How does it end? What makes markets go to where they have to go and then stop? One way it happens, a default way, so to speak, is that an industry group ceases to be important.
I know, it seems inconceivable that tech could ever not be important to the market. But it is happening, right now.
Rachel Andrews and I have been trying to come up with graphic representations of the importance of tech. One way to do so is to examine the top 25 capitalization names in the
S&P 500 now vs. a year ago.
| Current Top 25 Stocks in the S&P 500 (by Market Cap) |
| Company Name | Current Market Cap | Market Cap on March 1, 2000 | ($ LOSS) / GAIN |
| General Electric (GE Quote - Cramer on GE - Stock Picks) | $475,622,500,000 | $447,920,813,618 | $27,701,686,382 |
| Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) | 316,788,800,000 | 484,520,133,053 | (167,731,333,053) |
| ExxonMobil (XOM Quote - Cramer on XOM - Stock Picks) | 286,074,800,000 | 268,470,875,694 | 17,603,924,306 |
| Pfizer (PFE Quote - Cramer on PFE - Stock Picks) | 285,231,700,000 | 202,435,275,972 | 82,796,424,028 |
| Citigroup (C Quote - Cramer on C - Stock Picks) | 253,417,700,000 | 200,478,237,490 | 52,939,462,510 |
| Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks) | 227,755,300,000 | 221,946,607,731 | 5,808,692,269 |
| AIG (AIG Quote - Cramer on AIG - Stock Picks) | 195,942,300,000 | 143,024,225,319 | 52,918,074,681 |
| Intel (INTC Quote - Cramer on INTC - Stock Picks) | 195,170,000,000 | 389,919,375,000 | (194,749,375,000) |
| AOL-Time Warner (AOL Quote - Cramer on AOL - Stock Picks) | 193,427,000,000 | 250,130,588,519 | (56,703,588,519) |
| Merck (MRK Quote - Cramer on MRK - Stock Picks) | 184,283,300,000 | 138,011,417,784 | 46,271,882,216 |
| IBM (IBM Quote - Cramer on IBM - Stock Picks) | 179,981,800,000 | 180,950,170,546 | (968,370,546) |
| Cisco Systems (CSCO Quote - Cramer on CSCO - Stock Picks) | 172,731,600,000 | 473,887,345,313 | (301,155,745,313) |
| Verizon (VZ Quote - Cramer on VZ - Stock Picks) | 137,249,000,000 | 152,325,594,697 | (15,076,594,697) |
| Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks) | 133,373,299,990 | 100,204,690,864 | 33,168,609,126 |
| Coca-Cola (KO Quote - Cramer on KO - Stock Picks) | 128,949,100,000 | 124,772,783,212 | 4,176,316,788 |
| Bristol-Myers Squibb (BMY Quote - Cramer on BMY - Stock Picks) | 121,349,700,000 | 98,198,335,929 | 23,151,364,071 |
| Oracle (ORCL Quote - Cramer on ORCL - Stock Picks) | 121,144,600,000 | 199,696,574,063 | (78,551,974,063) |
| Home Depot (HD Quote - Cramer on HD - Stock Picks) | 103,528,900,000 | 135,501,060,294 | (31,972,160,294) |
| Tyco (TYC Quote - Cramer on TYC - Stock Picks) | 94,973,280,000 | 66,798,452,882 | 28,174,827,118 |
| Procter & Gamble (PG Quote - Cramer on PG - Stock Picks) | 91,902,930,000 | 115,041,610,957 | (23,138,680,957) |
| J.P. Morgan Chase (JPM Quote - Cramer on JPM - Stock Picks) | 91,796,590,000 | 107,548,577,937 | (15,751,987,937) |
| EMC (EMC Quote - Cramer on EMC - Stock Picks) | 91,152,790,000 | 133,097,975,139 | (41,945,185,139) |
| Viacom | 90,551,950,000 | 102,827,478,433 | (12,275,528,433) |
| AT&T(T Quote - Cramer on T - Stock Picks) | 86,132,000,000 | 179,051,576,087 | (92,919,576,087) |
| Wells Fargo(WFC Quote - Cramer on WFC - Stock Picks) | 85,579,510,000 | 59,801,354,817 | 25,778,155,183 |
 | | TOTAL | ($632,450,681,360) |
| | If You Remove MSFT, INTC and CS from the top 25 the total is | $31,185,772,005 |
| | Removing Tech (MSFT, INTC, IBM, CS, ORCL, EMC) the total is | $152,651,301,753 |
| | Removing Tech and Tel the total is | $260,647,472,537 |
| Source: Bloomberg |
You can see how tech is becoming less of a factor in the S&P 500. I would argue that when you see only a handful of tech companies in the top 25 capitalized companies, we will be closer to a bottom than we are now. We are certainly getting there, though.
This representation shows several things. The massive collapse of
Cisco(CSCO Quote - Cramer on CSCO - Stock Picks) -- timed perfectly from when John Chambers predicted the company would be the first trillion-dollar company -- coupled with the tremendous shedding of value in
Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks),
Oracle (ORCL Quote - Cramer on ORCL - Stock Picks),
EMC(EMC Quote - Cramer on EMC - Stock Picks) and
Intel (INTC Quote - Cramer on INTC - Stock Picks) makes sense to me.
It is right. Tech was too big an overrepresentation in the S&P vs. what it was to the economy. It is now getting in line with its role in the economy. That's rational.
So, why not pull the trigger? Aha! Here's something you have to think about, as it is deadly for tech and will cause us to swing from radical overvaluation to the possibility of severe undervaluation. Billions upon billions of dollars are indexed to the S&P. It has a tremendous lagging impact, like an anchor on the companies that have been getting smaller in the S&P. Firms that index money will be allocating fewer and fewer dollars to the shrinking names, once the S&P rebalances its stocks based on market capitalization.
It is a self-fulfilling prophecy: The smaller get smaller. It is what happened to oils, to foods, to drugs and to industrial America year after year after year while tech gained in value.
That process is in reverse and will stay in reverse for some time. In other words, don't wait for a bang to get into tech. It will end with a whimper, the way all declines really end.
Jim Cramer
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