- Why I focus on technology above all else…
- What happens to tech stocks if Biden wins?
- “This first trade has paid for my lifetime membership!”
Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
I’d like to finish off the week by stepping back and taking an even higher-level view of the year 2020. I thought it might be interesting to compare what we are going through to previous years. How does it compare?
Fortunately, the Centers for Disease Control and Prevention (CDC) has data all the way back to 1900, which provides great perspective.
The CDC also does something very useful. It adjusts the data for increasing longevity since 1900. Back then, life expectancy was under 50 years old. Today, that number is approaching 80.
So the y-axis in the chart below is the “age-adjusted death rate.” This is the number of total deaths per 100,000 people. The 2019 data isn’t available yet for the CDC, and the 2020 data is estimated right now using 135,000 deaths. Therefore, the 2020 number shows annualized non-COVID-19 deaths plus 135,000 COVID-19 deaths.
Why does the CDC “age adjust”? Because as human longevity increases, more people will die of natural causes (there are many more people who are 70 years or older now). The CDC adjusts the age to the year 2000 as the basis. That way, the chart offers more of an apples-to-apples comparison.
It is very striking to see how different the 1957 and 1968 airborne viruses were from COVID-19. The 1957 pandemic adjusted for population growth would have been around 200,000 deaths. The 1968 pandemic adjusted for population growth would have been around 165,000 deaths.
And during that time, of course, there was no economic shutdown, no school closures, and no “fear and panic” driven into society.
Some of us may disagree, but I find this incredibly uplifting. Life expectancy has gone from the upper 40s to nearly 80 years on average, and the age-adjusted death rate is around all-time lows in history right now.
We have a lot of reason to feel fortunate and optimistic… and even more reason to question all of the misinformation that is currently being spread around right now by the media.
I want to sincerely thank all of you who wrote in with feedback from my Bleeding Edge issue on Wednesday. Most feedback agreed with the topics that I covered.
For those who disagreed with my statement that we should open schools again, the key argument was the belief that the kids will spread the germs and infect parents and grandparents.
Those who are 55 years and younger – who are not morbidly obese and do not have other risk factors like diabetes – are at very low risk. In fact, their risk is on par with influenza.
Sweden understood this and dared to be rational about its approach. It was unwilling to sacrifice the health and well-being of its future – its school-age children and teens – as well as the health of its economy.
Where is Sweden today? Out of a population of 10.2 million, just 71 people under the age of 50 have died. And the country is likely very close to reaching natural immunity. Daily new cases and deaths have dropped down to almost nothing.
Our energies can be spent ensuring that we isolate the small part of the population that is at risk. Teachers who are at risk should not teach until the pandemic has passed (or we have a vaccine).
We should protect and isolate our grandparents. Those who are at high risk can isolate at home, and the majority of society can get back to learning, growing, and producing to the benefit of all.
Healthy debate is the cornerstone of a civil society. I want to thank The Bleeding Edge readers for that and wish you all a great weekend.
Now for our mailbag…
Why tech stocks offer the best gains…
First, let’s start with a reader who’s wondering about portfolio diversity…
I’m impressed by your work, Jeff. Now I’m a reader of The Near Future Report. I’m more impressed when I know you put all your wealth in tech stocks. What made you make a bold decision like that? Are you not thinking of diversifying?
– Fredrik H.
Hi, Fredrik. Thanks for your question. You bring up an excellent point. Typical asset allocation strategies will tend to diversify wealth among stocks, gold and silver, real estate, bonds, cash, and potentially other alternative assets.
Generally speaking, this a smart approach and certainly a more conservative way to manage risk. And there is nothing wrong with this approach at all.
What I see happening in the world of technology and biotechnology, however, is something absolutely extraordinary. The rate of technological change is accelerating monthly, and I can see record levels of private capital going into early stage tech and biotech companies.
In my whole life, I’ve never seen so many exciting investment opportunities, and the returns are so far greater than other stocks. I know of no other segment of the market that consistently has the returns that technology and biotech do.
This is why I spend my days focused so heavily on these sectors.
Technology companies working on some of the most promising trends – 5G, artificial intelligence (AI), self-driving cars, nuclear fusion, and precision medicine – have the best chance of explosive gains.
A company that develops a new source of clean energy… a cure for blindness… or a way to improve computing power by 20x performance… those kinds of revolutionary changes can easily lead us to double, triple, or even 5x or 10x our capital. This kind of thing rarely ever happens in other sectors over such short periods of time.
And believe it or not, investors can still diversify within technology.
Allocating a percentage of liquid assets to large-cap technology stocks… some to small- or micro-cap technology stocks… and including exposure to sectors like biotechnology… does provide diversification. Most investors will also have some exposure to real estate and other fixed assets.
These are very personal decisions for each individual investor. But as for me, I’m “all in” on technology and biotechnology (and, of course, my primary residence as my real estate investment).
How would a Biden win affect tech stocks?
This reader wants to know if politics will impact our recommendations…
Hi, Jeff. Do you have a back-up game plan if Trump does not get re-elected? (He is not my image of an honest, responsible leader, but I won’t go into that.) How will Biden as president impact our portfolios? Hopefully you have recommended companies among your services that will do well no matter who will be elected in November.
– Josephine Z.
Hi, Josephine, and thanks for the great question. My comments that follow are not political at all. In fact, my only interest in politics is how policies may positively or negatively impact economic growth and opportunity.
Why do I care about that? Because a healthy economy with lots of opportunity is great for society and investors.
I’m on the record for predicting that President Trump will win the upcoming election this November by an even greater margin than the first election. As technology investors, this will be great for technology stocks.
Why?
