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Dow Jones and Company reported Monday that it would be adding two additional companies to its industrial average. The two corporations are Travelers in addition to Cisco Systems. However, when two go in the average, two have to come out. Given the news that has occurred with GM over the past few months, it is a no brainier that GM would be cut from the average. On the other hand, Citigroup was in addition let go. Travelers was once a subsidiary of Citigroup and will help maintain the representation of financial companies in the average. Citigroup has had a fairly rough year with subprime lending, the credit crisis, and ultimately the recession taking huge cuts from Citigroup. Citigroup is the 2nd fiscal corporation to be dropped from the average during this downturn, the first being AIG. AIG was taken off the average in September when the government took an 80% stake in the company 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 market and what the general public regularly looks at to gauge 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 mix ups will start next Monday. Citi has been sitting in the Dow industrial average for 12 years, at which 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 unattached corporation ever since. So, it is a bit strange that the parent business has fallen off the average and has been shown the door by its subsidiary. In truth, Travelers is accepting AIG’s previously held place in the average. The center product of both corporations is the similar; casualty insurance sales. GM has to get its actions organized to even be considered before it is put back on the average yet again. It will probably be years for the once strong auto business to see the tops of any list. Of course, I do think that bankruptcy was a footstep in the correct direction. If it were left up to its own devices, GM would have been going into liquidation mode a year ago, if the government wouldn’t have come in. Worse, if they didn’t file for bankruptcy and couldn’t reorganize, the government would have lost all of our money in the GM “gamble” and would be throwing money into a infinite pit.
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