Of Feuerstein

Adam Feuerstein is something of an enfant terrible (although recently admitted to 53 yoa), but does offer up an interesting tweet every now and again. This recent one is one such. The interesting bit isn't his tweet, but rather one of the comments:

Most small cap PMs are underweight biotech. It only matters when they start losing to the benchmark due to this factor for a period of time. It may be concerning but remember, those who questioned tech's influence on S&P500 in 2017 got burned underweight FAANG.
-- Spreckels_Organ

Two maxims of playing the market

- past performance is no indicator of future results
- never, ever, conflate the performance (past or current) of one sector with the future of another

The reason for those maxims is as simple as the Sun rising in the West: Mr. Market's reactions are to events, not data. The data generating process and the event occurrence process in those sectors are as different as the Sun and the Moon. Tech works from some fundamental and, reasonably, well understood laws from Mother Nature, but bio-pharm? If you ever took science in college, especially chemistry, then you will recall the length and weight of the Organic book vis-avis Inorganic; tech operates in the latter while bio-pharm the former. No to forget that the boundary between chemistry and physics makes bio-pharm heavy in the former while tech is heavy in the latter. Again, the laws of physics are far more regular. Tech is Latin while bio-pharm is American English; one is structure the other is chaos. Throw in a big stinking pile of biology? The 90%+ failure rate and the serendipitous discovery of so many compounds makes predicting, especially the future, so difficult (a tip of the Hatlo Hat to Yogi).