Why is the market is reacting so poorly to Biden’s stimulus plan?
Replied my smartest friend, “I have no idea why the market has its manic-depressive mood swings.”
There’s talk that we’re pushing up the national debt too much. We’ll see high interest rates and burdensome inflation. And they’ll kill the golden goose that has pushed stock prices up so nicely.
To me that’s a long, long worry, given how much spare resources — people and plants — there are still.
Moreover, there isn’t one economist (including me) who wouldn’t argue that the huge expenditures Biden is promising — to get us all vaccinated and to juice the economy — aren’t the absolute best investment the U.S. can make at present.
Hence I don’t buy the doom and gloom forecasts — including one this morning from the CEO of a hedge fund who forecast a stockmarket crash rivaling the Great Depression — the S&P 500 fell 86% in less than three years and did not get into positive territory until 1954.
My basic investing thesis is scalable technology with major,quickly-adoptable benefits. For example, here are four AI (artificial intelligence) stocks in the last three months:
This week’s Economist has a piece “Why a dawn of technological optimism is breaking”
Here are three reasons:
First is the flurry of recent discoveries with transformative potential. The success of the “messenger rna” technique behind the Pfizer-BioNTech and Moderna vaccines, and of bespoke antibody treatments, shows how science continues to empower medicine. Humans are increasingly able to bend biology to their will, whether that is to treat disease, edit genes or to grow meat in a lab. Artificial intelligence is at last displaying impressive progress in a range of contexts. A program created by DeepMind, part of Alphabet, has shown a remarkable ability to predict the shapes of proteins; last summer Openai unveiled gpt-3, the best natural-language algorithm to date; and since October driverless taxis have ferried the public around Phoenix, Arizona. Spectacular falls in the price of renewable energy are giving governments confidence that their green investments will pay off. Even China now promises carbon neutrality by 2060.
The second reason for optimism is booming investment in technology. In the second and third quarters of 2020 America’s non-residential private sector spent more on computers, software and research and development (r&d) than on buildings and industrial gear for the first time in over a decade. Governments are keen to give more cash to scientists (see Briefing). Having shrunk for years, public r&d spending across 24 oecd countries began to grow again in real terms in 2017. Investors’ enthusiasm for technology now extends to medical diagnostics, logistics, biotechnology and semiconductors. Such is the market’s optimism about electric vehicles that Tesla’s ceo, Elon Musk, who also runs a rocket firm, is the world’s richest man.
The third source of cheer is the rapid adoption of new technologies. It is not just that workers have taken to videoconferencing and consumers to e-commerce—significant as those advances are, for example to easing the constraints on jobseeking posed by housing shortages. The pandemic has also accelerated the adoptions of digital payments, telemedicine and industrial automation (see article). It has been a reminder that adversity often forces societies to advance. The fight against climate change and the great-power competition between America and China could spur further bold steps.
You can read this Economist piece in full here.
Last night on Cramer, the CEO of SIG, a jewelry retailer, told a wonderful story of adopting technology to sell rings, bracelets, necklaces, etc. See if you can watch that segment. It’s really exciting how technology has improved her company’s sales. Watch it.
Today stocks have been on sale. I nibbled at ABNB, AMD, NGA, MRNA and AVXL. I also bought some more ROKU. I covered my short in SWI.
The speech Trump should have given
The Biden speech was the one Trump should have given 6 months ago. Then, most likely, he would have won the election. I bet there were a zillion advisers telling him just that — throw money at solving our two biggest problems — the virus and the economy. Or ignore them. He ignored them in favor of his ego.
His big appeal in 2016 was as a successful businessman he’d the fix those parts of the economy which had passed so many Americans by. The businesses had been off-shored, automated, etc.
One fellow,. Kevin Greeson, 55, died of a heart attack, last Wednesday outside the Capitol. He was apparently pretty disillusioned with what had been happening in north Alabama, his home.
For much of the late 20th century, north Alabama was home to a number of large factories and industrial facilities that provided blue-collar jobs with decent wages to people like Greeson. But many of those positions were eliminated over the past two decades as manufacturers and plants closed or sold to foreign companies — and as the jobs disappeared, the Democratic Party’s support dwindled. And all that radicalized Greeson.
There’s an interesting story on Kevin Greeson in ProPublica here.
Mother shows baby elephant how to cross the river
Totally irrelephant, but fun. To watch the short video, click here.
Favorite political cartoona
That’s it. A horrid day in tech stocks. But a good day for tennis. We started this morning at 6:11 AM.
P.S. If you have friends who want to subscribe or unsubscribe, go to the left hand column on the web site.
See you Monday. — Harry Newton
