Tech stocks in the last 20 years

I tried to use my historical database to test out NASDAQ 100. The return is great. To illustrate, from 1/4/1999 to 6/6/2001, the annualized return is 54% vs SPY’s 1.6% without considering dividends.

Do not ‘wow’ too early. The reason of the high performance is due to the survivor bias. Many internet companies were taken out from the index and/or the database, and hence the performance as a group is deceivingly high.

The following chart is for the popular high tech companies for the selected 10 years. For every one of the following successful high tech companies, there must be many that do not make it.

	1990-2000	2000-2010
	Annualized Return	Annualized Return
Microsoft	940%	-4%
EMC	7500%	-7%
Apple	20%	65%
Dell	8200%	-7%
Average	4000%	12%

The above figures are estimates for demonstration without considering dividends and compounding. Dell has been privatized today. Now, we can draw some conclusions.

·         Tech stocks usually beat the S&P500 index. Risk usually pays.

·         1990-2000 are the golden years for tech stocks.

·         2000-2010 are not so good for tech stocks due to the crash of 2000. If it is not for Apple, the return of this portfolio would be negative.

·         Except with Apple, it indicates the first ten years (or the early phase) of the tech stocks give the best returns. After they become mature companies, they seldom maintain the same growth rates. The worst of the group in the first 10 years become the best after 2000.

Buy when the market does not favor this sector

Interestingly, you should buy when the institution investors are dumping such as buying Apple in May, 2013 as recommended in my book Scoring Stocks. Ensure they have value first by scoring them fundamentally and allow at least one year for the market to recognize the values. 

I reviewed my old blog and found some bargains I described in 12/03/2012. Here is the performance summary. Again, all performance returns are annualized.

The stocks are AAPL, CSCO, INTC, MSFT, XRX, STX, WDC and ALU.

	One year later	Two years later
Ann. Return	84%	59%
SPY  Ann. Return	28%	23%
Beat SPY by	200%	157%

Interestingly, AAPL is the weakest performer in both tests. It must start with a high price.

How to test a Sector Rotation strategy

This is the last chapter of the book Sector Rotation: 3rd Edition (from Amazon) summarizing the strategies. We have a total of 12 strategies not including Andrew’s: Buy strong sectors which have pulled back onto support and avoid overbought sectors at resistance and using Elliott Wave.

Some strategies use market timing: When the market is plunging, most sectors will be down and most contra ETFs will be up. Daily news would affect sector performance.  Which strategy works best today? The following is a suggestion using two tests.

Test without a historical database

Even with a historical database, this test is useful as most vendors do not include all metrics from finviz.com or other sources such as RSI(14), SMA20, SMA50, Rel. Volume and EPS Q/Q. Select the two best-performed sectors from many sources from last month and include the above metrics in a spreadsheet or on paper. Test how the metrics performed. Perform this test at least once a month. Only invest with real money when you’re satisfied with the result. The market may change so are the results.

Test with a historical database

Many vendors provide a historical database and usually at a fee. The following are guidelines for your own implementation.

·         Include a list of ETFs and you can find them in the chapter on sector ETFs and other ETFs such as bond ETFs, SPY and DOW. Include contra ETFs that should perform well in a down market. Include country ETFs if you use country strategy.

·         Define the test period. I use Jan., 2007 to Jan. 2017. I have two tests a year. If you have more time, start from 2000 and have 12 tests a year instead of 2.

·         Duration is one month; I add two months as my annuity allows switching for holding 61 days without a penalty.

·         Use annualized rate of return and compare it to SPY if they’re available.

·         I select two of the best-performed ETFs and get the annualized returns.

·         Average the totals and see how the strategy performs. The last three months may be more important than older results. When the market plunges, buy contra ETFs such as SH.

My vendor’s timing grade does not perform so I stick with mine described above.  Dividends are not considered.

Drug kills

"Imagine that mole who has the info needed to keep a lid on the endemic drug usage by NFL players, many of whom hit retirement age by 30, and supposedly a high percentage suffer permanent brain damage - courtesy of their team medical staff."

I can tell you it is true for most sports and singers too. Just check how many athletes (singers too) and their children have health problems. They are far more than the average. With the newly legalized drugs, I expect it spreads to the rest of the population. How many deformed babies are caused by drugs.

The Brits pushed opium to China about 300 years ago for trading. Now it is our turn and it is pushed by our greed, enjoyment and politicians.

I do not care about Obamcare, Trumpcare... Please fix this critical problem at home before we want to conquer the world and force them to follow our culture (including drugs?)

Prevention is better than curing in any aspect.

Will China devaluate its currency?

Most currencies are down against the strong USD and will continue so for the rest of the year. China is the majority of the bank in loaning money to the participants in her One Belt, One Road initiative, so it is better to loan them a weak Yuan and be paid back in a strong Yuan - logical?

China is playing the game not to agitate the US and the other game is avoiding product dumping. The huge deficit with the US will be addressed by China.

The technique is to deceive your enemy as in The Art of Wars: Your enemy thinks you're doing this but in reality you're doing the opposite.

Mind Craft, iPad...

