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What would happen if the Dow Jones Industrial Average (DJI) replaced General Motors (NYSE: GM)?
Chart Courtesy of StockCharts.com
It's hard to predict, of course, as much depends on what company replaced the once venerable name. Lots of names get thrown around, such as Apple, Cisco, and even Pepsico. But, one thing is clear, it's something that has to be on the minds of the Dow Jones guys that put together the indices.
But, there is a lot to consider before making the choice. After all, you want a company that is big enough to fit in with the rest of the giants. And you also want a stock that is not so volatile that by itself can influence the entire index when events that affect it lead to big moves.
Some have talked about Google as a replacement. But, it's volatility and the fact that it's always in the news make it an unlikely candidate. Some oil and oil service companies, such as Schlumberger and Conoco Phillips have also been thrown around as possible replacements, according to some sources.
At this point, no one really knows which company it will be. But as talk of bankruptcy for GM rises, it's fairly clear that at some point the stock will be gone from the Dow Jones Industrial Average.
So, returning to our original question. What would happen if GM gets removed from the Dow? Psychology would likely change, certainly at GM, one of the most American of companies, which would essentially cease to formally exist as a blue chip. Beyond that, it's anyone's guess, as more dominoes would likely fall.
These are interesting times indeed.
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Doctor Joe Duarte's Market I.Q., offers subscribers a unique blend of intelligence, market commentary and trading strategy. Duarte's daily articles, and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Doctor Duarte is a writer, and an emerging futurist, with a diverse background, and a growing audience. His combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of four books: "Futures And Options For Dummies," "Successful Energy Sector Investing," "Successful Biotech Investing" and co-author of "After-Hours Trading Made Easy."
In early 2001 Dr. Duarte in "Successful Energy Sector Investing," correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States.
In 2003, also Dr. Duarte was among the first to widely publicize the long-term friendship between French President Jacques Chirac and Saddam Hussein.
He has also appeared as a weekly guest on Market Mavens Radio, has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990.
His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines.
In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.
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