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Kraft Foods to Replace AIG in Dow

Posted By Barry Ritholtz On September 18, 2008 @ 9:38 am In Index/ETFs,Markets | Comments Disabled

Wow, that didn’t take long . . . effective September 22 (Monday).

AIG, which joined the Dow in 2004, is the latest in a series of disastrous Dow picks: Microsoft, Intel, and Home Depot . . .

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Here is the statement from the Dow committee, via the WSJ:

Kraft Foods [1] Inc. will replace American International Group [2] Inc.
in the Dow Jones Industrial Average effective Monday, a further sign of the woes
afflicting the insurance giant.

The change comes as the federal government late Tuesday agreed to take over
the troubled insurance giant in an $85 billion bailout.

The composition of the Dow industrials was last changed in February, when Bank of America [3] Corp. and Chevron [4] Corp. replaced former
Kraft parent Altria Group [5] Inc. and Honeywell International [6] Inc.

Robert Thomson, managing editor of The Wall Street Journal and overseer of
the Dow’s makeup, said not adding a financial company to replace AIG is prudent
at this time "because of the extremely unsettled conditions." He added Kraft was
added because the index has no food companies.

Dow Jones Indexes editor John Prestbo said pulling AIG from the index stemmed
from AIG’s "effective nationalization … and its very low stock price."

Shares have tumbled 90% this month as investors got increasingly concerned
about AIG’s ability to raise capital. That crisis of confidence, coupled with
credit-rating downgrades earlier this week, effectively forced the government to
step in after private entities refused to help in the firm’s rescue without risk
guarantees.

AIG joined the Dow industrials on April 1, 2004.

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Source:
Kraft to Replace AIG in Dow [7]
KEVIN KINGSBURY
WSJ, SEPTEMBER 18, 2008, 9:34 A.M. ET
http://online.wsj.com/article/SB122174423720252297.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2008/09/kraft-foods-to-replace-aig-in-dow/

URLs in this post:

[1] Kraft Foods: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=kft

[2] American International Group: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=aig

[3] Bank of America: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=bac

[4] Chevron: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=cvx

[5] Altria Group: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=mo

[6] Honeywell International: http://www.ritholtz.com/blog/public/quotes/main.html?symbol=hon

[7] Kraft to Replace AIG in Dow : http://online.wsj.com/article/SB122174423720252297.html?mod=googlenews_wsj

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