NEW YORK (CNN/Money) -
The tech world has returned to its regularly scheduled slump as investors worry about bad news (and rumors of bad news) from an assortment of sagging stocks ranging from Verisign to Sun to Qwest.
Such travails wouldn't matter quite so much were not so many investors still so over-invested -- financially and emotionally -- in tech.
How over-invested? Salomon Smith Barney strategist Tobias Levkovich notes that while the tech sector only accounts for about 4 percent of GDP, tech stocks account for roughly half of S&P 500 trading volume. "Tech captures the imagination, more so than talking about auto build rates," Levkovich says.
As a result, many investors refuse to sell even the most distressed tech names because they're afraid of missing out on what they expect (or at least hope) will be a big rebound. Sure, it's possible that the next batch of winners will include a number of holdovers from the last batch -- the Dells, Ciscos and Intels of the world.
But it's also possible that these names will go down as our generation's Nifty Fifty, stagnating for years and bringing down returns of those who hold on to them like grim death instead of diversifying a little.
Outside of tech
This year, the S&P 500 is down 5 percent year to date; the tech-heavy Nasdaq 100 is down 20 percent. But non-tech stocks in the S&P 500 have actually moved up more than 10 percent over the past six months, according to A.G. Edwards Chief Equity strategist Stuart Freeman. "There's a "non-technology bull market raging beneath the cover of the S&P Composite index," says the strategist.
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As we learned today, technology may make you fat: a recent study by the National Bureau of Economic Research notes that technology has made work more "sedentary" while lowering the cost of food, leading to a steady expansion in the modern posterior. (Hey, when's that delivery from Peapod going to get here?)
But at the moment technology's not making portfolios any fatter.
Some years back, Courtney Love, the wife of Nirvana's Kurt Cobain, offered a diet tip to the readers of a little alternative 'zine called Rollerderby. "No cheese," she told Rollerderby editor Lisa Carver. " Period...NO CHEESE...STOP CHEESE....I swear to God, Lisa...Don't eat cheese. There are a million things to eat that are not cheese."
Freeman, not quite as fanatical in his advice, doesn't suggest that investors bail out of tech entirely because it isn't working at the moment -- merely that they diversify, giving tech roughly the same weighting in their portfolios that it has in the S&P 500 (about 17 percent).
To paraphrase Ms. Love: There are a million things to invest in that are not Cisco.
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