BoA, Alcoa, Hewlett-Packard To Be Dropped From DOW

nhboy

Ubi bene ibi patria
Link to original article.

"Bank of America, Alcoa and Hewlett-Packard will be dropped from the Dow Jones Industrial Average and replaced by Nike, Visa and Goldman Sachs, various outlets are reporting.

The change, which will come when trading closes on Sept. 20, according to the Wall Street Journal, will be the Dow's most dramatic shakeup in a decade. In a statement to the WSJ, the S&P Dow Jones Indices LLC, which is responsible for the Dow, said that the move was "prompted by the low stock price of the three companies slated for removal and the Index Committee's desire to diversify the sector and industry group representation of the index."

This is a developing story, check back for updates. "
 
They should make V and GS split if they are going to be included in the DJIA. As it is their share prices are too high, they'll have outsized effects on the index's point movements going forward - like IBM does now.

AA, BAC, and HPQ, on the hand, have undersized effects on the DJIA's movements because their stock prices are so low. A price gain of 100% for AA would have about the same effect on the DJIA as a price decline of 5% for IBM would.
 
Alcoa, Hewlett-Packard and Bank of America to Be Replaced on Dow Industrials - WSJ.com

^^ From the Wall Street Journal

It changes the credibility of the index in my opinion - and turns the DOW into somewhat of a popularity contest.

Do you say that based on the change in the sector balance represented by the new DJIA component mix? Or do you think the new components are less relevant indicators than those they are replacing? Or something else?


EDIT: I'm not necessarily disagreeing with, just curious as to your thinking.
 

Dakota

~~~~~~~
Do you say that based on the change in the sector balance represented by the new DJIA component mix? Or do you think the new components are less relevant indicators than those they are replacing? Or something else?


EDIT: I'm not necessarily disagreeing with, just curious as to your thinking.


Both… the DOW isn’t perfect and if I had some choices, I think some changes would need to be made to the core representation…. But I must say that I do feel the new components are less relevant indicators and are changes I don’t like.

1. Goldman Sachs replacing BOA – BOA’s stock is slightly up and they have had their fair share of controversy over the years but it pales in comparison to the controversy I have seen out of Goldman Sachs. Two words, okay, three words subprime+mortage+mess… my two words were not so nice. Now, I will admit I have called Bank of America the Bank of Satan in the past but their shady practices make them look like members of the choir compared to GS’s practices.

2. Visa replaces HP – WTH? We are taking an American company that PRODUCES products and the powers that be have decided to replace it with a company that I associate debt accumulation with and not product development….. And besides, we have American Express which to me floats in the same boat as Visa.

3. Nike replaces Alcoa – Alcoa is another American core company and it is being replaced by NIKE? Seriously??? Nike shoes made all over the world? Maybe even in sweat shops. :eyebrow: Alcoa, like HP, seem so American to me… Nike and Visa don’t.


Here is one of the comments attached to the articles I've read...


“Alcoa, a Dow component for 54 years, will be replaced by athletic gear maker Nike Inc.”

Aluminum manufacturing, replaced by tennis shoes loved in the ghetto. That about sums up what the political party has done to our nation. And yes, there is only one “party”.

That about sums it up... Plus HP's stock has been on the up and up this year which I really didn't think we'd see again.... and replaced by Visa... just makes no sense to me.
 
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FreedomFan

Snarky 'ol Cuss
Aluminum manufacturing, replaced by tennis shoes loved in the ghetto. That about sums up what the political party has done to our nation. And yes, there is only one “party”.

Putting the "industrial" back in "industrials", eh?
 

Dakota

~~~~~~~
Putting the "industrial" back in "industrials", eh?

Yep and a financial institution isn't an industrial. Materials and technology out, overpriced shoes and money that is shifted around... putting people in bankruptcy, in... is NOTwhat I consider a good representation of the U.S. economy... :ohwell:
 
Both… the DOW isn’t perfect and if I had some choices, I think some changes would need to be made to the core representation…. But I must say that I do feel the new components are less relevant indicators and are changes I don’t like.

