“We”re going to use the genome map to slow down the aging
process so the next generation has the opportunity to live to be
150. Unfortunately, all the diseases we thought were wiped out
decades ago will come back in new supercharged form, so
everybody succumbs to dysentery at 23.”
–Gail Collins, New York Times
Yes, the unveiling of the first rough map of the human genome is
a fantastic development. As many said this week, it was the
biological equivalent of landing on the moon. Craig Venter of
Celera Genomics commented, “For the first time our species can
read the letters of our own genetic code.”
The genome was not supposed to have been mapped until 2005.
The healthy competition between Celera and the National
Institute of Health sped it up. Injecting capitalism into the
process has a way of doing that.
But listen to James Watson, the discoverer of the double-helix
structure of DNA back in the early 1950s.
“Now we have the instruction book for human life…People say
we can read it. We can”t read it. We have the book, and now
we”ve got to learn how to read it…It”s like inventing the printing
press. That”s great, but let”s print a book now. We”ll shout
”hurrah” when we save lives.”
As to this last point, that day will arrive sooner than we think but,
in the meantime, please beware the hype.
Yes, we are entering a new era of molecular medicine where the
development of treatments and vaccines for some of our worst
diseases could be available by 2010, if not sooner. But two
comments.
First, from an investment standpoint, if you”re going to just buy
one stock, pick a company that”s been around awhile. I don”t
mention specific issues but any adviser could recommend one for
you (or read a good publication like Barron”s or Business Week
for ideas and go to BuyandHold.com).
The smarter way to play the immense potential of the biotech
sector is through a mutual fund. And then make sure your overall
portfolio isn”t suddenly 60% in XYZ”s biotech offering. Rather,
buy a diversified tech fund that not only invests in biotech issues,
but also in the Cisco”s and Intel”s of the world. That”s the best
advice I can give. Believe me, if a fund with 50 overall issues has
4 or 5 biotech plays, and the sector pops, you will participate.
I say all this because many a fortune will be lost playing this
exciting game. It costs megabucks to run these firms. Research
doesn”t come cheap. Almost all of them currently lose money and
the vast majority will fail. [Think Internet.]
My second comment has to do with the lead-off quote. Advances
in medicine will be many but we can”t take our eye off the ball.
What Gail Collins is referring to is the incredible misuse of
antibiotics, worldwide, which is leading to the comeback of
diseases like tuberculosis in virulent forms. The World Health
Organization warned that even gonorrhea has become completely
resistant to penicillin, turning it into “a potentially life-threatening
contagion.”
Anyway, if you want to learn more about the genome project, you
can check out the following site. I will not be commenting on
every development that is overplayed in the media these next few
years.
www.ornl.gov/hgmis/project/progress.html
Dirtballs
And tied to the above discussion is a follow-up to my comments
of a few weeks ago, when I discussed Bill Joy”s (the chief
scientist at Sun Microsystems) concerns on how the future misuse
of technology, specifically nanotechnology, could spell the end of
civilization (no exaggeration). So this week, I saw the following
report.
“Most researchers in the field (of nanotech) don”t share Joy”s
concern. ”We are compelled to keep going. It is just so cool,”
says Paul Alivisatos, professor of chemistry at the University of
California-Berkeley. ”We are knocking on the door of creating
new living things, new hybrids of robotics and biology. Some
may be pretty scary, but we have to keep going.”” [Source: U.S.
News]
I hope you now see why I share Joy”s gloom. Nice attitude,
professor! You feel any responsibility whatsoever?!
And last week, I wrote of the employment consultant who was
depressed over the incredible lack of ethics within the Internet
generation. Employers promising a prospective employee the
world, knowing that at the same time they have two months of
cash left.
This week there were a few more examples of this new world full
of dirtballs. It has come to light, and the SEC is investigating,
that many dot-coms are selling out their customer lists even
though they have stated privacy policies saying they won”t. The
reason? Why they need the cash!
[Here at S&N, I wouldn”t do that and this site isn”t going away.]
And then there is Larry Ellison, chairman of Oracle and “Dirtball
of the Week,” hands down. It”s a long story but to sum it up,
Ellison hired a bunch of investigators to look into organizations
that were supporting Microsoft and their case against the Justice
Department. The investigative firm that Ellison hired, IGI, is
headed by Terry Lenzner.