Here is old wine (jokes) into new bottom (post):

From my blog:
* My six-year old grandson called the library about the availability of the book Mine Craft. The lady told him that only Mine Craft for Dummies was available. He told her it was not for him as he was not a dummy.

* iGenerationAlmost everyone has an iPhone. Folks including myself in the lower class of the society carry imitators and/or those 'outdated' iPhones that are several months old. My grandchild of just over one year old had a good time in playing with the iPad and it usually kept her busy for hours. Before she could say Mom, she said “I” for iPad.

During my family gatherings, my cousins communicate with each other via their smart phones even when they sit next to each other. When they do not text messages, they play games with their smart phones. Even with one pair of eyes and one pair of ears, they can play iPad, listen to iPod and text using iPhone at the same time. Thanks Apple for demonstrating what multi tasking really is. I prefer to do one task correctly than several tasks incorrectly.

Chinese and Indian students are leaving us further behind by spending more time in study. Do you believe those children spending extra 2 hours every day in games would accomplish the same later in life?

Some parents have a hard time to explain to their children that their existence was due to the blackout of the iPad and iPhone caused by the hurricanes.

Huawei

Didi with its sister company may not be a threat right now but Hwawei is which is placed a distant third in global sales. It has conquered many EU markets by giving them discounts to the networks that use Hwawei network. Hwawei is one of the 3 companies that have the advanced network LTE and they're working on the next generation.

The reasons for their success: 1. Huge home market. 2. Cheap and qualified engineers. 3. Government and local government encourage business. 4. No need to report to their stock holders.

On infrastructure

Besides the obvious, it should include dams, flood control, water quality, network...

We have spent too much on the world policing instead of fixing our problems at home. One is consuming and the other is investing.

EU

I predict EU will be dissolved or at least not in the same form as today within 5 years for the following reasons:

1. Most EU countries do not welcome refugees / immigrants esp. from Middle East. They have too many bad experiences. I'm sorry about the Syrian refugees. Most complain they have lose their own national characters.

2. A common currency is only good for tourists and some small countries would enjoy it. If we let Greece to depreciate its own currency, they would recover faster.

3. It allows countries to cheat easily.

Many EU elections will be in this year. See what will happen.

More problems at home

We have more problems to be solved at home than Middle East. It only costs billions to bring a aqua duct from Washington to California and solve the drought problem (actually some problem of too much rain). How much we spend in the wars in ONE day? Trump is talking about increasing the military budget.

Too much or too little of everything is no good as every thing in life.

Without the agricultural advances, a very large portion of the world would go starving. Now, we have the extremes of weather and I do not know what's next.

About our leaking dam

We set our priorities wrongly and in the wrong hands of our politicians. Who care to be #1 if we cannot fix our basic problems? You do not get a medal to fix a potential leak but a medal to help the victims after the flood.

We do not depend on God neither. Why? For over 2,000 years, we still have natural disasters even many pray every day (or at least every Sunday). Or, God wants us to fix our own problems and experience life.

It is another proof of my Coconut Theory. In short, why some countries are always poor as they have less coconuts (or more disasters).

North East has been quite safe in spite of snow storms - keeping my fingers crosses.

A promotion

After his speech, our president just promoted himself to a new car salesman from a used car salesman. One small speech for him, and one giant step for the country (and the stock markets).

More on One Belt, One Road

With some friends talking more on this topic, here are my notes:

There are many links and the six Youtubes (about 50 minutes each). For more info and updates, Google "One Belt, One Road".

The YouTubes are produced by Chinese CGTN (used to be CCTV-News), so they are in Chinese point of view.

Here are the reasons from my view point:

1. Make the neighbors rich so they can buy Chinese products. China used to loan us money so we can buy their products; it does not work well as the addicts will just ask for more.
2. Choice of land route and sea route. Sometimes one route saves the trip more.
3. Connect Asia and Europe at our expense.
4. Import energy and ores.
5. Flex Chinese influence.
6. Over capacity in China.

BTW. Chinese have never (or seldom) colonized any country (is Tibet a country?).

One Belt means Chinese neighbors, the modern silk road and/or both to me. It is feasible to some extent. There is no perfect deal. Today, Pakistan and Kxxxstan (gas supply to Shanghai from the video) already benefit. One train in Africa is a waste of money so far.

Chinese blue water might can enforce the sea route (Suez Canal and the strait next to Singapore).
Brazil is too far away but it supplies China with oil and ores. Brazil really depends on China and Australia too.

The NW China is mostly semi desert and some desert. That's why it has not been developed compared to the East.

The sea route could be choked by the Malacca Strait, the two mentioned canals, Gibrata (typo)... That's where the Chinese blue water navy comes in handy.

The road route is not free of trouble spots. Many are desert and semi desert. Earth quakes are frequent in the near East. One episode showed the train takes goods all the way from China to Madrid.
EU and China should be good traders for a long while until China catches up. China is moving some polluting industries to the neighbors. China has to supply them with infrastructure (electricity, road...) first with its excessive capacity.

