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Dow Jones and Company reported Monday that it would be adding two additional businesses to its industrial average. The two businesses are Travelers in addition to Cisco Systems. Of course, when two go into the average, two have to leave. Given the reports that has occurred with GM over the earlier few months, it is a no brainier that GM would be removed from the average. On the other hand, Citigroup was in addition given the boot. Travelers was once a subsidiary of Citigroup and will help maintain the representation of financial corporations in the average. Citigroup has had a rather rough year with subprime lending, the credit crisis, and ultimately the downturn taking huge cuts from Citigroup. Citigroup is the second financial business to be dropped from the average during this downturn, the first was 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 money. The Dow industrial average is made up of 30 stocks. These stocks are a gauge of the market and what the public commonly looks at to measure the health of the markets as well as the economy. It is at present 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 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 merged with Citicorp. In 2002, Travelers was spun off for a second time and has been a separate corporation ever since. So, it is a bit odd that the parent corporation has fallen off the average and has been shown the door by its subsidiary. In actuality, Travelers is accepting AIG’s formerly held place in the average. The core product of both businesses is the similar; casualty insurance sales. GM has to get its act composed to even be considered before it is put back on the average once more. It will probably be years for the once robust auto corporation to see the tops of any list. Of course, I do think that bankruptcy was a action 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 stepped in. Worse, if they didn’t file for bankruptcy and couldn’t reform, the government would have lost all of our capital in the GM “risk” and would be heaving money into a unlimited pit.
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