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Picking stocks is more profitable than picking ETFs. Revisiting my biases against biotech.

“What’s your prediction for this week?”

He asked me. He wanted an assurance that now was a good time to begin his program to invest in stocks.

I answered, “It’s been going up strongly lately. And generally — more years than not — stockmarkets go up.”

Take my five biggest holdings — Apple, Amazon, Nvidia, Generac and PayPal.

They’ve done well this year. In this chart I’ve included my favorite ETF — namely Vanguard’s Technology ETF — VGT. The three strongest gainers are, sadly, not my largest holdings. They are Generac, Nvidia and PayPal, which proves it’s always better to pick individual stocks than ETFs. Though ETFs are safe.

Of course, you could pick the wrong stocks — like Chinese stocks — in which case VGT would have outperformed the “top” five Chinese stocks this year:

VGT is in bright blue in both charts above.

Then again, you could consult economists. The New York Times did a cover piece on Sunday:

They See Storms Amid Sunshine
After years of getting it wrong, most economists have learned not to be optimistic

Here is the charming illustration the Times chose for its piece:

Here’s how the article begins:

America’s dismal scientists can paint even a blue-sky outlook gray.

The country is experiencing the fastest economic rebound in at least a generation, but Wall Street and Washington are hardly taking a victory lap. In any other environment, the 6.3 percent pace of expansion economists have penciled in for the United States this year would represent a victory. They do acknowledge that it is a solid rebound after the shock and slump of 2020. But that doesn’t stop them from fretting about every incoming piece of data, and how quickly it can go from good to terrible.

Is the job market recovery poised to slow? Are we about to slip into a slow-growth, high-inflation stagflation? In the murky, Delta-infused post-pandemic recovery, behind every good economic data point lurks potential disaster.

Neil Dutta, the head of economics at the research firm Renaissance Macro, can see why his colleagues across Wall Street are penciling in good-not-great economic growth for 2022: After years of forecasting robust numbers and finding their projections dashed following the last recession, they have learned not to be too optimistic.

He gets it. He does. He just completely disagrees.

“Thinking about this like post-financial crisis is crazy,” Mr. Dutta said.

You can read the full article here.

So let’s pick stocks

Everyone who reads this blog knows I like companies with strong scaleable growth unburdened by heavy fixed or heavy variable costs. That tends to be software service companies operating in the cloud.

But the description can also apply to biotechs which I’ve shunned because of their risks, and because I understand networking, telecom, computing, semi-conductors but not drugs. That said, I plowed into these biotechs — vaccine maker Moderna, Abbott Labs, Ascendis Pharma, Charles River Labs, Doximity, JNJ, Novavax, and Zoetis. I like the stories on each one. I can see what they do (from on high — very high) and why they do it well.

Hence, I’m revising my previous warnings to stay away from biotech.

But I am not revising my warnings to stay away from Chinese stocks. Maybe things will change in October at the Comm. Party big year meeting. Right now every petty and major Chinese bureaurcrat seems to be trying to impress President Xi with how strong he’s acting against the big, bad Americans (i.e. us). Once Xi is set for life, things may ease a little.

What does it take to convince them?

Some still refuse to get vaccinated. I run into them daily. They give me cockamamie reasons. From CNN:

Delta Air Lines joined other companies in mandating vaccinations, but went a step further by telling employees they would have to pay a health insurance surcharge of up to $200 a month if they refuse the shot.

That’s exactly right, wrote John Banzhaf III, a pioneering crusader against smoking. “Covid-19 is now an ‘epidemic of the unvaccinated.’ But we the vaccinated are still being unnecessarily exposed to the risks — however small — of illness, hospitalization, ‘long covid’ and death. We the vaccinated have to wear masks in many places like offices and airplanes where masks would probably not be required if most Americans had their shots. And the vaccinated are unfortunately also being forced to bear most of the financial costs so that some can remain refusers.”

“Let’s stop coddling the minority, and hold the unvaccinated responsible for the consequences of their own deadly decisions.”

Don’t fly

A couple of weeks ago, the director of the state of Hawaii’s Department of Health held a press conference, in which she implored Hawaii residents not to travel.

Quotes from her press conference:

“This is a horrible time to travel. Stay home. Unless you have to travel, stay home.”

“It used to be if you were fully vaccinated, you could do just about anything. But the delta variant being so pervasive, the fight has changed. When someone is infected with the delta variant of COVID, they have about one-thousand times to one-thousand-two-hundred times as much virus in them than those who had the original-type COVID … Even if you’re fully vaccinated, if you’re sitting next to somebody with COVID, having lunch or having a drink, you’re being bombarded with the virus, and you have a very real chance that it could overwhelm your system and you could become infected. The vaccine is still very, very good at what it was designed to do, which is to prevent severe illness, to prevent hospitalization and to prevent death. But we don’t have the armor that we once thought we had with vaccination, and so we need to be thoughtful about our actions.”

Being cooped up on an airplane, with no social distancing on the aircraft, and with tiny lavatories on board that are shared by many passengers, a person has a great risk of catching the delta variant, even if he/she is vaccinated. If that person becomes infected, he/she would become a virus-spreader, even if he/she is asymptomatic.

That means giving it to your grandchildren.

Hoisted on my own petard

This is a soldier (called a petardier) blowing in the city gate with a bomb, called a petard.

If his fuse is too short, he will get killed by his own bomb. Hence the expression, hoisted on your own petard.

The day after I spent $1600 to fix my AC, it dropped 20 degrees to the mid-sixties and is now cold.

Here’s the little I know about air conditioning units:

+ In hot weather, keep your house’s central air running all the time.

+ Buy some universal capacitors from Amazon. Keep them handy. Your AC guy will probably not have them in his truck.

+ Surround your outside chillers with mousetraps.

+ Turn off power to them, so the mice don’t find them atractive warm nesting places. Mice have been our biggest problem with the outside chillers.

+ Replace your outside equipment every ten years, maybe sooner. Don’t replace them during the summer. You won’t get any technicians.

+ The company that made your outside units is no longer making them.

+ Window units are easier.

In Florida

In Spain. A hole in Juan.

Drink water, Keep moving. Take naps.

I’m eyeing Digital Turbine (APPS). Not a pretty chart. But great growth.

See you tomorrow or so. — Harry Newton