Now Lenzner is known for his machinations while working for
one Bill Clinton. Specifically, Lenzner helped dig up dirt on
Paula Jones et al. IGI, in the case of Microsoft / Oracle, went
through the trash of these independent organizations who wrote
opinions on Microsoft”s behalf.
Illegal? Probably not. Unethical? Big time.
But the payoff was watching Ellison on television Wednesday,
denying he knew anything about IGI until this past Tuesday.
Yeah right, Larry. Go straight to the Dirtball Hall of Fame. Your
plaque is ready.
Gasbags
Nice to see that the day after my oil diatribe of last week, the
Washington Post ran the following lead editorial titled, “Gas Price
Gasbags.”
“The number-one energy problem in this country is the opposite
of a high price; it is profligate consumption.”
Of course the Post then went on to suggest an energy tax
increase…ah, I don”t think so.
The American public is so ignorant. Let”s examine one such
example, a typical consumer, appearing on a major network this
week.
“Gas prices are so high I”m only taking one vacation.”
O.K., bud. Let”s say you travel 1,000 miles each way, a good-
sized trip, and your car gets a none-too-generous 20 mpg on the
highway. That”s 100 gallons, round-trip. Now gas is about 55
cents higher than last summer (a level which placed it near
historic lows). That”s $55 more, this year than last. For that you
cancel your vacation?
And I almost threw my adult beverage through the TV screen last
Saturday night as Mark Shields was foaming at the mouth on
“The Capitol Gang.” [You”re not allowed to make fun of the
editor”s exciting Saturday entertainment.]
Shields was ranting and raving about oil company profits
increasing “296-471%.” “Outrageous,” he spit. You see, he was
comparing oil company profits from the first quarter of 2000 to
Q1 of 1999. Geezuz, we had close to $10 oil for most of Q1 ”99
and companies were lucky to turn any profit. So this spring we
climbed to $30 and they made some money. We should all be
saying, good…and those of you in the energy business probably
give thanks everyday at the dinner table…or on your second
vacation.
And then there was Congressman David Bonior, once again
talking of a windfall profits tax to penalize Big Oil.
Congressman, why don”t you go down to Louisiana, walk into a
bar, and say that? What”s wrong, scared? I don”t blame you
because 13,000 were laid off in that state alone when the price of
oil fell to $10!!
Wall Street
In addition to the preceding, for the 4th straight week, the Dow
Jones finished with less than a 2% move, up or down, as it closed
at 10447 (+0.4%). The Nasdaq managed to break its string at 3,
closing at 3966 (+3.1%).
The Federal Reserve, as largely expected, held the line on interest
rates and, in their statement, said that signs of a true economic
slowdown were still “tentative.” And I can”t say I blame them.
No one knows where we”re headed. It”s guesswork, at this point.
So until the Fed next gets together, August 22, we will slice and
dice every bit of data in the interim, starting with next week”s
June employment report, for signs that the current slowdown is
for real and, also, for an indication as to the future direction of
inflation.
The bond market, at least for a week, seemed reassured that
inflation was not about to take off so bonds rallied.
U.S. Treasury Yields
1-yr. 6.05% 2-yr. 6.36% 10-yr. 6.02% 30-yr. 5.89%
Back to equities. Friday wrapped up the quarter, a lousy one,
especially if you were a tech investor, as the Nasdaq lost 13%.
The average is still 21% off of its all-time high of 5048. The Dow
stands 11% from its peak of 11722.
Earnings season is upon us and, recent individual company profit
warnings aside, the numbers should be strong. But with the
recent slowdown, I bet you see an awful lot of companies just
”hit” the estimate with few exceeding by substantial amounts.
And for those who just meet the number, that will spell trouble.
I have said more than enough on valuation over the past year or
so. I felt like the second quarter vindicated many of us. I
certainly don”t see how a potentially slowing earnings picture will
help matters going forward. And, conversely, if all we are
witnessing in the economy is a “pause that refreshes,” well, then
the Fed will jack up rates in August and that won”t be a positive,
either.