Over the past four years, the current administration has pursued economic policies that have bolstered America’s economy and delivered exceptional returns in the equity markets.
Broadly, the policies I’m referring to are…
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Lowering corporate and middle-income taxes
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Rolling back regulation to bolster new business creation
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Reinvesting in American manufacturing
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Renegotiating unequal trade practices between America and its trading partners
Again, to be clear, this is not a political statement. I’m simply presenting my analysis.
The policies resulted in record-low unemployment for every segment of society and record-high levels of labor force participation. That’s what we saw from the 2016 election until COVID-19 spread.
But for the sake of argument, let’s consider the possibility of a Biden presidency…
I predict the markets would respond negatively. We’d almost certainly experience a very sharp and large market pullback.
Why?
Candidate Biden’s proposals – specifically for corporate taxes – would be a drag on equity prices. Look no further than Biden’s official “Build Back Better” position on economic growth…
Biden will ensure that corporate America finally pays their fair share in taxes [and] puts their workers and communities first rather than their shareholders…
The plan goes on to say that President Biden would reverse “some of Trump’s tax cuts for corporations.”
This is referencing the Tax Cuts and Jobs Act (TCJA), which was signed into law in December 2017. The TCJA, among other things, cut corporate tax rates from 35% down to 21%. At 21%, American corporate taxes are the lowest they’ve been since 1938, when the maximum tax rate paid by American businesses was 19%.
This lower corporate tax rate left American executives with a question. What should they do with all this extra money they are saving?
American corporations chiefly did two things: First, they used the money to invest in new equipment, facilities, and research and development. Second, they rewarded shareholders in the form of stock buybacks.
Stock buybacks are when companies purchase shares of their own stock and reduce the number of outstanding shares. This results in a higher price per share. We can think of buybacks as a way for companies to reward investors. In this regard, it’s not unlike a dividend.
Some voters might believe in a higher corporate tax rate. But as an investor? There’s no denying that making America’s corporate tax rate one of the most competitive in the world has been good for equities.
Again, this is not a political endorsement of any kind. It’s just my analysis. A Trump administration is good for U.S. equities. On the flip side, higher taxes, higher regulations, a $2 trillion green deal, and more government printing will not increase employment and investment opportunities.
A Biden administration will not be as good for our portfolios as a second Trump term.
That said, if a Biden victory seemed likely, we would certainly look to reposition our portfolios. There is never anything wrong with taking profits off the table and sitting on the sidelines for a while.
We’re going to have some volatility as we get closer to the elections. And we can count on the mass media to stoke as much fear and panic in the markets over the next few months as it can.
But we can handle some short-term volatility. And the best part about great technology companies with disruptive products and services is that they will grow in just about any economic environment.
Whichever way the election goes, I am 100% certain that we are going to have great investment opportunities in technology and biotechnology over the next four years. And I can only hope that the U.S. in particular returns to a peaceful and civil society.
Putting money into readers’ pockets…
Let’s conclude with some feedback from readers about our latest winning trade in Early Stage Trader…
Dear Jeff,
I locked a 61% gain yesterday from selling [your recommendation]. Thank you. Even though I am a long-term investor, and very seldom trade on short term, I decided this time to follow your suggestion.
– Patricia C.
Hi Jeff,
This is the first sell alert for me. I locked in gains of $6,600 in seven months. I am pleased with this…
I own all three of your services and am up $125,000 if I sold today. Thanks for your great advice and sharing your knowledge. I am looking forward to your new venture!
– Karen N.
Hi, Jeff,
I was able to secure an 88% gain on this position. It was my first profit from Early Stage Trader, as I never had shares in your big winner of 2019. (Gain of +$4,322.) I’m looking forward to the next moneymaker. Thanks much for your motivation to “help the little guy.”
– Frank S.
Hi, Jeff,
Since I joined Early Stage Trader in early February, we have experienced COVID-19 and all of the fallout of that. With that, I have been able to purchase every one of your recommendations at or better than your recommenced price, with two exceptions. Still waiting for those to drop back into your recommenced range.
[This recommendation] is the first stock that I have sold using your service. Although I was not able to lock in the “gains of 99%” referenced in your email, I did secure a gain of about 61%.
I am looking forward to the rest of the year to see what this holds for us, and I hope and expect some good profits are coming! As I’m one to keep track of all, and I mean every one, of my stock trades with Excel, I’m pleased to inform you that this first trade has paid for my lifetime membership! I invested $5,016.00 and sold for $8,066.66. Now, let’s keep the momentum going!
– Dan S.
Thank you to all of the readers who wrote in to share about their profits. There is nothing that makes me happier than hearing from subscribers like you who are benefiting from my work. I mean this sincerely when I say that it is a real motivation for me to keep putting in the long hours of research and travel.
Helping subscribers is truly the reason why I do everything I do. My mission is to “balance the scales” in favor of the retail investor. I want investors who follow my work to have an edge over Wall Street, not the other way around.
And I’m certain that we will have several more big winners in the coming months. We have so much to look forward to.
That’s all the time I have this week. If you have a question I didn’t get to, you can submit your question here. I’ll do my best to get to it next week.
Regards,
Jeff Brown
Editor, The Bleeding Edge
P.S. As we just saw, members of my Early Stage Trader service reported gains of $3,050, $4,322, even $6,600. And that was just from one trade.
I’m so happy to hear readers are seeing success with this research. But I believe those returns could pale in comparison to what’s coming next…
I’m currently tracking an early stage biotechnology company that could surge higher as soon as July 30. In the past, these types of setups have produced triple-digit returns in a matter of hours.
Like what you’re reading? Send your thoughts to feedback@bonnerandpartners.com.