I watched the Ethiopia one (may not be included in the series). Without the Chinese train, it cannot be possible to bring the fruits to the seaport without spoiling them. Another topic is high speed rail to the world; I believe long-distance travel still depends on air.

I chromcasted the video to big HD screen and it is damn good.

CCTV-news is English speaking with Chinese topics. It is similar to Radio America to China but everyone speaks Chinese and on TV. My Verizon has it included.

Russia did not play a major role initially. With their relationship with EU and low oil price, it seems to be more in tone with China now. Russia could play China hand against the US as we did it on Russia 30 years ago.

Russians do not forget. They still treat the Mongolians badly after Ghengis conquest many decades ago. They made it independent as a buffer zoom to China.

Education (repeated ideas)

Education starts at home. With so many single-parent families and so many multi generation of teen-age mothers, have we set up ourselves as good examples?

The video games are Trojan horses from the east (so is fast food). If you believe our children can achieve the same as most Asians by playing two hours more a day, you believe in miracle.

Throwing money blindly into classroom does not help either, so are all the mottoes from our politicians.

We've a class of 45 with limited facilities, and my class achieves a lot with a doctor, a dentist, a pharmacist, a chief hospital administrator, a producer, a world-renown chef, MIT Ph.D... I'm the yellow sheep of my class. Our common motivation is: If you do not work hard, you will suffer later in life as NO one will bail you out.

Permissive cutlure

We have been in a permissive culture too long. Sugar is less evil than the legalized drugs and cigarettes; I do not want to open a can of worms by bringing up guns. It is probably due to our success: abundant food supply.

My friends from Asia were amazed by some of our giants - one took pictures for proofs back home. Singapore is the other extreme: All over-weight (by their standard) government employees are forced to exercise. Happy to stay in the middle of the extremes!

Life and profession

I have a friend (luckily in IT) retired from a chemical company. He told me most of his co-workers died early and most due to cancer. The silver lining is they do not burden our bankrupted entitlement system.

Rate hike

I do hope they hike rate .25% or 1% for the entire year. The retirees can earn some income even it still cannot beat inflation.

How can the banks lose? I lend them my money for zero interest and beg them to keep it for me and they loan "my" money to others for 4%. interest.

Same - east or west

How about sending 3,000 robots to China's "convention"? It must be sponsored by hotels, restaurants, airlines, ladies in the oldest profession...

Same for the US.
http://bit.ly/2mAou6A

A program named F-U

I'm writing a program named F-Y to make all government decisions including twitting. It will be born in the USA.

When every country has my program which is free, we will not have wars after balancing the benefits and harms.

Do not cry for me as I can make some money too. I buy SPY the day before my very positive speech and short SPY on the day before I fire Sessions. A land of opportunities!

Japan, China and US

Japan is not looking good. Deflation hurts. Inflation will return when the oil price rises. China is already #1 in trade which does not matter. China needs trades due to the lack of natural resources while US can even survive without trade.

Live longer or happier

At one time, Hong Kong was #1 in life expectancy, a surprise to me.

I bet the red meat, fast (fast to die?) food, legalized drugs/pain "killers" and video games kill.

The quality of old age counts too.
China's elderly exercise more even they have less medical facilities/drugs ; check out any square in the morning.

Ours is bad; check out the blood lab in the afternoon in any clinic/hospital.

OTCPK?

As explained in my book Penny Stocks & Micro Cap:

These stocks are risky as many do not have information required by SEC and the major exchanges. They are traded over the counter, OTC. They cannot be shorted (and most likely you do not want to do so even it is allowed). Pier 1, Ford and many others were all penny stocks at one time.

Expect one winner for several losers. However, the total profit could outpace the total loss if the strategy is properly implemented. The purpose of this book is to improve your odds of making a profit. Do not expect to be rich overnight.

You can buy 5000 shares at 1 cent each or one share of Apple (in May 2013). When this penny stock moves up to 2 cents, you make 100%. This is not the reason to invest in penny stocks but it shows they’re volatile. At the same time, you may have a hard time to sell a penny stock as the average volume is very low.

On today's financial news

* Do we have a secular bull market? From the valuation and the economy (esp. our wars are draining our economy), I do not think so. However, this can last for a long time. We have this non-correlation since 2010. What happens to the readers of a best seller telling us to leave the market due to so many bubbles? The trick is using technical indicators.

* SNAP is a momentum play but make sure you sell it before the insiders can.

* Venezuela has been in big trouble for a long time with long lines for everyday items. The country has given free oil to the poor in Mass. with one of the Kennedy - a reverse act of Robin Hood? BTW, the word 'Kennedy' used as an adjective in my unofficial dictionary means dying early.

* The decline could be due to many other Carribean (typo as told) islands are better tax shelter with no compulsory disclosures.

* Yahoo! gave big bucks to say good-bye to a CEO for doing a poor job. I have to open the window and yell Yahoo! or "I cannot stand it anymore."

* One Loser + One Winner = One Big Loser. How can SolarCity survive without tax credits?

* If the company does not care about your health and financial health, you do not care about the company. It applies to Coke, Pepsi, MCD, WFC, banks...