A massive liquidation of nontech assets is under way as people reach for the means to buy more Cisco, 3com and Apple. It's an incredible display of pack investing that begs the question, Is NASDAQ bulletproof?
The reallocation is not just in assets but also in talent. Bankers, lawyers and money managers are fleeing careers in depressed pockets of the market like real estate to hitch a ride to Silicon Valley.
The shift is clearest, though, in hard numbers. In January, investors poured a record $40 billion into stock funds, and $29 billion of it went into aggressive growth and growth funds - the ones that own NASDAQ stocks. The rest went into sector funds, which are 75% invested in tech. Equity-income funds and growth and income funds (which favor blue chips) had outflows. Bond funds also had outflows - a hefty $10 billion worth.
By one measure, the NASDAQ accounts for every penny made in the stock market the past 12 months. In that span, the market value of all U.S. stocks increased $2.5 trillion, but NASDAQ stocks alone rose $3.1 trillion. That means non-NASDAQ stocks fell $600 billion. Foreigners are equally gaga. Last year they were net sellers of Treasury bonds for the first time, and they bought a record $107 billion of U.S. stocks. Care to guess which ones?
~ Daniel Kadlec, "What Blue Chips? The NASDAQ is killing the Dow, which is why it's more critical than ever that you stay diversified,"