DOW Components Change

CNBC/Bloomberg ^ | April1,2004 | CNBC/Bloomberg

[BenLurkin]

Just announced on CNBC and Bloomberg Financial television:

AT&T and International Paper have been dropped form the Dow Average.

Verizon and AIG to be added.

Effective April 8th.

[dogbyte12]

How can you actually judge historical performance when you get rid of companies? I can see if a company goes bankrupt, out of business, etc... removing them, but removing a bellweather stock because it's size isn't so great kind of defeats the purpose of the average IMHO.

[TexasGunLover]

Wow, weren't they doing OK in the mid 90's with Ernie Davenport as CEO? I have not followed them at all.

Their market is so cyclical that yes, they were doing very well, but Ernie turned out to be a horrible CEO and ran the company into the ground with some poor acquisitions that were only designed to make him richer. Ultimately, he's put the company in a horrible position and had a great parachute.

[CasearianDaoist]

I worked at Bell Labs for several years, I left just shortly after they broke it AT&T. I know its history quite well.

[Wright is right!]

"I worked at Bell Labs for several years, I left just shortly after they broke it AT&T. I know its history quite well."

What's doubly amusing is to stand by and watch as the Baby Bells re-assemble themselves by merger - minus the top-heavy AT&T structure. They still do have, however, that incredibly arrogant AT&T attitude.

Which is why MY niche works so well. My customers are small-to-medium business that want the top-notch Avaya product without paying Fortune 500 prices and dealing with the Avaya attitude (one thing that divestiture couldn't stop them from holding over.) We save them the grief and the money.

Michael

[July 4th]

Those stocks will also get a nice rise today since mutual funds that follow the Dow by direct purchase of shares will need to acquire them. Likewise AT&T and IP will be down today.

[CasearianDaoist]

Well whatever the plus in the telecomm business sector, the Nation is worse of for the passing of the old Bell labs. They hardly do any basic research anymore - they are a shadow of what they once were. That type a basic, "quantum leap" research is not being done much in this country now, and what is is mostly down the paths of what was already done. I am talking about things like the transistor, the laser, microwave, telecom satellites etc. We live in another world now. Universities do not have the money and most firms so not have the attention span for this sort of work. It required a semi-regulated monopoly to get these sort of things done. The "attitude" that you speak of is more a reelection of the fact that AT&T was a sort of national utility prior to Charlie Brown, not some sort of innate vileness of character.

The transition could have been smother, we lost another national asset. But know since we seem to think that we can move our entire technology industry overseas I guess it does not matter (that one strikes me as pretty arrogant.)

[P.O.E.]

Over the years, a lot of huge companies were spun off of AT&T. Not only the RBOC's, Avaya, Lucent, etc.

NBC

Western Electric's system for bringing sound to motion pictures, cellular technology, television, satellites, etc.

Western Electric was also instrumental in the startup of overseas companies: NTT and NEC (Japan), Alcatel (France), Northern Telecom (Canada), etc.

Don't forget Bell's work with the deaf, including being the inspiration for Helen Keller to work with Anne Sullivan.

[js1138]

This move should drive the market farther up. Since the new companies are looking better than the ones being replaced.

It's George Bush's fault.

[Moonman62]

Beats the hell out of me. Because U.S. Steel and Archer Daniels Midland paid for the proprietary rights to the Soviet flag?

Because Marx considered only labor that produced tangible goods such as farming and manufacturing to be valid economically. It's all in Das Kapital, and in many posts here on FR, though Marx is seldom given credit. At least conservatives tend not to subscribe to communal property.

[Alberta's Child]

Because Marx considered only labor that produced tangible goods such as farming and manufacturing to be valid economically.

You mean Karl Marx was an advocate for small government?

I guess he wasn't as far off the beaten path as I thought. I've said for a long time that the most critical sectors of the U.S. economy were manufacturing, construction, agriculture, and mining -- based on the same rationale that Marx used.

