Innovation is the lifeblood of capitalism. For the longest time, the headquarters for capitalism was where Wall Street hit Broad Street -- that's right, the New York Stock Exchange, and all of its accouterments, the banks, the brokerages and the money.
But that's no longer the case. The headquarters for innovation is right here in San Francisco, and on a day where the averages rolled higher with the Nasdaq as leader, we come out to cheer capitalism's new headquarters, because actual engineering, not financial engineering, is what matters.
Capitalism's under assault right now, taking its lumps here in ways not seen since the Great Depression. The problem? Wage disparity -- and it is something that I know is universal, and, frankly in your face, like the $62 million that Boeing (BA) was contractually obligated to pay ex-CEO Dennis Muilenberg, fired for inability to get the MAX problem fixed in the wake of two air tragedies.
Can new CEO David Calhoun change the trajectory, as well as a culture that seems rotten in light of some suboptimal emails and stands like no new training is needed for the MAX, something that's fine if you have flown thousands of hours like U.S. pilots, but not fine when your clients are foreign countries with different standards, standards that needed to be augmented if they were going to understand all the new systems. Except Muilenberg contended they weren't new and he's been broomed for that and a host of other reasons. You can be sure that negative light shone on capitalism will be mentioned repeatedly on the campaign trail.
I think capitalism deserves a better shake and that belief stems from what's happening out here in San Francisco. Now, we've got a real windfall here: JP Morgan (JPM) is host for one of the largest conferences in the world, the JP Morgan Healthcare conference, and we are out here to explore all of the new drugs and devices that are real bargains if you need them.
Every year there is a theme to this conference, and this year it is personalization in health care, a system that increasingly runs on the customer's choice, if the customer will accept it. We have been hearing a lot from Democratic front runner U.S. Sen. Bernie Sanders that the government should be paying for your health care and that the system as it is now produces tremendous inequities. That's undeniable.
To listen to him is to believe that every company out here is a ripoff.
But I am not here to bash; I am here to shine a light on what's changing things and what's being rewarded financially for changing them.
First, we recently heard about a dramatic decline in cancer deaths, a drop-off that can only be explained by what's going on out here.
Bristol-Myers Squibb (BMY) , for example, has the best oncological franchise there is, now that it has merged with Celgene, a deal announced last year that is already paying dividends, and I don't mean the bountiful ones it pays to shareholders. Opdivo and Yervoy and now Revlimid are all being experimented with for so many different cancers. When we met this morning with Bristol CEO Giovanni Caforio, he talked about drug price restraint. I think the restraint is real and the life-saving priceless.
Or how about how about what Emma Walmsley and GlaxoSmithKline (GSX) are doing for the advancement of early care for still too common ovarian cancer. Talk about consumer choice, she's teaming with genomics and biotech firm 23andMe to find out who might be most susceptible to cancer for early detection. Sometimes it is only awareness that keeps the innovation from the hands of the people. Then there are vaccines. SmithKline has invented a vaccine for shingles, one of the most painful illnesses that a third of the people in the United States will get. It doesn't have to happen. You get the vaccine, you don't get the illness.
And then there is CVS Health (CVS) . Here's a company that's changing the paradigm. No longer wanting to be pegged as a corner drug store, CVS has stepped in to the consumerization of health care in a big way. With its Health Hubs -- now just a small but successful trial, but soon to be in 1,500 stores -- CVS is helping the customer with health care the way a doctor formerly helped. If you have a practitioner that might not be a big deal. But most millennials and Gen Xers don't. They go to the emergency room when they need help. CVS might be the answer to that breakdown in the health care system and now that it has merged with insurer Aetna, it can help 50 million boomers figure out what to do with all the forms of Medicare insurance.
Remember when CVS was supposed to be Amazon roadkill, both the front and the back? Remember when Walgreen's (WBA) was going to take all its business when the Theranos machine test began in Arizona? Remember when CVS had to take the billion dollar tobacco hit when CEO Larry Merlo, who will be with us soon, said what of company can pretend to be a health care company if it is a purveyor of cigarettes?
Or how about GW Pharma (GWPH) ? We've pretty much given up on the idea that cannabis can make a dent in the U.S. health care system. And then we got the preannouncement yesterday from GW Pharma that it had a $100 million-plus quarter. GW Pharma makes Epidiolex, a legal form of a cannabis treatment -- made of cannabidiol -- that's made for children who have epilepsy. It's speaking at the conference about how the dreadful illness' treatment -- which ignited the entire group of pot stocks. We haven't liked them, but we sure like what we heard about Canopy Growth (CGC) from Bill Newlands, the CEO of Constellation Brands (STZ) , which just put its fantastic CFO, David Klein, at the helm of Canopy, which has the capability to control national legalization.
I say be careful, I don't see legalization any time soon, and that's why GW Pharma's treatment is able to outsell pretty much the entire industry.
Of course the rally, especially in the Nasdaq wasn't just in the health care sector. The 5G story we keep flogging worked again with Apple (AAPL) leading the way followed by a host of semiconductors and Monday the tower stocks rallied. I keep telling you that 5G is a huge theme.
Cybersecurity stocks erupted as we heard rumors that the U.S. was about to launch a cyber attack on Iranian infrastructure. That would certainly require mandatory cyber protection, so we saw the stocks of Crowdstrike Holdings (CRWD) , Zscaler (ZS) and Palo Alto (PANW) surge.
Plus, it is worth noting that Alphabet (GOOGL) is nearing trillion dollar status. I don't like that this move is based on nothing fundamental, just the momentum that we see in so many techs. Momentum that we see in the two other stocks in the trillion dollar club: Amazon (AMZN) and Apple, something that can't withstand anything but super beats, not just better than expected by a couple of pennies. I don't know if that's even possible. Facebook's (FB) in the same boat.
Innovation drives capitalism and capitalism drives innovation; you can't have one without the other, at least if you are going to have the kind of wonderment I have now seen.
