点评老道内幕

ctcld

What's behind the Dow changes?

By John Prestbo
NEW YORK (MarketWatch) -- Beginning with the opening bell on Monday, June 8, the Dow Jones Industrial Average will have two new components: The Travelers Companies Inc. /quotes/comstock/13*!trv/quotes/nls/trv (TRV 41.90, -0.01, -0.02%)  instead of Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 3.65, -0.04, -1.08%) , and Cisco Systems Inc. /quotes/comstock/15*!csco/quotes/nls/csco (CSCO 19.59, +0.09, +0.46%)  instead of General Motors Corp.
(俩新媳妇没太赏脸)

The changes were announced roughly an hour after GM /quotes/comstock/13*!gm/quotes/nls/gm (GM 0.69, -0.06, -8.00%)  filed for bankruptcy protection, from which it will emerge a much smaller automaker owned primarily by the U.S. government. See related story on a more volatile Dow.

I made the media rounds today explaining why two icons of American business were booted and why we selected the two replacements we did. Here are some of the questions thrown my way:

Why make the changes now?

GM's bankruptcy filing forced our hand. Companies in bankruptcy proceedings are not allowed in the Dow. Why? Because they are on a different playing field than those operating in the normal competitive arena, and thus their stock action, if any, reflects unusual conditions and developments.

OK, but why was Citigroup ousted at the same time?

Whenever we have to change a stock because of an external event -- a merger, say, or in this case bankruptcy -- we look at all the other components to make sure they continue to do a good job representing their respective industries.(要减少美金的含金(融)量) We felt Citigroup was going into a period of substantial restructuring in which its stock would be more reflective of that process than of the banking sector.

Citigroup is a big bank with large international operations and a well-known brand. Any chance it could get back into the Dow someday?

Sure. Several companies have returned to the Dow after a period of absence. Chevron, for example, was brought back in last year after being ousted in the 1990s. General Electric was in and out three times, though it is the only one that was among the original 12 stocks when Charles H. Dow created the industrial average in 1896. (这里埋下了个伏笔)

Did the fact that Travelers used to be part of Citigroup play a role in choosing that particular insurance company?

No. Citigroup spun off Travelers in 2002, so it has been operating independently for going on seven years. And it was independent prior to becoming part of Citigroup in 1998. We were committed to restoring the insurance sector to the Dow after ejecting American International Group, Inc. /quotes/comstock/13*!aig/quotes/nls/aig (AIG 1.68, +0.02, +1.21%)  last September after the government takeover. Travelers is a property and casualty insurer, as AIG is, and it is certainly a leader in that industry.  (让我想起了AT&T)

Why choose a tech company, Cisco, to replace an automaker? (新桃换旧符)

We did not need another consumer goods company after adding Kraft Foods when we removed AIG. In looking around, we were struck by the fact that Cisco makes products that pave the Information Highway -- computer networking equipment, things that enable high-speed data and video transmission, and so on. We saw Cisco helping the economy and culture adjust to the digital age, much as automobiles influenced economic and social changes in the 20th Century.

Well, why not Apple /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 139.45, +0.10, +0.07%) or Google /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 426.75, +0.19, +0.05%) ? (和超女还是有代沟)

Those companies certainly qualify as blue chips, but we chose Cisco this time.

Who is this "we" you keep referring to?

The selection of Dow components is ultimately the responsibility of the managing editor of The Wall Street Journal. Robert Thomson is in that position today (as well as being editor-in-chief of all of Dow Jones), and he made the choices. I help with suggestions and research, as do two senior editors of the Journal.

GM is being delisted by the New York Stock Exchange. How can you keep it in the Dow until Friday's close?

GM's shares henceforth will be traded over the counter, in a system known as "pink sheets" because in the pre-digital era these stocks' prices were printed on pink paper. We will take GM prices periodically from this OTC market until Friday. Interestingly, GM shares rose in price after the bankruptcy filing, even though the CEO, Fritz Henderson, reminded everybody that common shareholders are wiped out in a bankruptcy. To my knowledge, this is the first time any Dow stock has not been listed on an exchange, but it is only temporary.

Everybody saw GM's bankruptcy coming from a mile off. Why didn't you take it out sooner -- or even Citigroup, for that matter?

In our opinion, the sharp price declines of both stocks were very much a part of the bear market phenomenon. In other words, we felt these two stocks were helping represent what was going on in the overall market, even though their prices dropped to the low single digits. Normally, we wouldn't keep a company as a component if its stock price fell that far, but the combination of a big credit crisis and nasty recession made the market anything but normal.

How long in advance did you plan these changes?

We have been watching every Dow stock closely since last summer. Earlier this spring, we recognized that the march of events seemed to be carrying GM closer and closer to bankruptcy, so we started discussions. Meanwhile, we saw that while the banking sector seemed to be stabilizing, Citigroup still was facing a major restructuring under heavy government influence. That is when we decided the stock wouldn't be representative while the company was reformulating itself. I think it was early May when we decided that when the time came we would make both changes at once.

How many stocks did you consider as replacements?

I recall roughly a half dozen names being discussed over the course of a couple of months. This wasn't a snap decision. We'd exchange some ideas and then spend a few days or weeks thinking about them, and doing a little research.

Cisco has been on bloggers' suggestion list for a long time. Do you pay any attention to these kibitzers? (不要说了, 老道就喜欢熟妇)

Yes. They and many others take the Dow seriously enough to complain when they think we are doing something wrong and to offer their ideas. So, we take them seriously in return. However, most of these folks are looking at things from an investor's point of view, as though the Dow was a portfolio they owned (and maybe some of them really do). But our goal is to maintain an index to accurately reflect the market as whole, and by extension the U.S. economy. That is a different purpose, which sometimes leads us in a different direction.

John Prestbo is editor and executive director of Dow Jones Indexes, a unit of Dow Jones & Company, publisher of MarketWatch

snowwolf229

oldfox

Thanks.

noname6688

那么如何影响计算DOW INDEX?

ctcld

很有意思的是: C是97年世袭了TRV才进老道家的(90年代初, C比现在还破落, 后借小克之力成了暴发户, 吞并了TRV后又吐出), 现在又只能把龙椅交还给老主人. 真是10年河东,10年河西啊.

ctcld

那么如何影响计算DOW INDEX?
noname6688 发表于 2009-6-1 23:14

#---weight-----$

"The DJIA's methodology of calculating an index is known as the price-weighted method. On top of having to deal with stock splits, the downside to this method is that it does not reflect the fact that a $1 change for a $10 stock is much more significant (percentage wise) than a $1 change for a $100 stock. Because of price-weighting's associated problems, most other major indexes, such as the S&P 500, are market-capitalization weighted."

To figure out how a change in any particular stock affects the index, divide the stock's price change by the current divisor. For example, if General Electric is up $5, divide five by 0.14418073, which equals 34.68. Thus, if the DJIA was up 100 points on the day, GE was responsible for 34.68 points of the move.

steven68

ding

aurora99

ding

judyfruit