Obama. It is entirely possible that the same would be true if Mr. Biden became president.

Read the entire article here.

Be thankful

Imagine you were born in 1900.

+ When you’re 14, World War I begins and ends when you’re 18 with 22 million dead.

+ Soon the Spanish Flu appears, killing 50 million people. And you’re alive, 20 years old.

+ When you’re 29 you survive the global economic crisis with the collapse of the New York Stock Exchange, causing inflation, unemployment and famine.

+ When you’re 33 years the Nazis come to power.

+ When you’re 39, World War II begins and ends when you’re 45 years old with a 60 million dead. In the Holocaust 6 million Jews die.

+ At 52, the Korean War begins. At 64, the Vietnam War begins and ends when you’re 75.

A child born in 1985 thinks his grandparents have no idea how difficult life is.

Today we have all the comforts in a new world, amid a new pandemic. But we complain because we need to wear masks. We complain because we must stay confined to our homes where we have food, electricity, water, gig Wi-Fi, Netflix, and Newton’s blog! None of that existed back in the day. But humanity survived those circumstances and never lost its joy of living.

The family is healthy, happy and learning (the kids, mostly on Zoom). I’m thankful for what we all have.

Ransomware is back again

Open a bad email attachment. Bingo all the files on your computer are locked. You can’t get your precious data back unless you pay them — in untraceable bitcoin.

If you pay, the honest crooks may send you a key to get your files back. May or may not. There are keys:

+ Don’t open attachments from anybody without checking first with the sender. That includes Word Docx and PDFs.

+ Keep backups of all your files. There are many ways — from flash drives to the cloud.

+ Have a complete clone laptop all loaded up and ready to take over the moment ransomware strikes. Not that pricey. Maybe $1,500 at the most.

 + Load your day-to-day laptop with anti-ransomware software. PCMag recommends Zone Alarm by Check Point. Click here.

The good old days. They’ll be back.

This is Michael and me on a Backroads biking trip in Slovenia.

I was thinner then, and a bit taller.

Oh, the places to visit again

This is Venice from the air.

Here are the two charts that freaked me out on the weekend.

They were on the front page of the New York Times:

From top down, the countries are

Sweden
Spain
Belgium
Canada
U.K.
France
Netherlands
Japan
Italy
South Korea

The second chart compared the U.S. with Italy and Spain, neither country known for their great government:

You can play with the New York Times’ interactive charts here.

If I were in Portland

If I were in Portland, I’d go downtown this evening with a bullhorn and tell everyone to go home.

All the protestors are accomplishing now is to help get Trump re-elected. Which is what none of them want.

They can’t win the protests, but Trump can. Trump is better armed. He’s got an army of bullies who get off on killing “low lives,” “anarchists” and “terrorists.”

It’s really dangerous. His troops will kill and maim protestors. Trump is encouraging his troops to do just that.

The more he pushes them, the more they will act irresponsibly. He wants this. Desperately wants this.

He will win major political points. For only he can solve this mayhem.

The only solution is for the protestors to disburse and go home — NOW.

If I were there, I’d go equipped with a bullet-proof vest, shatter-proof protective glasses, a gas mask, a helmet, a bullhorn and a ladder for standing on and delivering my speech. I’d carry a big sign “Go Home. You can’t win.

I would deliver my speech again and again and again, all night.

I sent these words to Ted Wheeler, Portland’s mayor’s private email address. I included:

Dear Mr. Mayor, you can do this and save your city from the massacre that Trump is about to unleash on Portland.

In reply, I received

This is an automatic notification: I cannot accept or respond to any emails on this account related to City of Portland issues or business, nor can I accept scheduling requests. Please contact my office at mayorwheeler@portlandoregon.gov or call the office at 503-823-4120. Thank you.

Mayor Ted Wheeler gives new meaning to the word feckless.

See you tomorrow, or so. — Harry Newton

6 Comments

  1. Secret Squirrel says:

    You have beautiful grandchildren Harry. What would you do about this if you were in Portland?

    https://twitter.com/MrAndyNgo/status/1286406849659432962

  2. Omer Acikel says:

    Harry, I am certain you know this, and recently you put the chart on how much money “Fed” has been pushing into market in a such a short time -like in 3 months-. “Fed” (as you know there is nothing federal or reserve about its existence), pushes money through congress and for every $10 it gives to government, through banks, $90 more is loaned and it is legal but this money does not exist. In a real world, this would have created inflation: yet since 2008 (another “fed” moment of pumping money but believe it or not that time pumped money was lower and took about 18 months to push) there is no inflation, do you wonder why? Now you put that earlier Ross comments on how banking is functioning well and this week talking about creativity is done at tech companies and manufacturing and the rest is done “somewhere else”. Wasn’t this guy complaining about China? What a hypocrite. No wonder he is not mentioning trump anymore. The moral of this story is “fed” is pumping huge amount of money and banks are loaning the money they don’t have….familiar? There is movement towards “hard” assets, like all metals gold, silver, copper etc.

  3. Hugh says:

    Harry One of your best posts. Particularly the speech for the mayor. My thoughts exactly. They should put their efforts into getting out the vote for Biden then they can come back and protest all they want. Otherwise they are playing right into Trump’s hands and will lose everything they hope to gain from the protests and much more when they lose the election.

  4. Greg says:

    Harry. I assume you can’t spend all the money you’ve made selling your business and stock market gains and you seem to treat your kids well. With that said, what is your thinking on gifting your kids before Biden wins election? No question Biden’s lowers the estate limits. I met with trusts attorney that suggest doing it now.
    Also, when you were asking readers for 5g recommendations you already owned the best one…TSMC. Skyworks is interesting one as well.

  5. Dman says:

    #adrenochrome

  6. Tom from CA says:

    > For only he can solve this mayhem.

    Or the Portland mayor and PD could solve it if they had the courage to do so.