Skip to comments.Does Goldman have a better economic pulse than BofA? Why replace the latter in the Dow Index?
Posted on 09/11/2013 7:21:38 AM PDT by SeekAndFind
Dow Jones says a goal of the 30-stock index is to capture the pulse of the broader economy. So why replace a rebounding Bank of America with Goldman Sachs?
In the biggest change of the 30-stock index in nearly a decade, three companies will be replaced on the Dow Jones Industrial Average. Alcoa, Bank of America, and Hewlett-Packard are out, Nike, Goldman Sachs, and Visa (V) are in.
The shake-up partly reflects declining fortunes and share prices, but the timing and reasons are nonetheless curious when we look at the departure of Bank of America (BAC). Like other big banks, the Charlotte, N.C.-based bank lost big from the subprime mortgage market meltdown, and it's hard not to wonder why the Dow didn't delist the bank when it was losing billions of dollars and had the government swoop into the rescue.
The Dow gave Citigroup (C) the boot in 2009 while it was recovering from its own taxpayer-funded bailout following the financial crisis. Like Bank of America, it is steadily coming back -- Citi is trading at about $50 a share today, roughly where Bank of America was in 2007.
To be sure, the Dow (INDU) is a price-weighted index. So unlike the closely watched Standard & Poor's 500-stock index (SPX), which is weighted by market capitalization or essentially a company's size, the Dow is driven largely by stock prices. Today, Bank of America is trading at about $14 a share as it continues its road to recovery largely by cutting costs. Next to Alcoa (AA), Bank of America had the second-lowest stock in the index. But it was up from $5 at the end of 2011.
(Excerpt) Read more at finance.fortune.cnn.com ...
i can’t tell which is more of a tool for the government BofA or GS
BoA has 50 billion in corruption liability due to the foreclosures and countrywide - so, they will BK them to get rid of the liability soon.
One thing I am pretty sure of - Our Govt. is the tool of GS.
I’ve wondered about that myself.
On one hand W. Buffett took a large position in BofA at around $8/sh a few years ago. We all know Grandpa Warren is the ultimate crony capitalist.
On the other hand GS rules the world, according to independent trader Allesio Rastani, in a widely public interview with BBC. He may be right, or mostly right...who knows?
Goldman will probably keep the Dow from becoming less relevant than it otherwise would be. Just my opinion.
Goldman Sachs made at least 25 million dollars in trading on EVERY DAY IN THE FIRST QUARTER....FIRST TIME THAT HAPPENS EVER FOR THEM. EVER. EVERYDAY A WINNER.