Open the borders to willing workers from any and all nations. They will create businesses that pay taxes, especially payroll taxes to fund Medicare and Social Security benefits of retiring baby boomers.
Optimization tells us precisely how to diversify the portfolio, whether I should have 12% in semiconductors or 4% in biotech, etc., and it literally tells me how to diversify not only the industry groups but the stocks.
One of the things that launched the strength in biotech is when the pharmaceutical industry itself got a little slow.
I had Dell for four and a half years, and its sales are still phenomenal, but their operating margins started to contract, so I sold it in early 1999. There's nothing wrong with Dell! It's a fine company. It's just the business risk they took.
I simply can't buy as much of some stocks such as Detection Systems or United Education & Software as I'd like because there just aren't all that many shares available.
Now quantitatively we rank things on something called alpha over standard deviation, which is the return independent of the market divided by volatility. Usually, to get a high ranking, you need some buying pressure.
There are several things that can create an alpha - stock buybacks are one. High dividend yields are another, especially nowadays because the stock market yields more than the banks and the tenure treasury. But by and large, it tends to be companies with a strong cash flow, rising sales, accelerated earnings, a profit margin expansion.
I sell these intermediate bond portfolios for people that can't go to stocks.
I expect my return to be 18 to 25 percent in 1988, while the Standard & Poor's 500 should rise 8 to 12 percent and OTC stocks gain 15 percent as liquidity emerges.
We really believe in the earnings. We're very proud that often we do well in the down market. But you know, there are some markets where they just lose liquidity, like 2001, 2008.
Since we try and take a fairly buy-and-hold approach to our newsletter portfolios and don't sell at every whipsaw, we want to have a mix of stocks that will perform at both ends of the oscillation.
If you go back to 2001, the market had two violent short covering rallies then, although I know the market didn't officially get going until March 2003.
I still love the semiconductor industry.
After the Versailles treaty, the U.S. could have chosen to become a global economic loan shark, but we didn't, and let a lot of the tab slide. So not all lending and borrowing is bad.
We test everything on a one- and a three-year cycle. And you want to stress-test a model, and the three-year test usually does that because you have a growth and value bias. You have different interest rate environments.
We call it the zigzag theory. You want to find something that zigs and something that zags and blend them together to get a better combined performance.
