I’ve become rather well-known recently for telling investors that when it comes to technology stocks, it’s time to dream BIG again.
But is that really true? Could the profits ahead be anywhere close to the massive, overwhelming windfalls we experienced in the 1990s?
Sure: The average tech stock is trouncing the S&P 500 year-to-date, producing $2 in gains for every $1 earned on the overall index.
And yes, 93% of the new technology superstars in my model portfolio are up — with gains of up to 305% — enough to more than quadruple your money.
But let’s face it: That’s a far cry from gains early investors made the first time around.
Since its IPO, eBay is up 6,905% … Yahoo is up 7,282% … Amazon.com is up 19,864% … Apple is up 15,852% …
And Microsoft — arguably, the all-time tech stock champ — is up an astonishing 48,559%; enough to multiply your money 48,559 times over and turn a simple $25,000 investment into well over $12 million.
Could the stocks I’m recommending now do as well as Microsoft? Honestly? Probably not. These are not the 90s. This is an entirely different time and place.
But that’s really OK: Even if these new technology superstars only do ten percent as well as Microsoft, your $25,000 investment could turn into more than $1.2 million …
And if they only do ONE percent as well, your $25,000 would grow to over $120,000. You could walk away with a gain of nearly $100,000!
But some folks still worry. Like Robert of Boise, Idaho, who recently wrote me to say …
“I’m convinced that the U.S. dollar is about to crash and burn. Wouldn’t that put a chill on these red-hot tech stocks?”
My answer: A decline in the U.S. dollar — even a crash — could be one of the BEST things that could happen to tech stocks for two critical reasons:
First, a decline in the U.S. dollar causes inflation; rising prices. And one of the first things to rise tends to be financial assets.
It’s called, appropriately enough,”asset inflation” — and you’ve actually seen it happen before your very eyes lately.
Since the Fed began printing money willy-nilly in 2008, asset prices have exploded. The S&P 500 has soared 82.8%. Gold is up 60.4%. And silver has skyrocketed 79.3% higher.
Now this is important: All that asset inflation — and the profits it has made investors so far — are probably only drops in the proverbial bucket. Because until now, only a tiny portion of the $3 trillion the Fed printed has trickled off of bank balance sheets into the economy.
Now, though, that trickle is turning into a flood and that means the price inflation in stocks — including technology stocks — could very well intensify in the months ahead.
Second, a falling dollar is actually one of the best things that could possibly happen to U.S. tech companies because it makes their products cheaper — and by definition, more competitive overseas.
Let’s say a French company wants plans to spend $10 million to install business-management software. It has narrowed the field of vendors down to just two. The company will either buy the software from German giant SAP or from U.S. giant Oracle.
Now, let’s say the dollar plunges 20 percent against the euro, making the Oracle software 20% cheaper than the SAP equivalent.
If you were the French CEO, what would your decision be? To pay more for the German software? Or to save 20% — $2 million — by purchasing the U.S. company’s product?
See the point? Instead of fearing inflation, we technology investors can harness it to grab tremendous profit potential.
And after all — if the question is,”How will you live when everything costs more …”
Wouldn’t the best answer be,”Make more money!”?
P.S. Want to talk tech stocks? Here’s your chance to ask me anything you like about technology stocks: Simply click this link to jump over to the Money and Markets blog. I’ll check in during the day and give you my best answers to your questions.
I won’t be able to do this forever, so be sure to join the conversation right away: Just click this link and let’s get the conversation going!