And speaking of the Fed and the economic data that emanates
from the Bureau of Labor Statistics (part of the Labor
Department), more and more folks, including Fed governors
themselves, are whispering that the recent numbers (like the last
CPI) could be rigged. If upcoming figures refuse to acknowledge
the impact of rising energy prices, you have your answer. The
administration, in attempting to ensure a Gore victory, could be
playing with fire.
–Amazon.com”s Jeff Bezos was all over the airwaves, trying to
reassure investors that Amazon wasn”t about to run out of cash.
If I was a shareholder, I wouldn”t have been convinced. And
lookee here, my 7/10 issue of Business Week just arrived with
Bezos on the cover. The article is titled “Can Amazon Make It?”
I don”t have time to read it all so let”s just jump to the
conclusion…I”d say it reads 55/45 against survival.
–And here”s to Carl Icahn, who made a cool $600 million in 9
months, on Philip Morris”s acquisition of Nabisco. [He made
hundreds of millions more than that, actually, the $600 million
being his most recent bet.] The guy played the game fair and
came out ahead. [I like the old-timers.]
–It”s now been exactly a year since the Fed started hiking interest
rates. Since then the Dow has lost 5%. The Nasdaq has soared
48%.
Russia
President Putin spoke before military academy graduates this
week.
“Russia in the new century cannot carry out the monumental tasks
of building up the state without the army. This is impossible. In
any country, but in Russia in particular, the army has always been
a pillar of state.”
This is nothing new, mind you. It just points out that in the U.S.
we talk about the economy and in Russia it”s the army. And,
barring a crisis, that”s not about to change.
Putin”s problem is with his generals. His conventional forces are
Third World. And the generals claim they aren”t getting the funds
because what little is available still goes largely to the nuclear
forces. Thus, Putin”s aggressive stance against our national
missile defense. They can”t afford to increase or maintain their
existing nukes.
Look at the situation in Chechnya. Bogged down by a bunch of
terrorists. What if Russia got in a dispute with China (not out of
the realm of possibility)? Even China”s toy soldiers would roll up
the Russkies.
So look for Putin to continue to drive a wedge between the U.S.
and its allies. He needs time…and continuing high oil prices…to
give his generals the ability to start the rebuilding effort.
*And when you see the U.S. bombing Vieques, understand that
this is crucial training few of our potential adversaries have the
luxury of holding.
China / Taiwan
Geezuz. Taiwan”s new President Chen Shui-bian was all over the
board this week. First, he told a group of Americans that he
approves a “One China” policy, Taiwan style, as first proposed in
1992, which allows the two sides to have their own definition of
what that means. This is a departure from his campaign rhetoric
which espoused a truly independent Taiwan. [Sorry, it”s
confusing to discuss this relationship when changing one word
could spell war.]
Well, Chen”s own party supporters were none too pleased with
his seeming cave-in to Beijing so, on Friday, Chen said he was
misinterpreted and that he still favors an independent Taiwan and
negotiating with China on a “state-to-state” type basis.
But if you are sitting in the CIA, the NSA, or the Defense
Department, you have to ask yourself, will China do anything this
fall while the administration is preoccupied with the election?
Would China care if they then handed it to Bush? Of course not,
they”d have Taiwan!
And China exhibited its worst face one more time when they
blasted Britain for allowing Taiwan”s former president Lee Teng-
hui to visit. Next stop on Lee”s “Places I Want To Visit Before I
Die Tour,” Japan. That will really tick off Beijing.
Elsewhere Around the World
Japan: The LDP is still in charge, post-election, but the ruling
coalition lost substantial ground. The fate of Prime Minister Mori
hangs in the balance. And it certainly wasn”t good news that
Japan”s government debt-rating was downgraded by Fitch.
North / South Korea: Said one schoolchild in the South, “Now
we”re learning the North is O.K.” And North Korean songs are
topping charts in Seoul. Ee-gads. That music must suck. Advice
from the West: Don”t get too carried away.
Cuba: Congress took the first step of opening up the Cuban
market by approving the sale of food and medicine for the first
time in 4 decades.
Saudi Arabia: Interesting article by Daniel Pearl in the Wall Street
Journal. Despite its oil wealth, the Kingdom has an
overwhelming problem with poverty in its urban areas, an
obviously explosive situation. At a minimum, $80 billion in
infrastructure projects are needed over the next 25 years.
