Science Shmience? Array ( [cookie] => 565a8c-e2f446-c135cc-11d790-3ad46e [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 42112 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

“Research is to see what everybody else has seen, and to think what nobody else has thought.” – Albert Szent-Gyorgyi

Chart of the Day

Good morning!

Since the end of World War II, the federal government has funded basic research into any number of obscure, seemingly esoteric subjects. In years past, institutions such as the National Science Foundation have paid scientists to study seemingly obscure and impractical subjects such as the venom of the gila monster; how the Streptococcus pyogenes bacteria defends itself from viral infections; and dark matter, for example. 

Historically, populists from both parties have criticized such spending as a waste of our hard-earned tax dollars. The latest wave of attacks on science have come from the Trump administration, helped in part by Elon Musk’s DOGE. These initiatives have included layoffs, as well as funding cuts and freezes at science-centric agencies such as the Food and Drug Administration, Centers for Disease Control and Prevention, the National Science Foundation, and the National Institutes of Health. It has also included slashing federal funding of research at major universities. 

Yet the research cited in the first paragraph led directly to the development of Ozempic; to CRISPR gene-editing technology; and to the rapid mass production of tens of thousands of suddenly and badly needed ventilators to treat patients during the COVID pandemic – respectively. 

Such work is known by the somewhat perjorative term of “basic research,” even though for most of us, it is hardly easy to understand. And contrary to what the populists would argue, basic research that seems to have no real-world value at the time it is being carried out underlies much of modern life, from hard drives and smartphones to wifi. It has significant value. 

A 2023 Dallas Federal Reserve study estimated that government-funded non-defense research accounts for approximately one quarter of productivity growth achieved in the U.S. since World War II, as well as indirect economic benefits. Collectively, these have resulted in total implied returns of 150% to 300%, according to the Dallas Fed economists. The authors of the study further assert that a decrease in government funding of R&D is partly to blame for the broader slowdown in productivity growth since the late 1960s. 

Small-government proponents might respond that regardless of the value, that such work should be funded by the private sector, and that in fact eliminating (or at least significantly reducing) government funding of basic research will do us no harm, because the private sector will step up to fill the gap. But the Dallas Fed’s work shows that rather, publicly funded research complements and stimulates private-sector research, rather than being an economic substitute for it.  Reducing publicly funded basic research impedes privately funded research — and progress.

We can see this in the modern pharmaceutical industry, which (correctly) views basic research as too abstract for private companies to fund themselves. Yet nearly all of the private sector’s drug innovation begins with discoveries made by federally funded scientists doing such research. A 2023 multidisciplinary study at Bentley University found that basic research funded at least in part by the National Institutes of Health (NIH) was behind 354 out of 356 drugs approved between 2010 and 2019 – medicines that almost certainly could not and would not otherwise have been invented. (The same study found that often, NIH funding for these drugs were greater than what private-sector pharmaceutical companies spent to complete the development and bring them to market.)

Since 2017, the American Association for the Advancement of Science has named winners of the “Golden Goose Awards“, seeking to recognize federal funded basic research that resulted in significant benefits in the real world. The name, an allusion to a classic children’s parable, is apt: the Dallas Fed noted that the economic benefits from government research funding typically do not emerge immediately, taking eight to 15 years to become apparent. It might seem like eliminating such funding leaves us with more money in our pockets. The disappearance of such a benefit likely will not be obvious at first – killing the golden goose might not have any immediate detrimental effect. But the year 2040 is really not as far away as it might seem.

Share your thoughts

What economic risks, if any, do you think reduced government funding of basic research will have on the U.S. and the world? Click here to send us your response.

Here’s what a reader commented

Question: How much does social media affect your trading decisions?

Answer: I do not engage in social media anymore. Zero. No Facebook, X, etc. It’s all noise to me and a waste of time. I read [Fundstrat], Bloomberg, NYTimes, The Guardian and my local newspaper (digital), daily plus sometimes other news from my iPhone’s news aggregator.

Catch up with FS Insight

The messaging from the White House has changed from “no negotiation on tariffs” to “the President has maximum leverage to negotiate.” We see this as quietly signaling the return of the Trump put.

Technical

Unfortunately, more evidence is needed to try to mark a short-term bottom. However, while markets remain extraordinarily volatile, the risk/reward should be excellent for those who have at least a 2-3 month timeframe.

Crypto

Crypto’s weekend selloff brought BTC in line with equities, and to us, it highlighted signs of a potential relief rally including elevated volumes and market sensitivity to trade headlines.

News We’re Following

Breaking News

• Dow futures bounce 1,000 points after 3 days of turmoil from Trump’s tariffs CNBC 
• CK Hutchison’s Panama deal in doubt as auditor alleges violation BBG

Markets and economy

• China vows ‘fight to the end’ after Trump threatens extra 50% tariff FT  
• Chaos at Fannie and Freddie adds little-noticed economic risk to Trump agenda SEM

Business

• PNC names former BlackRock star Mark Wiedman as president WSJ
• Trump orders new review of U.S. Steel acquisition by Japan’s Nippon Steel CNBC 
• Apple’s plan for trade war damage control could run through India QZ 
• MicroStrategy expects to post loss after Bitcoin price slumps WSJ 

Politics

• Supreme Court allows Trump to use wartime law for deportations BBC 
• Ex-official says he was forced out of FDA after trying to protect vaccine safety data from RFK Jr. AP 

Overseas

• Trump says US ‘having direct talks’ with Iran over nuclear deal | US foreign policy GUA 

Of Interest 

• Official: incredible new Corvette concept previews next-gen US supercar TG
• Boarding now: a brand new Orient Express FT