Without the Tech Sector, the U.S. Would Be Toast

NEW YORK (TheStreet) -- While all eyes are on the deal makers in Washington, have we forgotten why the Federal Reserve keeps its foot down on the bond-buying pedal?

The central bank, which has controlled the monetary policy of the United States sincd 1913, has little room for "tapering." The U.S. economy isn't firing on all cylinders. Sentiment indicators among investors and the average American indicate the current fiscal and governmental mess is beginning to discourage many.

As Mike Norman wrote recently in Real Money, "Even though we are without weekly and monthly government economic data, we are still getting some private stuff, such as the ICSC-Goldman Sachs' chain-store sales data, which came out last week and showed an unexpected 0.1% weekly decline.

"There was also last week's horrible unemployment claims number, which was at least partially attributable to some glitch in California claims reporting (also based on the government shutdown), but we'll see whether or not that is corrected in the release this Thursday. If not, then more cause for worry."

However, one reason I'm not worried our economy will end up like Greece's is the U.S. is the world's leader in technology. From cloud computing to mobile devices, electronic gaming to ecommerce solutions, the U.S. is tops.

If you combine the market capitalization of Apple ( AAPL), Google ( GOOG) , Microsoft ( MSFT), Cisco Systems ( CSCO) and Intel ( INTC), you have a financial empire within a nation.

After adding up the market caps of these six tech behemoths we see a conglomerate worth over $1.27 trillion. Very few nations would offer a net domestic product (NDP), let alone a gross domestic product (GDP), that rivals this sextet of innovative greatness.

As I read the debate about how Apple's new-generation iPad and iPad Mini will be priced, I'm reminded that in the world of ecommerce technology I failed to include another Godzilla-sized company named Amazon.com ( AMZN).

With a market cap of $142 billion, this technology/online retailer sells everything from household items to the new Kindle Fire HDX. Which company or country on planet earth today can compete with King Amazon and its imaginative guru, Jeff Bezos?

Amazon is such a unique business world wrapped in its own multifaceted model that only Chinese ecommerce champ Alibaba Group can hold a candle to it.

Alibaba chalked up $4.1 billion in revenue in 2012, yet 24% of Alibaba is owned by another American tech titan -- Yahoo! ( YHOO). So $1 billion of the revenue benefits a U.S. firm.

By comparison, Amazon's trailing 12-month revenue was almost $67 billion. Alibaba has a long way to go before it can even get close to the commercial magnitude of AMZN.

Alibaba is growing by acquiring U.S. tech companies. It recently spent $206 million in a privately held company called ShopRunner, which is a small rival to Amazon. "The U.S. market in the long run is very interesting to us," Alibaba's co-founder Joe Tsai said in a recent interview.

"Coming into this market is about learning about American consumers and how the market operates," he added. No doubt Amazon is the 800-pound gorilla Alibaba wants to eventually dethrone.

It's been said that when the U.S. economy sneezes, the rest of the world catches a cold. But one of the big reasons the U.S. economy isn't sneezing worse is its technology sector has raised the bar for excellence, profitability and adaptation over and over again.

Let's look at a five-year chart of the Tecnology Select Sector SPDR ETF ( XLK) to illustrate the awesome resilience and diversity of this globally successful financial tour de force we call the technology sector.

XLK Chart XLK data by YCharts

If you're willing to double your risk on the giant American technology sector and also double your potential reward, you might consider the ProShares Ultra Technology ETF ( ROM).

Here's the same chart comparing XLK with ROM, and it paints quite a mouth-watering picture.

XLK Chart XLK data by YCharts

If you're tempted to double down on the tech sector, especially with leveraged ETFs like ROM, be sure to use risk management strategies such as trailing stop loss alerts, which I use for every position I own.

As my readers know, one of the secrets of successful investing is to avoid unacceptable losses and to control one's own emotions...especially greed and fear. Great investors avoid both the "paralysis of analysis" and the "deer in the headlights" syndrome that keeps us from knowing when to sell.

Mathematician and systems scientist Dr. Richard Smith took decades to develop a system that trains the investor to use a carefully chosen exit strategy. It is built on the determination to cut our losers and let our winners run.

Even with the best technology stocks and ETFs, we all need a system that utilizes strict disciplines for protecting gains and knowing when to sell a position when it's no longer working.

Especially if you own high-fliers like Google and Amazon, find an optimal trailing stop loss percentage that fits the trading range of those stocks and stick with it.

Speaking of the large-cap tech sector, the same reasons that make these companies great investments -- generating large, steady, dependable streams of free cash flow; being shareholder-friendly and adapting to the changing demands and needs of the consumer -- are the reasons they've helped this country to avoid financial ruin.

As a sector the tech titans of America has provided a remarkable return on onvestment (ROI) and most pay cash dividends and engage in meaningful stock buyback programs.

When it comes to creating millions of job and hundreds of billions of dollars in tax revenue, it's hard to deny the technology sector is one of America's bulwarks. Our government should agree.

I'm more concerned with the government creating roadblocks for America's pioneering technologies than I am about our fiscal woes turning us into the next Greece.

Long may we be a nation that rewards innovation, worthwhile risk-taking and profitable entrepreneurship. Our technology companies demonstrate the epitome of the lucrative results.

At the time of publication the author was long AAPL, MSFT and ROM.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial editor, he specializes in unique investment strategies, overlooked stock investments, energy and resource companies, precious metals, emerging growth companies, the prudent use of option strategies,real estate related opportunities,wealth preservation, money-saving offers, risk management, tax issues, as well as "the psychology of investing". Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the ¿herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.


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