Tag Archives: Data

Why High Oil Prices May Not Matter for Stocks

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You don’t need me to tell you that oil and gas prices are through the roof these days.

Gas stations are changing numbers faster than slot machines. And the explosion in prices is sowing fear in the stock market.

But I think this huge spike in oil prices won’t matter much for stocks in the long term.

Looking at some historical data today, I noticed that big advances in oil prices are actually associated with above average returns for stocks.

Let’s look back at some major oil price spikes and see what happened to stocks.

A Trip Down Memory Lane

Our first stop takes us back to the late nineties. That was the last time I saw gas under a dollar!

Indeed, oil was a mere $12.36 a barrel in February of 1999. Just one year later, it had shot up to $28.28, a 128% increase.

Surely a stock market crash was next, right?

Wrong. Stocks increased 11% that year, an above average return.

Our next stop takes us to the depths of the financial crisis. At the beginning of 2009, oil traded for $46.17.

By April of 2011, the price had jumped to $107.55, an advance of 133%.

Market meltdown? Hardly.

Stocks surged 48% as the economy rose again from the ashes.

Why would stocks go up even as oil, a major cost center, rises?

Both are responding to an improving economy. Stronger economic growth means better prospects for companies, raising stock prices.

A stronger economy also means more demand for oil as families go on vacations again and buy bigger and shinier SUV’s. That increases oil prices.

Indeed, you’ll notice that during periods of increasing oil prices, economic growth also increased rapidly:

What About Today?

In April 2020, oil prices stood at just $20.28 a barrel, the lowest in over 20 years. Today, West Texas Intermediate oil has increased to $119.26 a barrel, a staggering 488%.

Sure enough, a similarly massive upshift in economic growth happened during that time. US GDP went from falling 31% year over year to growing 34% year over year, as lockdowns were implemented and then lifted.

Since lockdowns began to ease in later 2020, economic growth has remained strong, routinely clocking around 7%.

That roller coaster for growth resulted in a roller coaster for oil prices as well. We shouldn’t be unduly alarmed that oil is recovering along with the economy as a whole.

While geopolitical events have contributed to higher prices this year, you’ll note that most of the increase in oil prices happened well before Russia’s invasion of Ukraine.

High prices or no, I’ll be holding my stocks.

More on markets:

How Did High Dividend Stocks Perform In the Last Crash?

FBI Raids Short Sellers

Is Russia’s Google Finished?

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Photo: “Gas Prices. WTF?” by kristiewells is marked with CC BY-NC-SA 2.0.

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China Hacked Microsoft With Data from Previous Infiltrations

Microsoft Corp. and U.S. government officials are still working to understand how a network of suspected Chinese hacking groups carried out an unusually indiscriminate and far-reaching cyberattack on Microsoft email software, more than a month after the discovery of an operation that rendered hundreds of thousands of small businesses, schools and other organizations vulnerable to intrusion.

A leading theory has emerged in recent weeks, according to people familiar with the matter: The suspected Chinese hackers mined troves of personal information acquired beforehand to carry out the attack.

More here.

Microsoft Exchange servers run Microsoft Outlook, which is used almost universally for e-mail in corporate America. Having access to that is having the keys to the kingdom at almost any company in the country and many abroad.

So where did they get all this personal information? The evidence indicates that it came from prior hacks:

Among the potential sources of the personal data is China’s vast archive of likely billions of personal records its hackers stole over the past decade. The hackers may have mined that to discover which email accounts they needed to use to break into their targets, according to people familiar with the matter.

Chinese hacking is starting to operate like a flywheel: hack target A, get information, use it to hack target B, get more information, then hit C.

The Biden administration provided some wise guidance to Microsoft:

Microsoft has pushed its customers to install security patches over the past month, releasing a blizzard of more than 25 patches that covered the wide array of Exchange versions. At the Biden administration task force’s urging, the company also simplified the updating process for customers, releasing a “one-click patch” option.

I can’t help but think that this level of sophistication would’ve eluded the Trump administration.

With China increasingly aggressive in numerous ways, this could be a big opportunity for American security companies to step up and provide better protection. I’ll definitely be on the look out for network security startups that look promising.

For more on technology, check out these posts:

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Photo: “Xi Jinping at the EP” by European Parliament is licensed under CC BY-NC-ND 2.0

For the Vaccinated, Masks May Be Over

If you’ve been vaccinated for COVID, can you finally take off the mask? Early data from Israel says yes:

Pfizer Inc and BioNTech SE said on Wednesday that real-world data from Israel suggests that their COVID-19 vaccine is 94% effective in preventing asymptomatic infections, meaning the vaccine could significantly reduce transmission.

If you don’t even have an asymptomatic infection, you shouldn’t be able to transmit the disease to others. That said, this data is preliminary and is not yet peer reviewed.

