Dow Industrials drops GM along with Citigroup

Dow Jones and Company reported Monday that it would be adding two additional companies to its industrial average. The two businesses are Travelers in addition to Cisco Systems. Of course, when two go in the average, two need to come out.

Given the reports 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 holding of Citigroup and will help preserve the representation of financial corporations in the average.

Citigroup has had a rather rough year with subprime lending, the credit disaster, and finally the recession taking huge cuts from Citigroup. Citigroup is the 2nd fiscal business to be dropped from the average throughout this downturn, the first was AIG. AIG was taken off the average in September after the government took an 80% investment in the corporation and lent it several billion dollars in bailout money.

The Dow industrial average is made up of 30 stocks. These stocks are a measure of the marketplace and what the public commonly looks at to determine the health of the markets as well as the financial system. 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 on 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 unconnected 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 reality, Travelers is taking AIG’s formerly held spot in the average. The center product of both businesses is the same; casualty insurance sales.

GM has to get its actions organized to even be considered before it is put back on the average once more. It will probably be years for the once sturdy auto corporation to see the tops of any list. Of course, I do believe that insolvency was a movement in the correct direction. If it were left up to its own devices, GM would have been run into the ground a year ago, if the state wouldn’t have stepped in. Worse, if they didn’t file for insolvency and couldn’t reorganize, the government would have lost all of our money in the GM “venture” and would be heaving money into a endless abyss.

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