1. Goldman Sachs replacing BOA – BOA’s stock is slightly up and they have had their fair share of controversy over the years but it pales in comparison to the controversy I have seen out of Goldman Sachs. Two words, okay, three words subprime+mortage+mess… my two words were not so nice. Now, I will admit I have called Bank of America the Bank of Satan in the past but their shady practices make them look like members of the choir compared to GS’s practices.

2. Visa replaces HP – WTH? We are taking an American company that PRODUCES products and the powers that be have decided to replace it with a company that I associate debt accumulation with and not product development….. And besides, we have American Express which to me floats in the same boat as Visa.

3. Nike replaces Alcoa – Alcoa is another American core company and it is being replaced by NIKE? Seriously??? Nike shoes made all over the world? Maybe even in sweat shops. :eyebrow: Alcoa, like HP, seem so American to me… Nike and Visa don’t.


Here is one of the comments attached to the articles I've read...


“Alcoa, a Dow component for 54 years, will be replaced by athletic gear maker Nike Inc.”

Aluminum manufacturing, replaced by tennis shoes loved in the ghetto. That about sums up what the political party has done to our nation. And yes, there is only one “party”.

That about sums it up... Plus HP's stock has been on the up and up this year which I really didn't think we'd see again.... and replaced by Visa... just makes no sense to me.

Fair enough. I don't necessarily agree with you about BoA and GS, but that doesn't matter for these purposes.

I think Nike and Visa are probably more relevant today than Alcoa and HP when it comes to assessing the general state of the economy. But what it mostly comes down to is this: Alcoa, HP, and BoA have gotten too cheap on a per-share basis. Because the DJIA is price-weighted, their movements just don't affect the average much. Alcoa could go to zero - it could lose all of its value - and it would only drop the DJIA about 60 points. It's an insignificant part of the measurement. If IBM went to zero, the DJIA would drop 1,400 points even if every other component was unchanged. BoA and HP are bigger pieces than Alcoa, but still pretty small.
 
Putting the "industrial" back in "industrials", eh?

Yep and a financial institution isn't an industrial. Materials and technology out, overpriced shoes and money that is shifted around... putting people in bankruptcy, in... is NOTwhat I consider a good representation of the U.S. economy... :ohwell:

The DJIA hasn't been trying to be a measure of industrial activity for quite some time (using industrial in the more specific sense of manufacturing, rather than the more general sense). It's tried to be a broader measure of the economy, though it's still a pretty narrow measure. They've kept the name (DJ Industrial A) because it has significant brand value, and using the term industrial in the general sense it's still appropriate.
 
The US has no industry other than making burgers.

If you're using industry in the more specific sense as meaning something like manufacturing, then fair point - we're less and less a manufacturing-based society. But such is the case as nations advance - at some point manufacturing stops being the engine of prosperity growth, manufacturing doesn't serve that purpose as well anymore - they turn to other things, more service oriented and development oriented things. Those latter things become the engines of greater prosperity.

Manufacturing is becoming less important globally (i.e. the human labor component of manufacturing is), especially relative to other forms of industry (general use of the term). That's particularly so in the U.S. and other developed nations. That's a good thing for the most part, not a bad thing. We rode that train about as far as it could take us, now we're jumping on other trains that can take us further. Labor resources are dynamic in the aggregate, they adjust to what's needed and most useful.

Society used to devote tremendous labor resources to agriculture and food production. That represented a major growth engine for human prosperity for a while. But, over time, we advanced to the point that we didn't need as many labor resources for that and where it didn't provide as much growth in prosperity. It was replaced to some extent by manufacturing, we started devoting a great deal of labor resources to manufacturing and that represented a major growth engine for human prosperity. That cycle is likely reaching its zenith, we'll soon be moving on to other engines of human prosperity.
 
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