We’ve talked about the makeup of the Dow Jones Industrial Average before. My general opinion is that it’s a worthless index with no true bearing on the real world. But that’s like telling your fiance The Hills is a stupid show or telling your co-worker Fox News has a right-wing bias; people still flock to it regardless of how important or accurate it is.
The Dow is supposed to be a list of the 30 greatest American companies, and so when one of those companies starts to falter it gets kicked out. Earlier this week it was announced that Citi was getting the pink slip. Citi gets to do the walk of shame down Wall Street, this is a symbolic fail to the highest degree. But it’s the company replacing Citi that makes this story really unique: Travelers.
You’ve probably never heard of Travelers before, but up until 2007 you hadn’t heard of AIG either. Travelers is the second largest insurance writer and the largest insurance company based on market capitalization. Travelers used to be the insurance arm of Citi. Through a series of subsidiaries, spinoffs, and mergers Travelers went from being a Citi subsidiary to the company that replaced Citi in the Dow. Imagine if you were Brad Pitt and you were riding high on life, only to find as you were busy collecting kids in Africa your little brother Doug came up and dated Jennifer Aniston and left her for your smokin hot Angelina Jolie leaving you with nothing but a bunch of rug rats and you have to get support from the government just to get by. Damn Dougy and his boyish charm. On June 8th, 2009, Dougy becomes the new stud in town.
This wasn’t the only bit of irony to come out of the news today. In September of 2008, another financial powerhouse by the name of AIG was shown the door to the Dow club. I guess Travelers wasn’t so stupid as the team over at AIG. AIG was replaced by Kraft. Wall St replaced by Mac and Cheese – double fail.
In other news, Citi at least had a buddy to cross the street to the S&P 500 camp with. We all knew this one was coming: General Motors. GM filed for bankruptcy first thing in the morning on June 1st and within a few hours it was announced they were done with the Dow. I really don’t have much to say about this, it completes a trifecta of industrial failure. GM dug their grave in the 90s by dumping so many resources into large vehicles. You can blame the unions too but all they really did was help them pick out a casket. I will note that GM is not dead! The media, including bloggers, have already said this is the end for GM. This is not true. GM will move its best assets into a new company (to likely be called GM) and then the rest of whats left of GM will just wind down into nothing. Imagine your house burning down and you just move the family to a new house.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
