Novas medidas do Governo pressionam contas em 0,6% do PIB

[Figas]

SmartMoney.com
A Rebalancing Act
Tuesday July 15, 1:11 pm ET
By James B. Stewart


This article was originally published on SmartMoney Select on 7/09/03.

THE STOCK MARKET surged ahead again on Monday after something of a pause ahead of the Fourth of July weekend. This occurred, according to some commentators, because the national holiday came and went without a terrorist attack. Perhaps it's an encouraging sign of the times that not once over the weekend did I even think about such a possibility. Not that we shouldn't remain vigilant, but it's nice to enjoy a summer weekend without the clouds of terrorism that have hovered since Sept. 11.
Terrorism aside, plenty of warning signs have been flashing about the market lately, but it continues to "climb a wall of worry," as market pundits like to say. There has been much talk about the lack of fundamental economic data to support the rally, last week's rise in unemployment being the latest example. But I for one am unconcerned by such lagging indicators when the market is, as usual, trying to predict the course of the economy. With the market comfortably between both the "buy" and "sell" signals in my disciplined approach, I can relax and enjoy checking my portfolio again.

Which is what I was doing on Tuesday morning, when I noticed a pretty striking pattern that might call for some fine-tuning. If you've been following the market at all lately, it will come as no surprise that tech stocks have led the rally, the very stocks that plunged so precipitously when the bubble burst and that supposedly investors had come to despise. But have you noticed just how much tech stocks have led the rally? To cite a few from my portfolio: Corning (NYSEGLWNews) is up nearly 150%; Vitesse Semiconductor (NASDAQVTSSNews) is up 160%; Veritas Software (NASDAQVRTSNews) is up 90%. Meanwhile, cyclicals like the big industrials and oil and gas companies — the very companies that should be benefiting from all of these economic stimuli — have in many cases barely budged from where they were at the beginning of the year. DuPont (NYSEDDNews) is down sightly; Deere (NYSEDENews) is up less than 1%; 3M (NYSEMMMNews) is up slightly

So what's the market telling us? That when the economic recovery finally arrives and picks up momentum, businesses are going to be spending like mad on information technology rather than on the basic building blocks of industry.

It's not for me to say whether this is right or wrong, for who knows?

What I can say is that my portfolio is now looking overweighted in technology. True, this has been a good thing so far, and vindicates my sense that to have sold those technology positions last year when they were so battered would've been a mistake. But another reason I'm overweighted is that I clung to these positions far too long after they peaked in 2000, and then discovered they were too low to sell. I vowed then that I wouldn't make the same mistake again. Yet here I am, looking at all of these gains in technology stocks and feeling warm and fuzzy about the very names that caused me such pain just a few years ago.

So it's time to put those feelings aside and turn to strategies for shifting some of my technology holdings into undervalued cyclicals. One way to do this would be to sell calls on positions I'd like to pare back, and use the proceeds to buy calls on those I'd like to increase. Or I could simply sell some tech stocks and buy cyclicals. Or I could reduce my position in the Nasdaq-100 stocks by selling some QQQs (AMEXQQQNews) and buying a Standard & Poor's 500 or Dow Jones Industrial Average-based index fund. The goal is to reduce my tech exposure while maintaining my overall allocation to stocks. I'm still doing my homework, and will report back next week.