What Pearl didn”t get into is an important part of the overall
energy debate. The U.S. is far better off with $20-$30 oil than
with $10 oil. Why? Until we get our own energy act together
and stop importing as much as we do, we don”t want to see the
Saudi”s and the other Arab oil producers go through a period of
chaotic internal instability. For example, when oil was $10, the
economies of these nations suffered tremendously. An uprising
against the monarchy in Saudi Arabia would lead to $50 oil, or
higher.
Zimbabwe: Prime Minister Mugabe”s ZANU-PF party won only
62 of 120 seats in last week”s parliamentary election, a true
display of heroism on the part of those who went out to vote for
the opposition. Even with the additional 30 members that
Mugabe can handpick, he does not now have enough votes to
force through constitutional change. And he also remains a
candidate for the S&N “Dirtball of the Year” award.
Mexico: Election Sunday. Comment next week.
Canada: My friend Harry K in Toronto keeps sending me articles
on the disastrous state of the Canadian military. For example, 11
of their 41 aging Sea King helicopters have now crashed, killing
7, and replacement choppers don”t seem to be on the drawing
board.
Colombia: $1.3 billion in aid is on its way. Whether you like it or
not, folks, you need to pay attention. This is going to be one
dicey situation and Americans are inevitably going to die (at first,
the advisers). The various guerrilla / narco-terrorist outfits have
threatened massive retaliation if the U.S.-backed Colombian
armed forces start blowing up their coca plants.
Cocaine production in Colombia has more than doubled over the
last 5 years, thanks, of course, to the demand side of the equation
here in America. So watch for the legalization debate to be front
and center when the first group of Americans gets shot up. As
for the military commitment, that”s only going to grow. Yes,
opponents will say it”s another Vietnam. I say, it doesn”t have to
be. [And I will have more in the 7/6 edition of “Hott Spotts.”]
Indonesia: The poor Christians can”t get a break. Up to 500
boarded a ship to escape the violence perpetrated by the Muslim
militias. The ship sank. All 500, lost.
This Week in Politics
–During his press conference, at one point President Clinton said
he hadn”t been following the polls, then two seconds later he
rattled them all off.
Newsweek had the surprise poll of the week showing George
Bush with only a 42-40 lead over Al Gore, a statistical dead heat.
Every other poll has showed Bush with at least an 8-point lead
and a CNN / USA Today survey the same week had Bush up 52-
39. Ergo, Newsweek had bad data, at least for now.
–Gore does lead Bush by 22% among Hispanics.
–Newsweek claimed that Bush will name his Veep 7-10 days
before the convention but will refrain from naming his cabinet
(Powell / Sec. Of State; McCain / Sec. Of Defense) until after the
election, if he”s so fortunate.
–As reported here weeks ago, the Clinton administration was
able to officially trumpet new budget surplus calculations of an
additional $1 trillion over the next 10 years. It”s up to us to
remind our congressional representatives that these are only
projections. One economic recession of modest size and you can
toss them out the window. So don”t let Congress spend like a
bunch of drunken sailors. [Not to get on sailors…some of my
best friends are…]
–In his press conference, Clinton said all of the administration
scandals were “bogus.”
–Ross Perot has actually been seen in public, fueling rumors he”s
about to throw himself into the Reform Party nominating process.
Buchanan”s campaign is a mess. Perot denies the talk.
–The real third party candidate, Ralph Nader, formally received
his Green Party nomination. His platform will tie-in themes like a
“children”s defense program” as opposed to a missile defense one.
He labels the two parties, “Democratic do-littles; Republican do-
nothings.” And this catchy line, “When labor gets taken for
granted, it gets taken.”
So here”s the deal. The “independent” presidential debate
commission has 3 debates scheduled for the period Oct. 3 through
17, plus a vice presidential debate somewhere along the way. The
reason why they are all crammed into such a short time frame is
because of the Olympics in September and then the World Series,
end of October. The commission has ruled that a candidate needs
to average 15% in 5 major polls in order to be included. Nader
and Buchanan, combined, garner about 10% today. The pressure
to include them both in at least one of the debates will be intense.
And you all should want that. We”re talking Emmy-winning stuff
if they”re on the stage.
Random Musings
–In Kenya, elementary school students rioted, stormed a beer
truck and drank all the beer. [Source: New York Times]
–From Richard Morin of the Washington Post. Following is poll
data, taken from various surveys, which give you an idea on the
different positions held by blacks and whites in America today.
