Posts filed under “Index/ETFs”

GM: Out of the Dow

We finally get the answer to the question we have been asking since 2007: When will GM get kicked out of the Dow?

The editors at Dow Jones are now hinting what everyone else already knew: GM is going to be replaced in the Dow Jones Industrial Average — and replaced sooner rather than later.

John Prestbo, an editor and executive director of Dow Jones Indexes, said “There are two choices for GM: bankruptcy or increased government ownership. Both of those events are negative for continued membership in the Dow. Definitely the trend is in the direction that would force us to remove it. I’m not going to say absolutely.”

While GM is not yet officially out, it is only a matter of time.

My bet for its replacement is Cisco (CSCO). As hard as it may be to believe in 2009, this internet thingie, which I think will be big one day, is not represented in the DJIA index. Cisco is a manufacturer who makes all of the plumbing for the net.

The closest thing to an internet company in the index is Verizon (VZ), whose market share in the net is relatively small, and whose income from internet related activities is even smaller.

There’s less risk in a pick like CSCO than say a Yahoo! which is no longer in ascendancy, or a Google, which could be perceived as a one trick pony by the Dow index editors.  I doubt we want any more financials in there (i.e., Master Card ro Goldman Sachs) as we have 4 already). And as much as I have been a Mac guy my whole life, I seriously doubt the editors at DJ are ready to “Think Different.”

Tom Petruno at the Money & Co blog of the LA Times noted this clever reader suggestion:

How about [adding] the U.S. government? They make cars, money, insure, provide mortgages, invest in securities, provide rail transportation, health insurance. You know, a real all-around company.

Good stuff, Tom!

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Previously:
When Does GM Get Kicked Out of the DJIA? (November 7th, 2007)

http://www.ritholtz.com/blog/2007/11/when-does-gm-get-kicked-out-of-the-djia/

When Does GM Get Kicked Out of the Dow, part II (June 26th, 2008)

http://www.ritholtz.com/blog/2008/06/when-does-gm-get-kicked-out-of-the-dow-part-ii/

Sources:
GM Faces Ouster From Dow as Automaker Mulls 60 Billion Shares Share
Eric Martin
Bloomberg, May 7 2009

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_HrdoOgKB8g&

Got an idea for a Dow stock? GM may get booted soon
Tom Petruno
LATimes, May 6, 2009

http://latimesblogs.latimes.com/money_co/2009/05/the-dow-jones-industrial-average-may-have-an-opening-soon-dow-jones-co-is-signaling-that-its-ready-to-boot-general-moto.html

Category: Index/ETFs, Markets

Bianco: The Dow is Distorted

Bianco: The Dow is Distorted January 21, 2009 James A. Bianco, CEO of Bianco Research, LLC Comment – The Dow Jones Industrial Average (DJIA) is a price weighted index. The divisor for the DJIA is 7.964782. That means that every $1 a DJIA stock loses, the index loses 7.96 points, regardless of the company’s market…Read More

Category: BP Cafe, Data Analysis, Index/ETFs

Mutual Funds — Down, Down, Down

Average decline in diversified mutual funds in 2008 was 40% and the outlook for 2009 is unclear.

1/12/2009

Category: Index/ETFs, Investing, Video

Here Comes the Commodity Index Rebalancing

The major commodities indices are being rebalanced, and I am forced once again to question their timing. Recall the last major rebalance: At the time, I had been challenged by Larry Kudlow to find a smoking gun for the sudden 2006 collapse of Oil prices a month or two before the mid-term election. That challenge…Read More

Category: Commodities, Energy, Index/ETFs, Markets, Politics

ETF Mayhem

> No, Cramer isn’t behind this — they are merely paying distributions of dividends. >

Category: Index/ETFs, Markets

Fed Fighting Deflation

Here is the money paragraph: The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level.  As previously announced, over the next few quarters…Read More

Category: Bailouts, Federal Reserve, Index/ETFs

How to become Ultrabroke

Mark McHugh is a financial professional and former associate of a large investment firm.
He provides fee-based financial planning and tax preparation services in the Philadelphia area.

Editor’s Warning: Although Mark McHugh shares a surname with a respected contributor to The Big Picture Café, we’d like to state for the record, that Mark doesn’t know Jack.

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Are You getting ETF’d?

Objective: UltraShort Blah-Blah ProShares seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Blah-Blah Index.

Remember when you first heard about these leveraged ETF’s? That little part of your brain that actually wants you to survive started flailing its’ arms saying, Hold on there, Chief…. Double the gains?…How does this work?…How much fees and expenses?…Can this possibly work?…Remember? And you said, “Shut-up brain, I know what I’m doing.” Double your pleasure, double your fun, double your risk of cardiac arrest while just sitting in front of a computer. Now look at you, after a handful of “Plaxico” incidents, trying to externalize the whole thing.

Real men don’t read prospectuses, I always say. So when the eggheads at ProShares (and others) offered to warp time and space just for me, I was excited. Now, thanks to the recent performance of the SRS (ProShares Ultra-short Real Estate) and URE (ultra-long), I believe I’ve discovered a wormhole to a whole new dimension of excitement.

Take this past Monday, for instance:

While not able to understand to understand the Theory of Relativity, I can multiply by 2 (and subtract). Is a couple percent off target anything to be concerned about? The difference amounts to about $0.13 for URE holders and about $4.35 for SRS longs. I’d multiply that by the number of shares outstanding, but the only data I can find (MSN) says there are 8m shares of SRS outstanding (it traded over 15m today). And Yahoo says the expense ratio is 0.95% (sometimes the jokes just write themselves).

Read More

Category: BP Cafe, Index/ETFs, Markets

Mega-Bear Quartet

Doug Short overlays the 4 major bear markets of the past centruy onto one chart. Its a comparison of today’s S&P 500, the Dow post 1929, the Nikkei post 1989, and the NASDAQ after the tech bubble: > Chart via Doug Short Here’s another link that allows you to see the comparison by degrees. Very…Read More

Category: Index/ETFs, Markets, Short Selling, Technical Analysis

Stopped Out Longs, Possible Shorts

Dow is at 7997.28; S&P500 is at 806.58. Our cash position is back to 75%, we are still 25% long (including inverse funds). On this break, we could see (technically) a low of 681 on the SPX, Dow 7,100, and Nasdaq 1070. (There are deeper levels, but its too ugly to write now). Last week,…Read More

Category: Index/ETFs, Technical Analysis, Trading

ETF volume relative to underlying index volume

As the market has sold off since January, exchange-traded fund volumes have outpaced those of the underlying indexes, suggesting that ETFs are increasingly becoming the hedging and speculative mechanisms of choice in the U.S. equity market. Since the year began, volume in the PowerShares QQQ (QQQQ) ETF relative to the Nasdaq-100 index has jumped from…Read More

Category: BP Cafe, Index/ETFs, Technical Analysis