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Neal,
I appreciate your resonse. However, your characterization is not
acurate. You compare it to having only TV manufacturers or having only
Tulip Bulb farmers( I too am a fan of historical bubbles). The concept
of the MSH 35 is that it is not just computer manufacturers(DELL, SUNW),
it is chip makers, makers of the machines that make the chips, online
services, large database apps, special circuits, large telephone PBXs,
ect . . . . . .The whole Value Chain.
To accurately use your TV example of 30 to 40 years ago, you would also
have had TV component makers, the makers of the equipment that makes the
TV components, a content provider (CBS?), an advertising firm, a movie
studio. . . The whole Value Chain. I dare say that a basket of top
companies back then, selected in a broad sense of the then booming TV
technology world, would have stomped the DOW or the S&P, probably
serveral times over!
If the computer industry, large and PC, along with the internet and soon
to arrive high speed phone lines, is a fad, or will be commoditized real
soon, then this would be a bad idea. But just as the car changed
society, the internet will too in ways that you may not anticipate. And
no matter what Ted Kazinski(the unabomber guy) says about technology, it
is only technology, of all sorts, that can save and sustain the growing
world population and aleviate human discomfort. The internet and
computers in general are desparately wanted throughout the third world.
There are many new networks left to build and the older ones continually
need "the next version". Homes and cars WILL one day be integrated into
the "Net".
And remember the perfect porportional hedge of the MSH Index Puts for
those sharp tech corrections. If you own discreet diverse companies
such as tire companies, a restaurant chain, a cardboard box maker, Mary
Kay, ect. . . How would you headge all these during times of
intrepidation? Can you stay on top of all these different businesses?
If you use the DOW or S&P Index to hedge, these are price weighted
indicies, your hand picked basket would probably fall more than the
index. If you got in and got out, or bought individual Puts, commission
costs (and your time) would begin to add up. The MSH 35 is a equal
weighted index, that is composed equally and only of the 35 stocks that
you would watch here on.
I am not convinced that this is "fad investing" that is prohibitively
undiversified. It still seems to be the best approach for a 5 to 10
year window, that doesn't involve a never ending, time consuming, search
for the ever better growth stock.
Tim Proeber
> -----Original Message-----
> From: neal [SMTP:neal@xxxxxxxxxxxxx]
> Sent: Wednesday, March 04, 1998 1:19 PM
> To: TProeber@xxxxxxxxxx; RealTraders Discussion Group
> Subject: Re: Your very own Personal Tech Fund! ??? -- Please
> comment !!!
>
>
> Tim,
>
> This is called bad money-management..
>
> Investing all your funds into one market sector
> (Technology) is high risk.
>
> Consider a basket of 35 Tulip-Bulb farming companies,
> that would have looked good during the great
> tulip bull-market... Or how about a basket of
> Television manufacturers a couple of decades ago,
> they were the "Tech sector" at that time..
>
> -Neal.
>
>
> At 12:34 PM 3/4/98 -0600, Proeber, Tim wrote:
> >
> >*********************************************************************
> ***
> >*******
> >RealTraders !!!
> >
> >I have been doing a lot of thinking concerning how to pick stocks for
> >the long haul in which to invest savings and, hopefully, speculative
> >profits.
> >
> >Q: Do I run TradeStation ChartScanner on 5,000 stocks each night?
> >
> >A: No. I would commit suicide. Besides, for long term investments
> you
> >need to understand and be confident in the company -- You need to
> follow
> >the fundamentals. Picking stocks on a technical search means that you
> >must constantly read up on the companies that you find. And a
> greener
> >pasture(stock) is always just a newspaper or TV show away. When does
> >the searching end and the confident long haul start?
> >
> >Q: Do I subscribe to a Guru letter or system?
> >
> >A: No I don't think so. There will always be another Guru that
> looks
> >greener.
> >
> >Q: Do I put my money in an actively managed Mutual Fund?
> >
> >A: Why? If in 1997 90%, yes 90% of active managers where outdone by
> the
> >S&P 500 Index?
> >
> >Q: Do I then just use the Vanguard S&P 500 Index Fund?
> >
> >A: The market as a whole will not always do 25%, and sometimes, in
> the
> >next 10 years it may not nearly do 25% as a whole. The S&P Index is
> too
> >broad. And as the type of person that subscribes to RealTraders,
> just
> >passively holding a S&P 500 Index Fund would bore me to death!
> >
> >Q: So what is the answer?
> >
> >A: The Morgan Stanley High Technology 35 Index(MSH) !
> >The MSH has 35 of the best technology stocks, logically picked to
> >represent the high tech "value chain" of industries. Companies such
> as
> >CSCO, IBM, MSFT, INTC, DELL, CPQ, TXN, MOT, and HWP. Also, consumer
> >related high tech companies such as AOL, ERTS, INTU. Service
> >outsourcers such as EDS, AUD, FDC, and CSC. Special industrial
> control
> >and sensor makers such as STM and LLTC. The MSH is a broad spectrum
> of
> >the cream of the crop of US high tech. An occasionally, when a stock
> >falters badly or falls behind, the Index is updated. So, your "stock
> >picking" is done for you, by thoughtful analysts at Morgan Stanley.
> >
> >The MSH, an Index created in 1994 and that trades on the American
> Stock
> >Exchange, outperforms the S&P 500! I think that it stands to reason
> >that during the next 3 to 10 years, the trophy tech stocks in the MSH
> 35
> >will continue to outperform the generic market as a whole.
> >
> >And it is only 35 stocks. One mind can follow and really get to know
> >these 35 stocks over the years (I think this is VERY important). The
> >Internet and technology has a long way to go with lots of new
> >generations of hardware and software. These are the cherry companies
> >that will capture many profits in the future and experience continued
> >growth, with new product after new product.
> >
> >And now for the RealTraders show stopper: The whole dam portfolio can
> be
> >hedged in times of tech market peril with MSH Index Puts! (good
> >liquidity, too) So, as an investors mature and become more
> >sophisticated, they can limit or eliminate the damage down by
> >corrections. You can be "pro-active", and dare I say "empowered".
> >
> >One last point on options: Besides the Index Options, the MSH 35
> stocks
> >are among the most liquid equity options. So stock options could be
> >used to augment common holdings. And since you study these stocks,
> you
> >would be more likely to be successful and be able to augment major
> moves
> >with options.
> >
> >And it can all be done in an IRA!
> >
> >So, pre-ordained long term success, better than an S&P Index Fund,
> >because of the cherry high tech stocks, hedgable as a whole with
> minimum
> >transaction costs because of the perfect fit of your portfolio and
> the
> >Index, and interesting because of all the trading techniques that can
> be
> >used and the A to Z technology value chain that the MSH 35
> represents.
> >
> >
> >COMMENTS PLEASE !!!!!!!
> >
> >Thanks,
> >
> >Tim Proeber
> >tproeber@xxxxxxxxxx
> >*********************************************************************
> >
> >
> >
> >
> >
> >
> >
> >
> >
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