Is O.J. Simpson “probably guilty?” 13% blacks ”yes”; 65%
whites ”yes.”
Voted for Democratic candidate in ”98 House elections: 88%
blacks; 42% whites.
“Equal treatment in criminal justice system?” 9% blacks; 52%
whites.
“CIA imported cocaine for distribution in black community?”
73% blacks ”yes;” 16% whites ”yes.”
Voted for Clinton: 84% blacks; 43% whites.
“HIV and AIDS used as part of plot to deliberately kill African
Americans”: 62% blacks; 21% whites…unbelievable.
–Speaking of AIDS, a new U.N. study was released which
showed that in the sub-Saharan nations, a child of 15 has a 50%
chance of dying of the disease. The future is worse than bleak.
–According to the Center for Disease Control, in the land of
plenty, the percentage of American kids who are overweight has
more than doubled since the 1960s.
–Half of all auto accidents are caused by drivers whose attention
is directed elsewhere; from cell phones, to applying makeup, to
simulating a John Rocker interview.
–The New York Times has been running an interesting series on
race relations in America. Last week they profiled a town about
10 minutes from where I live. The finding in the racially
integrated school system was that while in elementary school kids
didn”t care about the race issue, as soon as they got to middle
school the separation was “profound.” I thought back to my own
experience and it was a similar one. But that was 30 years ago.
There are very good reasons for why this occurs, I”d just rather
not get into all of them right now. But I will throw out one
finding from the report. By middle school, doing well isn”t “cool”
among the bulk of black students and, unfortunately, the pressure
to “underperform” is substantial.
[You can read the series by going onto ”nytimes.com” and
clicking on the logo in the upper left-hand corner.]
–Do you think “The Perfect Storm” has received enough
publicity? Weather Channel, Discovery Channel, all the
networks…O.K., already. Where were you guys in 1991 when it
was actually taking place?
“We”re above the crew of the Andrea Gail and they seem to be
having problems. Let”s go in for a closer look. Captain, it
would appear you are taking on massive amounts of water and
drifting aimlessly. Can you make it?”
–National Missile Defense system test on July 7th. Be there,
aloha.
–The Supreme Court issued more than a few major rulings, the
biggest of which was in overturning a Nebraska statute which
banned partial-birth abortion. To say the least, this was an
explosive case and, in a rarity, all but one of the Justices (the
wimpy David Souter being the exception) wrote a full opinion.
In a dissent, Justice Thomas called the form of abortion
“infanticide.” Looking at the other side, as an outsider, the
Nebraska law did not have an exception for the woman”s health, a
major lapse. And that”s all you”re getting out of me.
–“Anybody here, seen my old friend, Elian…Can you tell me
where he”s gone?” –Dion
Actually, I hope some of you saw his arrival in Havana on CNN.
Classic stuff…you”d think the government could have whisked
him away in a car better than what looked to be a Corvair. And
there was Juan Miguel, frantically ”rolling up” the windows. Yes,
it”s time to lift the embargo and get Cuba back to at least the 70s.
–Just got the following phone call:
“Mr. Trumbone?”
“Trumbore.”
“Mr. Trumbone, I”m Jen from the ”Coalition for a Better America”…”
“Not interested.” Click.
Gold Closed at $292
Nymex Crude Oil, $32.40
Returns for the week, 6/26-6/30
Dow Jones +0.4%
S&P 500 +0.9%
S&P MidCap -1.4%
Russell 2000 +1.3%
Nasdaq +3.1%
Returns for the period, 1/1/00-6/30/00*
Dow Jones -9.1%
S&P 500 -1.0%
S&P MidCap +8.3%
Russell 2000 +2.5%
Nasdaq -2.5%
*Not including dividends.
Bulls 50.0%
Bears 32.4% [Source: Investors Intelligence]
Notes:
The ”Bar Chats” of 6/30 and 7/3 contain / will contain some
patriotic words from our founding fathers that you may find
enlightening.
I have introduced a new ticker at the bottom of the home page.
You can customize it to your liking. Thanks to my friends at
Money.Net and CSI for efforting this enhancement.
Spread the word.
Brian Trumbore
