Dow Jones and Company reported Monday that it would be adding two additional businesses to its industrial average. The two businesses are Travelers as well as Cisco Systems. Needless to say, when two go in the average, two need to exit.
Given the news that has happened with GM over the past few months, it is a no brainier that GM would be cut from the average. However, Citigroup was also given the boot.
Travelers was once a subsidiary of Citigroup and will help uphold the representation of financial companies in the average.
Citigroup has had a pretty bumpy year with subprime lending, the credit crisis, and eventually the recession taking huge cuts from Citigroup. Citigroup is the second fiscal business to be dropped from the average throughout this recession, the first being AIG. AIG was taken off the average in September after the government took an 80% stake in the business and lent it several billion dollars in bailout cash.
The Dow industrial average is made up of 30 stocks. These stocks are a measure of the market and what the general public regularly looks at to compute 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 start next Monday.
Citi has been on the Dow industrial average for 12 years, at which time it was listed as Citicorp. It turned into Citigroup in 1998 when Travelers Group combined with Citicorp. In 2002, Travelers was spun off another time and has been a unconnected company ever since. So, it is a bit odd that the parent business has fallen off the average and has been out performed by its subsidiary.
In actuality, Travelers is accepting AIG’s formerly held spot in the average. The center product of both corporations is the same; casualty insurance sales.
GM has to get its act together to even be considered before it is listed on the average yet again. It will likely be years for the once strong auto corporation to see the tops of any list. Of course, I do consider that bankruptcy was a footstep in the right direction. If it were left up to its own devices, GM would have been run into the ground a year ago, if the government wouldn’t have come in. Worse, if they didn’t file for insolvency and couldn’t restructure, the government would have lost all of our money in the GM “gamble” and would be heaving money into a unlimited abyss.
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