Citi leaves the Dow
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So Citi is being removed from the Dow, after all, to be replaced by Travelers, the insurer which got spun off from Citi in 2002 and is now worth more than its former parent.
The inclusion of Travelers makes a certain amount of sense, given that the Dow has been insurer-free since AIG dropped out. But replacing GM with Cisco is a bit weirder — could the continued exclusion of Google be a function of the personal prejudices of Rupert Murdoch? In a way I hope that it is, since that would be yet one more reason for all of us to stop looking at this silly average and start concentrating on more objective indices instead.
Update: Evan points out a very good reason not to include Google in the Dow: because the Dow is (idiotically) price-weighted, Google would have four times the weighting of any other Dow component.
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Symmetry: The acquisition of Travelers made Sandy Weill look less than perfect, and now this will seal the deal with Weill-haters (who conveniently ignore than Vichy Bandit wouldn’t even be at The Big C if Subsequent Management hadn’t been stupid enough to believe he knew what he was doing with his Exploding Plastic Inevitable Hedge Fund).
One is a Bump in the Road and proof that repealing Glass-Steagall was stupid for Competitive Advantage reasons; the other is Road-kill.
GOOG was passed over because the Dow is a price weighted index — it would have had 40x more influence on the index than Bank of America, and 4x more than IBM (the next priciest component). I think AAPL was passed over for the same reason.
More objective indices? Care to elaborate? I always come across people trashing on the Dow and S&P but no one ever endorses any other indexes.
John: that’s easy. The S&P really is an index–sure there are judgements to be made on the margins, but the largest companies are in the index, pro-rata, by capitalization. The Dow, on the other hand, is pro-rata by _price_; as another poster mentioned, this has very little merit indeed.
Felix, which indices do you recommend tracking instead of the Dow?
Good ol Sandy. Comes in and ruins a great company and then gets praised for his charity. The guy is a thief and nothing more. He was the person behind thousands of people losing their pensions and 401k’s. I hope he and his worthless daughter are all happy. On the other hand we know he is happy because he could care less. He is the scum of the earth.