July 2021

We are closing the month of June! Epic for equity holders, pleasant for bond investors. About flat on the DJIA, up about 2% on the S&P 500 at new all-time high, the NASDAQ Composite showing a gain of about 6% - at its own all time high! The 30-year US Treasury Bond rose nicely in price as its yield dropped from 2.90% to 2.63% in the month! Where is the error?

Huge fears of racing inflation in May clearly faded as the bond market appears to have ignored them completely. Yes, the data on inflation was scary, showing huge rises in the CPI, the PPI and the CRB. We thought that the Fed’s belief that these numbers were transitory and simply a temporary spike as the economy is waking-up into bottle necks of supply. As we say, read the markets, expect the news... This in the face of a re-emergence of COVID with its so-called Delta strain. This may dampen the economic resurgence, which even the Fed is expecting to be monumental into year-end. And they promised to hold interest rates for at least another year. Say no more! Equities have their after- burners on... This can’t and won’t last forever, we know, but say, stay for the ride for the rest of 2021, at least! These momentous times don’t come often (thanks Heavens!), but when they do arrive, embrace them! Think of all the analysts barely two years ago who warned of the impending 10% “Correction to come”, after some 50% rise, let it fall-back 10% - You remain some 35% up NET! ($100 rises to $150, falls 10% to $135). Bad on the nerves, great for the pockets! We are convinced that the trend we are in will continue and spread broadly across the financial globe for a good tch ahead.

When the economy appeared ready to restart from the pandemic fall, many invested into the decimated leisure and travel industries, then added consumer staples and other supposed beneficiaries from the rebound. We did (and do) believe in the global rebound but thought to catch it in a forgotten industry – the old energy sector! We believed that the first showing of recovery will be seen in oil prices. Many will first take the car to visit grandma, fewer will take a flight. If they do take a plane, the airline too will buy jet fuel which is still oil based... Exxon [XOM] the oil bellwether, has risen from $40 at year-end to over $62 into month-end today! (and it pays a 5.50% dividend yield).

Now many analysts are predicting a $100/Bbl of WTI oil in 2022... that is a 37% rise from today’s $73 level... Yes, we all dream of Tesla’s roaming the green streets of America where the buffalo once ran, Hydrogen powered jetliners and low energy air conditioners, but in reality, oil will remain our primary source of energy for the visible future. We can’t envision Crypto coins being mined using planet-saving oxen driven generators... We strongly suggest adding or holding some pure energy stocks in your portfolios. Maybe some ETFs in the sector?

The other end of the spectrum, the technologies of the future are now in the Medtech sector. Hiding under the clouds of COVID, we saw Moderna as a brilliant maker of mRNA-based vaccines. Indeed, Moderna and its brethren are not making much money in saving the world, and we suppose that in winning the Vaccine wars they are actually cutting their own legs – who will need to be vaccinated if the virus is gone? Or are we setting up for multi-year vaccination path? What has been ignored is the fact that the concept of mRNAs is revolutionising the universe of medicine. It is the early days of the new “antibiotics”, maybe they will even replace aspirin 😉! And take a peek at what the gene-splicing people are up to... customised, individualised medicine. Look at Crispr Therapeutics [CRSP] to learn about our future. Better yet, maybe we don’t need to fear an onset of Alzheimer’s disease as Biogen’s medication was approved by the FDA. Maybe Moderna and Crispr will be the Apple and Microsoft of the 21st century? We are there... and remember, a fool isn’t someone who is wrong, a fool is someone who is afraid of being wrong.