It's easy to get overwhelmed by the reams of contradictory data out there.
After all, the U.S. Department of Commerce has boosted its estimate of gross domestic product (GDP) growth to a 3.9% annual pace from last month's estimate of 3.5%. That creamed economists' predictions of a fall back to 3.3% growth.
On the other hand, the Conference Board reported that the consumer confidence number fell to its lowest level since June.
Markets were up and then down on the news last Monday - and ended the day mostly flat. It's enough to drive tech investors crazy.
But I'm not worried about the economy. Or the tech sector for that matter.
That's because all three of my "Overload Busters" - you could call them the "real news" - are moving in positive directions.
These three indicators cut through the floods of data every time. They've long proven to be accurate barometers of the markets - and surefire ways to instigate profits.
It's taken me an honors degree in economics and 30 years of tech investing to hone this system to perfection. But it's actually a pretty simple system that tech investors like you can pick up and start following immediately.
Let's get started.
Overload Buster No. 1: Jobs and the Economy
In the early part of the economic recovery, high-tech companies weren't too concerned about job growth. That's because the "jobless recovery" in 2009 and 2010 actually helped the tech sector.
With sales rising, firms were able to improve productivity and increase profit margins without adding to their labor costs. Instead of people, they invested in software, business electronics, cloud computing and robotics.
However, no industry can keep growing without solid economic expansion and lower unemployment. After all, people need jobs in order to afford the latest smartphones, HDTVs, and connected cars.
By employment standards, 2014 is now a growth year. The economy has added an average of more than 200,000 jobs for nine months in a row. That's the highest rate since 1995.
Unemployment continues to fall. It recently dropped to 5.8%, the lowest level in a decade. And jobless claims as a percentage of the workforce are the lowest they've been since the government began keeping these stats back in the 1970s.
We've also had two strong growth quarters in a row for the U.S. economy, as defined by GDP. It came in at 3.5% in the third quarter, beating forecasts of 3.1% by nearly 13%.
That followed 4.2% growth in GDP in the second quarter, which reflected growing personal consumption, private inventory investment, exports, fixed investment for home and commercial buildings and local government spending.
Indicators to follow:
- Employment Situation Report, released first Friday of the month,S. Bureau of Labor Statistics
- GDP Forecast, tracked by theConference Board
Overload Buster No. 2: Earnings
Next, I look at profit growth not only in the stocks I follow but also in the various markets. Here's why.
Stocks trade at multiples of their earnings. Generally, the higher the price-earnings (P/E) ratio - calculated by dividing a stock's price by its earnings per share - the more valuable the stock.
And because many tech firms are growth oriented, these stocks tend to have higher multiples than the broader marker - that's a big reason we like them.
Because I want a good forecasting statistic, I look at the forward P/E rather than at a multiple of past earnings (or trailing P/E). Specifically, I'm looking at the P/E one year out to get a sense of profit growth for the sector.
With this in mind, tech remains in great shape. The tech-centric Nasdaq 100 currently trades at 19.85 times next year's earnings, or 16.4% higher than the Standard & Poor's 500 Index's multiple of 17.05.
And it's not all just about tech. We also want to see an overall healthy earnings environment. And so, you also need to take a broad look at corporate profitability.
According to third-quarter data compiled by Thomson Reuters, U.S. companies are beating earnings expectations at a rate of 74%. Since the early 1990s, when Thomson Reuters began tracking the so-called "beat rate," the average has been 63%. And the national "beat rate" has been well above that all year long.
Strong earnings like this show us that these stratospheric stock prices we've been seeing are not unreasonable - that they're not caused by U.S. Federal Reserve stimulus alone.
During the third quarter, corporate profits grew roughly 10%. In that regard, tech came out well. High tech overall basically matched the market, with a growth rate of 9.8%.
But two key tech-related sectors crushed the S&P. Healthcare, which includes biotech and medical device companies, grew profits by nearly 16%.
And with a 21% growth rate, the materials sector doubled the S&P's average. Here we're talking about high-tech products like lightweight composite materials for aircraft, structural plastic for tech components, and specialty glass for smartphones and tablets.
Indicators to follow:
- Nasdaq 100 Forward P/E, tracked byBirinyi Associates, updated Fridays
- "Beat Rate," tracked byThomson Reuters I/B/E/S
- S&P 500 Earnings Growth Rate, tracked byStandard & Poor's
Overload Buster No. 3: The Mobile Revolution
It never ceases to amaze me that true mass-market smartphones only debuted in June 2007 with the introduction of the iPhone from Apple Inc. (Nasdaq: AAPL).
Today, the mobile revolution is an unstoppable global trend.
And we can use mobile sales as a snapshot of the health of the overall tech industry. That's because tablets and especially smartphones are big drivers in the demand for semiconductors, sensors, and advanced "miracle materials" like shatter-resistant glass.
So it's good news for tech investors like you that sales of mobile phones worldwide are still strong, with smart devices enjoying huge growth.
The forecasting firm CCS Insight forecasts that worldwide mobile phone shipments will reach 1.94 billion units in 2014, up roughly 10% from the 1.8 billion units shipped last year.
And of those, 1.28 billion units are smartphones. That means smartphones will account for nearly two-thirds of all mobile phones sold this year - compared with basically zero less than eight years ago.
Growth in mobile device sales more than replaces the decline of PCs, which fell 10% last year to just 316 million units.
And it's driving a boom in another segment: mobile commerce - that is, the buying consumers do with their mobile devices, as opposed to desktop e-commerce or storefront or catalog shopping.
ComScore found that second-quarter, mobile commerce spending jumped 47% year over year. ComScore projects that mobile commerce sales will hit $35 billion this year.
Indicators to follow:
- Mobile device shipments and forecasts, tracked byCCS Insight
- Mobile commerce spending, tracked bycomScore
Thus, all three of our Overload Busters are telling me that U.S. markets - and, therefore, tech investors like you - are in excellent shape going into 2015.
Of course, there's always the risk that world events could change our situation dramatically and quickly. But right now, the risks of that occurring in the next quarter or two seem remote.
Day to day, keep your eyes on our Overload Busters - these few regularly reported signals will help keep you on the road to wealth.
This is no time to be sitting on the sidelines. Instead, focus on tech investing - and building your fortune.
More from Michael Robinson: U.S. stocks are hitting record highs on an almost daily basis as we close in on the end of the year. But the whipsawing we've had to endure to reach this point has been brutal. My secret "risk-busting" strategy is perfect for rough rides like this. It's just the tool you can use to turn a volatile market to your advantage.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.