Posted by: David Kiley on March 10, 2009
There is buzz on Wall Street that General Motors may soon be dropped from the Dow Jones Industrial Average, made up of 30 bellwether companies. Citi is also rumored to be on the Dow block.
I get why Dow Jones would be considering it. Should the extreme woes of two companies, with problems that are out of proportion to the other listed companies, drag down the whole stock market index?
Are their problems so horrific that they distort the usefulness of the index to track the broader market?
On the other hand, if both these companies are both so intertwined throught the U.S. and gloal economy, and are too big to fail, shouldn’t they be part of a true market index even if they are trading at near a buck a share?