Dow Industrials Does Away With GM As Well As Citigroup
Dow Jones and Company said Monday that it would be adding two new companies to its industrial average. The two businesses are Travelers as well as Cisco Systems. However, when two go in the average, two need to exit.
Given the news that has happened with GM over the earlier few months, it is a no brainier that GM would be removed from the average. However, Citigroup was in addition given the boot.
Travelers was once a holding of Citigroup and will help uphold the representation of financial businesses in the average.
Citigroup has had a fairly rough year with subprime lending, the credit disaster, and ultimately the downturn taking huge cuts from Citigroup. Citigroup is the 2nd financial corporation to be dropped from the average during this downturn, the first was AIG. AIG was taken off the average in September when the government took an 80% investment in the corporation and lent it several billion dollars in bailout cash.
The Dow industrial average is made up of 30 stocks. These stocks are a gauge of the marketplace and what the public typically looks at to assess the health of the markets as well as the economy. It is right now made up of (on top of Travelers and Cisco) 3M (MMM), Alcoa (AA), American Express (AXP), At&t (T), Bank of America (BAC), Boeing (BA), Caterpillar (CAT), Chevron Corporation (CVX), Coca-Cola (KO), DuPont (DD), ExxonMobil (XOM), General Electric (GE), Hewlett-Packard (HPO), The Home Depot (HD), Intel (INTC), IBM (IBM), Johnson & Johnson (JNJ), JPMorgan Chase (JPM), Kraft foods (KFT), McDonalds (MCD), Merk (MRK), Microsoft (MSFT), Pfizer (PFE), Procter & Gamble (PG), United Technologies Corporation (UTX), Verizon Communications (VZ), Wal-Mart (WMT), and Walt Disney (DIS).
The changes will go into effect next Monday.
Citi has been sitting in the Dow industrial average for 12 years, at the time it was listed as Citicorp. It became Citigroup in 1998 when Travelers Group combined with Citicorp. In 2002, Travelers was spun off for a second time and has been a unconnected corporation ever since. So, it is a bit strange that the parent company has fallen off the average and has been out performed by its subsidiary.
In reality, Travelers is accepting AIG’s formerly held location in the average. The center product of both companies is the similar; casualty insurance sales.
GM has to get its actions together to even be considered before it is listed on the average once more. It will probably be years for the once burly auto business to see the tops of any list. However, I do think that insolvency was a move in the right direction. If it were left up to its own devices, GM would have been going into liquidation mode a year ago, if the state wouldn’t have come in. Worse, if they didn’t file for insolvency and couldn’t reorganize, the government would have lost all of our money in the GM “venture” and would be throwing money into a endless abyss.
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