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Technology Stocks : FSII - The Worst is Over? -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (2094)	7/12/1998 3:13:00 PM
From: Alan Gallaspy	Respond to of 2754

Lets take a step back and identify what our hypothetical investor is doing. He (or she) is actively trading a sector (semi-equips) and trying to rotate out into a less volatile sector when equips seem high. Don gave the example of Coke, I guess we could use other large cap consumer non-durables as well. Is that as good as we can do? Should we be monitoring other sectors for signs of a good place to stick money, maybe large cap pharmaceuticals (Merck), giant banks or financial stocks (Citibank), maybe oil (Exxon), retailers (Wal-Mart), or something else? Should we look for low volatility in our "other" sector or for a previously beaten down sector showing signs of life? I am going to try modeling Don's sector rotation idea with the above companies and maybe a few others, using his assumptions about tax liability. I have usually focused on individual companies without much regard for what the rest of their sector is doing, but from Don's semi-equip/Coke rotation example, it would seem good to monitor a few sectors that do not rise and fall in lock step with each other.

To: Donald Wennerstrom who wrote (2094)	7/12/1998 8:40:00 PM
From: Joe Dancy	Respond to of 2754

Just when it could not get worse Don it has - AMAT's warning on Friday, then the Japanese election does not go as planned and this may slow any actions to make the recovery quicker. On the other hand, it looks like the opposition party may make real reforms that are necessary a reality - **** "Fears that the loss could derail efforts to drag Japan and Asia out of the economic crisis are likely to throw global financial markets into turmoil today....... . . . Political instability in the wake of this election is expected to delay the passage of vital legislation for dealing with the nation's financial and economic crises by forcing the LDP to compromise with opposition parties. The opposition favours tax cuts over public works as the best way to restart economic growth. They also tend to favour stricter action for dealing with the banking crisis." *** scmp.com On the other hand the same paper has a sister article that states "An LDP loss is expected to lead to initial euphoria in financial markets on expectations of larger tax cuts." scmp.com So yeah, the market will be up or down on Monday either depressed or euphoric on the results of the election. This is why I can't time the market and would never be a good market prognosticator - Joe

To: Donald Wennerstrom who wrote (2094)	7/12/1998 8:48:00 PM
From: Alan Gallaspy	Read Replies (1) \| Respond to of 2754

I have worked out a few more cases of Don's Feb '95 to July '98 sector rotation using some Dow stocks. Sorry I can't get them to line up as nice as Don does, still trying to work out going from spreadsheet to SI thread. As you can see, Don's off-the-cuff example of Coca-Cola was spooky in that he picked the best one of the few that I have looked at so far. Wal-Mart was a close second with Merck and Citicorp not doing to bad. Also, there was no consideration of dividends. I was kind of suprised that Hewlett-Packard does not lend itself well to this strategy. Maybe because it is a tech stock it is to closely synchronized with the semi-equips. KO MRK CCI WMT HWP GM ALD XON 2/95 Buy $50k semi-equip net worth $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 9/95 Sell semi-equip for 100% gain pay 50% tax and rotate into ? at x/share 35 54 72 25 42 48 23 36 net worth $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 4/97 Sell ? at x/share pay tax and get into semi-equips 58 88 120 30 52 56 37 56 net worth 99,643 98,611 100,000 82,500 83,929 81,250 97,826 95,833 9/97 Sell semi-equip for 100% gain pay 50% tax and rotate into ? at x/share 60 100 136 37 70 67 42 64 net worth 149,464 147,917 150,000 123,750 125,893 121,875 146,739 143,750 share price of ? as of 7/10/98 87 132 171 64 58 71 43 71 net worth 216,723 195,250 188,603 214,054 104,311 129,151 150,233 159,473 annualized rate of return from 2/95 to 7/98 54 49 47 53 24 32 38 40