Wednesday, September 17, 2008

AIG, Merrill Lynch, and the DJIA: Questions

Someone on CNBC asked an interesting question of NY State Insurance Dept. Superintendent Eric Dinallo this morning: might AIG have avoided this crisis had Elliot Spitzer not forced out long-time AIG chief Hank Greenberg? Dinallo, who was nominated to his position by Spitzer during his scandal-truncated governorship, declined to speculate.

Two questions I haven't heard anyone speculate on yet (though I'm sure I'm not the first person to think of this): Is there any chance AIG will stay in the Dow Jones Industrial Average after this? If not, what companies will replace AIG and Merrill Lynch in the DJIA? It will be interesting to see if the editors of the Wall Street Journal use this opportunity to replace one or both of these companies with non-financial companies, to reflect the contraction of the financial sector as a percentage of the economy.

4 comments:

DaveinHackensack said...

Eddy Elfenbein snarkily asks whether the Fed should replace AIG in the Dow. Then he makes an interesting point:

"On a side note, little changes to the Dow can have major impacts. The editors of the Wall Street Journal changed the index in 1939 by tossing out IBM (IBM). They added it back in 1979. In those 40 years, IBM gained 22,000%. If the editors had left it in, the Dow would now be about 35% higher than where it is now. All the historical benchmarks would be different. The Dow would have cracked 1,000 in 1961 instead of twelve years later.

Behold the power of one really good stock."

Albert said...

AE commented more on PNWIF yesterday

DaveinHackensack said...

Saw that, Albert, but thanks for the heads up.

mpc said...

What was the last DJIA member to go bankrupt? Woolworth's?