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President Clinton and British Prime Minister Tony Blair, probably both very mindful of their misinterpreted statements back in March that caused the whole biotech sector to tank, spoke in glowing terms about the achievement of PE Celera <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRA)") else Response.Write("(NYSE: CRA)") end if %> and the non-profit Human Genome Project, and about this achievement's potential to improve the quality of life for everyone on the planet.
It was thrilling. I swallowed it all, lock, stock, and barrel. I don't care if the spin machine was on, I don't honestly think one can overstate the importance of this scientific milestone. It's like July 20, 1969... maybe even better, although the relative importance of our first venture into space versus the mapping of the human genome is something future historians will have to decide.
It will be a while before the knowledge base is put to the kind of use that will affect most of us directly. That's always the way with scientific breakthroughs. First a few benefit, then the many. I am holding out for a genetic breakthrough that will make me tan without all that tedious sunbathing, and something to return my hair to its youthful golden sheen would be appreciated, too.
Does that strike you as trivial? It was meant to. Curing cancer and genetic diseases is the noble and rightful goal of this research, but what will ultimately pay the bills will probably be a host of very trivial but highly desirable products designed for mass audiences.
I was thinking about the whole credit card thing today. (Yes, this is still the same column.) A reader wrote in describing how his family had broken out of the debt trap and that got me thinking about consumerism. It's a paradox, really. Our economy is run by consumer goods. All of the BMW-driving, Eddie Bauer-wearing soccer parents and each of their 2.1 Sega-playing children contribute to the development of an economy that supports this kind of grand scientific research.
People who avidly consume keep the capitalistic wheels greased and make civilization as we know it possible. Yes, literally. Yet, those who buy too avidly can pay a high and very uncomfortable price for their part in fueling economic growth, while those who opt out of much of the consumer mentality can still reap the rewards of that growth. Of course, if everyone opted out as much as I do, we wouldn't have an economy that could support the arts, science, medicine, or philanthropy. Thank you, yuppies, and the yuppie puppies, too.
The genetic research going on right now has so much potential that it's difficult to list the most likely applications, and I am certain if I did list them, I would find that list laughable in 20 years. One thing I will predict is that consumer products will come from this discovery -- and we will want them. And they will fuel economic growth and grease the wheels of the next great discovery. I can't wait to see what happens next.
Meanwhile, Celera, which played a major role in the fast completion of the project, fell 10% after its president, J. Craig Venter, got his handshake from President Clinton. Does that strike you as weird?
One of the less-useful Wall Street proverbs is: Buy on the rumor, sell on the news. That's what happened with Celera. It has been going up dramatically in the last few weeks as investors anticipated this announcement (which was not much of a surprise). When the announcement was made, apparently quite a few stockholders decided to sell on the news.
That kind of short-term trading mentality isn't very Foolish. I own shares in both Celera and Human Genome Sciences <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HGSI)") else Response.Write("(Nasdaq: HGSI)") end if %>, another biotech company that will profit from the genome map, and I consider them quintessential buy-and-hold stocks. Which doesn't mean I think you should buy them. For me, they are an exciting, but risky, way to connect to the future. But, one of the things I like best about them is that they have the potential to create millions of healthy, affluent customers for General Motors, Kodak, Caterpillar, and J.P. Morgan.
Speaking of which... the Foolish Four finally went up today. All our stocks except GM were in the green for a change, but the portfolio still looks pretty pitiful. The slide over the last several weeks has not been one bit of fun.
Check back here on Thursday and Friday for a discussion of the research project that we will be undertaking as soon as our new database arrives. The first order of business will be to explore the validity of the RP ratio as a predictor of future stock performance outside the Dow. Then we will look at possible improvements to the strategy.
By the way, I am not expecting any strategy that selects out-of-favor, large-cap stocks will have done particularly well recently. That would be nice, but we can't skew the research to pick something that does well in one particular type of market. Right now the market is all about the new economy, and it will probably stay that way until people catch on to the fact that the new economy is creating lots of customers for old-economy stocks, too.
Finally, tonight at 7 p.m. ET, David Gardner and Jeff Fischer will discuss the biotech industry in a Yahoo! chat.
Fool on and prosper!