I was chatting with Michael Panzner about the relative performance of numerous sectors since the market top in 2000. In addition to being a Technician, Mike is the author of the forthcoming Financial Armageddon.
We rejiggered a few starting dates, to see how when you bought specific sectors impacted your performance returns.
Consider these 3 different time frames:
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2000 Market Peak to Present
click for larger chart
If you bought Telecom or IT in 2000, you are still buried, as those Sectors lost half their value. Over the same period, Energy, Materials, and Consumer Staples all did very well.
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March 1, 2003 (pre-war) to Present
click for larger chart
If you made your entries just before the War began in 2003, IT and especially Telecom did appreciably better.
However, they were outperformed by Energy and Materials. Additionally, Utilities, Industrials and Financials all did quite well, outperforming IT and Tel over the same period.
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July 2006 (near market lows) to Present
click for larger chart
Buyers since the July lows of 2006 of IT and Telecom have finally outperformed Energy
and Materials, as well as Utilities, Industrials Financials and Health Care.
UPDATE: February 6, 2007 2:32 pm
Jack Ablin, chief investment officer at Harris Private Bank, says don’t get too excited about the recent pop in Tech (see above). It’s not about fundamentals — it’s about oil prices.
“Tech owes much of its advance to the 30% decline in crude prices. Over the last three years, technology has acted like a puppet on a string, responding to advances and declines in oil prices,” he writes in recent commentary.” The correlation between the oil prices and the relative performance of technology shares has been a remarkable negative 70%.”
Beginning July 21 when oil was near $75 a barrel, through Jan. 12, a few days before oil bottomed out around $50 a barrel, the S&P 500 Information Technology Index rose 28% – the exact mirror of crude prices. Mr. Ablin says as long as this relationship holds, “technology bulls must be, by definition, crude oil bears.”
I agree.
As we have noted numerous times before, thank your friends at Goldman Sachs for the rally . . .
Source:
Greasing the Tech Stocks
David Gaffen
WSJ, February 6, 2007, 11:44 am
http://blogs.wsj.com/marketbeat/2007/02/06/greasing-the-tech-stocks/
Financial Armageddon?? The world’s financial markets are 2yrs away from turning into dust?
Barry – I think you’ve become a permabear :-)
-l
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BR: That’s his book title, not mine!
I think the sector charts say something, and that is that tech has not been the place to be –e xcept when Oil/Materials do poorly
Are you sure Mike isn’t just Ravi Batra working under an alias?
how much of the telcom efect is due to the demise of Worldcom? i suspect a good deal.
Interesting… it could be a summary of the stuff Warren Buffet has invested in over the years.
Interesting… it could be a summary of the stuff Warren Buffet has invested in over the years.
Two years/ 4 years.The last bubble popped from the top. Dot coms evaporated. Corporate demand dried up. Jobs were lost. A rapid affair. Next on the agenda is the deterioration from the bottom up which will unfold slowly. Recently accumulated bubble debt will slowly erode the job market from underneath while debt incurred in the distant past and projected into the future will increasingly weigh on the economy. If Barry becomes a perma bear now it is no time to think of defrosting. He can cool it till the sun spot cyle peaks in 4 years at a projected high level for 400 years. That will thaw everyone out.
Do you remember when Goldman in the summer repriced their commodity index with the reduction of gasoline weight, could have they in their propritary desk sold short or their positions before the weight reduction in gasoline knowing the commodity index would tank. Would this be legal ? Seems odd that they are now selling their commodity index. Could they have done something not right ? Seems odd at best.
http://www.indexuniverse.com/JOI/index.php?id=787