The problem with real world application of this knowledge is that anyone can say they’re vaccinated. At a grocery store, for example, it would be hard to check everyone given constraints on time and manpower. So, I expect to see masks continue in public places until case rates are very low and everyone who wants a vaccine has had a chance.

That said, this data can inform our actions in private settings. I look forward to being able to wear one less frequently!

For more posts on COVID, check these out:

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The Miracle Particles Behind COVID Vaccines

The particles that the Pfizer and Moderna vaccines rely on are 1/1000th the width of a human hair. They’re called lipid nanoparticles, and they’re revolutionizing medicine as we speak.

The Pfizer and Moderna COVID vaccines work by sending mRNA to your cells. The mRNA tells the cells how to make proteins that block the virus. But you can’t send the mRNA on its own, because it would be repelled and flushed out through the kidneys.

The mRNA needs a wrapper, and that’s where the lipid nanoparticle comes in. The mRNA molecules are negatively charged and so are our cells. These two negatives push each other away. But, the nanoparticle can make it inside the cell.

Once inside the cell, the particle faces another barrier. The cell wraps it in a container called an endosome, because the cell doesn’t want to be contaminated. So, the lipid nanoparticle has to be specially designed to escape that endosomal prison.

Decades of research has gone into these particles, and they can now escape and spread the necessary information into the watery substance inside the cell (called the cytoplasm). Our commitment to funding basic science decades ago is paying off today in ways we could never have anticipated.

I learned a great deal about these incredible particles today at an online seminar hosted by the journal Nature with Kathryn Whitehead of Carnegie Mellon University and Yizhou Dong of Ohio State University. They gave some great perspective on the development of this amazing technology.

One thing Professor Whitehead mentioned was that despite concerns that the mRNA vaccines are too new and unproven to be safe, the lipid nanoparticles they use have existed for decades. In fact, she said she’s had research rejected for publication because these particles are considered too old hat!

I also finally learned why the vaccines have to be stored at such cold temperatures: molecules will start moving around too much once the temperature rises, so the lipid nanoparticles could come apart. Perhaps one reason Moderna’s vaccine doesn’t need quite as cold of storage is that they’ve been researching these particles for much longer than Pfizer/BioNTech, so their particles may be a bit more stable.

Beyond COVID, lipid nanoparticles and the mRNA therapies they’re a part of could be used for other viruses like the flu, Zika and Ebola. They may also be used as cancer immunotherapies. (This echoes what the co-founders of BioNTech said recently.)

These particles seem likely to underlie an entire new generation of medicines. I’ll be keeping a close eye on them, microscopic as they are!

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Photo: “2020_06_020100 – a human cell attacked by Covid-19” by Gwydion M. Williams is licensed under CC BY 2.0

Killer Kittens Can Be Placated With Meat and Playtime, New Study Finds

It would be wise not to anger him.

Cats kill billions of animals yearly, but feeding them a meaty diet and providing lots of playtime can redirect them to less violent pursuits, a new study finds.

The mother of one cat in the study had seen her furry friend wreak havoc:

“We’ve had birds in the bedroom, rats in the paper bin, rabbits in the utility room, and several vermin that have died of fright,” says her owner, Lisa George from Cornwall, U.K.

But redirecting their prey drive to play, plus keeping them sated with meat, greatly reduced the body count:

the high-meat diet and playtime approaches had the most sweeping impacts, slashing all types of animals on the doorstep by 36% and 25%, respectively.

See the full study out today in Current Biology here.

A surprisingly large number of species have a prey drive. Our gerbil stalked, attacked and ate caterpillars, leaving only the legs. He also ripped the head off a cockroach and wisely left the remains for my wife to clean up rather than eating them.

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Photo: “killer kitty” by Ayeshah Ijaz is licensed under CC BY-NC-ND 2.0

This One Trend is Driving Every Financial Market

Regardless of which market we look at, we see a similar trend: skyrocketing prices since the beginning of the pandemic. You can see this in the S&P 500, a broad measure of stocks:

In commodities:

In the increase in real estate prices and the corresponding decrease in capitalization rates (this chart is from Dallas…see similar trends in other cities in the research papers linked in this post):

And even in Treasury bonds (recall that the yield moves in the opposite direction from the price, so a lower yield means a higher price):

Why are all these markets looking the same? The likeliest cause is a huge jump in the money supply. The Federal Reserve has aggressively printed money since the beginning of the pandemic, looking to counter the seismic economic shock. I think this is probably appropriate. In any case, the effect is unmistakable, however you measure money supply.

Here’s how the “monetary base,” or “the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve),” has expanded:

If you look at another definition of the money supply, M1 (“the sum of currency held by the public and transaction deposits at depository institutions”), it looks like this:

And if you broaden your definition of money supply to M2 (“M1 plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares”), you see the same familiar pattern:

Whichever way you slice it, there’s a lot more money out there than there used to be. That money can be used to bid up stocks, bonds, real estate, commodities, bitcoin, Gamestop, or whatever you like.

