Is Quantum a buy or sell?

Howdy Friend!

I don't short stocks because when I was younger, I watched JDS Uniphase bubble up 200x before collapsing.

It was a helluva sight to behold…

They never lived up to the hype, but newsletter writers sure pitched the heck out of it.

The reason they were growing so much was due to M&A.

If you're been following the quantum space, that sounds an awful lot like IONQ.

The CEO sold nearly all of his shares as he pitched quantum as an Nvidia killer. That's a MASSIVE RED FLAG.

Recall that Nikola's CEO was sentenced to four years in prison stemming from false claims. He was pardoned by Trump before spending any time in jail.

Quantum is very task specific and will never ever ever compete with general computing tasks.

The military might like it for cracking codes, but it's complete vapor-ware at this point. It can't even add two numbers together because of all the noise.

Many quantum stocks started as SPACs (red flag #2!) so it's really hard for me to build trading strategies on the data. Almost as noisy as the technology.

So I'm not trading any of them. And I'm certainly not shorting them.

I am of course giving you fair warning to avoid that sector.

Even ChatGPT knows:

Disagree with me? Perfect. Markets exist because people see price differently.

If we were a Borg hive mind, the order book would be empty.

So if you want a bit of exposure to quantum, the QTUM ETF has some in their holdings (although it's mostly a who's who of tech stocks, not a pure play).

There's not much history, but I tried all four of our different techniques to build a strategy on it:

Indicators (Human-made)
Cyber code (linear genetic programming)
TAP data (Mispricing “glitches”)
Dark Pool data (Where most trading is done these days)

The winner was mispricing “glitch” data with a 53% CAGR.

Human-made indicators lowered the max drawdown, but didn't significantly outperform the ETF itself.

(I like to see at least a 2:1 ratio between Score of the strategy and Score of the ETF…under “Metrics” in Portfolio Boss).

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The ETF “glitch” rule consisted of two simple lines of code and produced significant alpha over buy and hold.

My biggest gripe is that the history was very short, going back to only 2018.

To sum things up, hype can lead to serious bubbles. Don't short 'em. But eventually quantum's chickens will come home to roost just as they did for JDS Uniphase.

Investors would have just been better buying the leaders at the time rather than the long-shot. Human nature is just hard to overcome.

In the mean time, built some strategies, combine them together, and trading gets a whole lot more consistent.

Portfolio Boss Strategy Performance:

Entry level: All-weather Alpha is up 1.8% for the month, and 35% for the year.

Mid-tier: Easy Ai 10 position Meta is up 5.6% this month, and 19% for the year.

High end (6-figure+ accounts): Outlier Method is up 1.2% this month, and 24% for the year. Historical tests show a 98.7% monthly win rate (without optimization) which wildly exceeded my expectations.

These are back tested numbers. Factor in about 0.1-0.2% per month for commission and slippage if you're trading with IB's BasketTrader (built into Portfolio Boss).

Portfolio Boss allows you to automatically take advantage of IB's money-saving algos like accumulation/distribution, opening auction participation, and REL orders so you trade more like a market makers instead of a market taker.

Trade smart,

Dan “Prince of Proof” Murphy

Government required disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.

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