[Moonman62]

You mean Karl Marx was an advocate for small government?

I think communal property ensures that the government will be totalitarian. Just make sure the hammer and sickle is below the Stars and Stripes on your flag pole.

Manual labor in manufacturing and farming eventually gets replaced with automation and other productivity improvements. Even though only about 20% of our labor force is in that category, our agricultural and manufacturing output is still number one in the world by far.

An economy where most of the labor manufactures tangible goods is just a phase in the evolution of a healthy economy. The Soviet Union got stuck in that phase, which is why Reagan was able to defeat the them economically even after a decade of Nixon, Ford, and Carter.

[headsonpikes]

When they add Newmont, it'll be time to sell my gold shares.

Those two stocks I gave the board last fall have each more than tripled, and my boots are still full! ;^)

[FlatLandBeer]

I like "The Donald" But he has a big EGO.
Will you have one too?

[backslacker]

D.J.I.A. F.A.Q.:

How are stocks picked for the DJIA? The editors of The Wall Street Journal select the components of the industrial average. They take a broad view of what industrial means, too; in essence, it is almost any company that isn't in the transportation business or isn't a utility (because there also are Dow Jones Averages for those kinds of stocks). In choosing a new company for the DJIA, they look among substantial industrial companies with a history of successful growth and wide interest among investors. The components of the DJIA are not changed often. It isn't a "hot stock" index, after all, and the Journal editors believe that stability of composition enhances the trust that many people have in the averages. The most frequent reason for changing a stock is that something is happening to one of the components, such as being acquired. Whenever one stock is changed, the rest are reviewed.

http://www.djindexes.com/jsp/avgFaq.jsp#q3

[RightWhale]

It's all in Das Kapital, and in many posts here on FR

Even manufacturing is a secondary industry. Mining and agriculture are primary industries. Timber and fishing count as ag.

[Citizen of the Savage Nation]

AT&T barely resembles the giant it once was. Before Divestiture, AT&T owned all the long lines (long distance), all the local Bell companies, the Western Electric manufacturing arm, and every last phone in the country. AT&T spun off manufacturing long ago to Bell Labs Lucent, which further divvied itself up in the 90's, spinning off its Enterprise unit to Avaya and making Lucent primarily a maker of Central Office switches. AT&T now consists only of a long-distance fiber and microwave carrier and a cellphone unit, and they're merging that away as we speak. There's really not all that much left of a once-proud company. And soon there won't be ANYTHING left of them, because they still have that Al Qerry arrogance about them.

I was just talking to a co-worker about AT&T this week, how they seem to be in a death spiral. So, they've sold off their cash-cow Cable and Internet business to Comcast, and now their cash-cow Wireless business to Cingular...to focus on what? What's left? Long distance land-line?

Don't make me laugh.

After all the money from the sell-offs dries up, then what?

[Aeronaut]

I just loved it when McDonald's became one of the industrials.

[Wright is right!]

"After all the money from the sell-offs dries up, then what?"

Like I said in an earlier post, they'll either complete die off or they'll go commercial trunk - providing fiber and perhaps satellite feed service. A business-to-business model. They've run so far from any consumer business that I don't think they have any other choice.

Michael

[qam1]

Oh man Verizon doing that great,

They were Evil when they were Bell Atlantic, They were evil when they were Nynex and they are still evil as Verizon.

I was hoping they would go the way of Worldcom or Enron and their leaders would end up being forced to sell their daughters into Prostitution in order not to starve to death.

!&!@#*()*()&^!@*( a*(*()!@&!*()$&!@()$!@&#$()!$&)!@

[JohnKeble]

I agree with dogbyte12. How can you fairly judge historical performance if you keep changing who is in the Dow? I may be missing something, but it appears as if whenever this happens that weaker companies are replaced by stronger ones, thus distorting what is really happening in the markets. When so much attention is paid to one index, it is easier and more tempting to manipulate perception. What does this do to all of the charts we've seen telling us how great the stock market has done historically?