There is some debate in the literature about whether you can draw a correlation between the money supply and increasing stock prices. This study sounds a cautionary note:

future profits may not change, if interest rates decline at the same time that demand for firms’ products, and thus their sales, decline.

This could be relevant for companies that can’t deliver their products in a contactless manner. But companies that can have been thriving.

In all, it appears that the massive increase in the money supply is driving financial markets of every stripe in one direction: up. Until the Fed changes policy, I suspect the bias is likely to be toward buoyant markets, especially with vaccines coming on line and the pandemic’s end in sight.

Have a great weekend, everyone!

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Photo: “Governor Jerome Powell speaks at Brookings panel, ‘Are there structural issues in U.S. bond markets?'” by BrookingsInst is licensed under CC BY-NC-ND 2.0

Could a New Class of Antibiotics Put an End to the Most Deadly Infections?

When I worked in medical software, multidrug resistant bacteria were always a concern. But new research has created a class of antibiotics that may make even the most drug-resistant infections history:

[They] focused on a metabolic pathway that is essential for most bacteria but absent in humans, making it an ideal target for antibiotic development. This pathway, called methyl-D-erythritol phosphate (MEP) or non-mevalonate pathway, is responsible for biosynthesis of isoprenoids — molecules required for cell survival in most pathogenic bacteria. The lab targeted the IspH enzyme, an essential enzyme in isoprenoid biosynthesis, as a way to block this pathway and kill the microbes. Given the broad presence of IspH in the bacterial world, this approach may target a wide range of bacteria.

I found it fascinating that the scientists used computer modeling to winnow down millions of possible drug candidates to a few compounds most likely to work, then tested them for real. This reminds me of the CAD/CAM software that has revolutionized manufacturing.

These drugs could be used for a wide variety of stubborn infections, per the original paper in Nature:

they kill clinical isolates of several multidrug-resistant bacteria—including those from the genera Acinetobacter, Pseudomonas, Klebsiella, Enterobacter, Vibrio, Shigella, Salmonella, Yersinia, Mycobacterium and Bacillus—yet are relatively non-toxic to mammalian cells.

This research is in its early stages in mice, but the early results are promising. I can only imagine the many more incredible drugs that may come from using this type of computer modeling for drug discovery.

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Photo: “Salmonella species on X.L.D. agar.” by Nathan Reading is licensed under CC BY-NC-ND 2.0

New Research Identifies the Key Causes of Aging

Dr. Jeremy Walston, Professor of Medicine at Johns Hopkins University and co-author of the study

I just read an interesting new study identifying the biggest causes of aging. The authors gathered a panel of leading experts on health and aging and asked them what the biggest risk factors are for failing health as the years go by. Here’s what they found:

Experts identified 13 factors predisposing to or clinically manifesting AACD [accelerated aging and cellular decline]. Among these, chronic diseases, obesity, and unfavorable genetic background were considered as the most important.

Early detection of accelerated aging and cellular decline (AACD): A
consensus statement

None of the risk factors will shock you, but seeing all the key risks laid out in order of importance can really help guide our decision making:

One risk stood out above all:

smoking was consistently viewed as the most prominent risk factor

So if you’re smoking, definitely consider quitting! I recently shared how I put down the cigarettes 6 years ago. Hopefully my experience can help.

These risks mostly boil down to either what you put into your body or what you do with your body. Here’s how I try to mitigate these risks:

  • Sleeping 8-9 hours a night
  • Exercising at least 4 times a week, in addition to walking at least 4 miles every day
  • Eating a lot of fruits and vegetables and avoiding too many processed foods
  • Meditating most days, generally for 10-20 minutes

Although I did, incongruously, read this article while eating some potato chips, so there’s room for improvement! 🙂 Have a great weekend everyone!

New Study Predicts End to Pandemic in Q2 2021

Photo: Dr. Maciej Boni, Associate Professor of Biology, Pennsylvania State University, study co-author

Assuming high vaccination coverage (> 28%) and no major relaxations in distancing, masking, gathering size, or hygiene guidelines between now and spring 2021, our model predicts that a combination of vaccination and population immunity will lead to low or near-zero transmission levels by the second quarter of 2021.

I came across a new study posted on January 15 that analyzes data from Rhode Island and Massachusetts to find optimal vaccine policies and predict when the COVID pandemic will end. With reasonably optimistic assumptions, the authors conclude we may be out of the woods by the second quarter of this year.

I find their 28% vaccination target plausible. It’s ambitious, but we need to be ambitious right now. Getting to 28% coverage would take about 1.1 million shots a day, 7 days a week, which seems achievable at current rates. ((330 million Americans * 2 shots each * 0.28)/163 days until July 1 = 1,133,742 shots/day).

We’ve recently passed 1.2 million shots in a day:

The study also finds that it’s best to vaccinate health workers first and then the elderly, which is what we’re doing.

In a time when the news is often grim, I find this study very hopeful!