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December 2, 2008 8:55:10 PM CST

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Time for the Dow to Ditch Ailing AIG

Posted Sep 16, 08 3:45 AM CDT in Opinion,  Business 

(Newser) – The downsizing of American International Group should spur its ejection from the Dow Jones 30, Paul R. La Monica writes in CNNMoney. The company's inclusion in the index means its troubles will hurt the market even more than the tribulations of Lehman, Fannie and Freddie—its shedding of divisions will remove the rationale that got the insurance giant included in the first place, La Monica adds.

The Dow's editors don't tend to remove listings lightly—or singly—notes La Monica, but the deterioration in GM's business should make it another candidate for the boot. Wells Fargo, Apple, and Cisco Systems should be considered to replace AIG and GM, La Monica argues. Apple and Cisco represent an industry where the US "has continued to hold its own," he writes—and Wells Fargo is widely seen as one of the better-run banks.

Source CNNMoney

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Pedestrians walk past AIG headquarters on Monday, Sept. 15, 2008 in New York.   (AP Photo/Jin Lee)
A headline announcing that News Corp. has offered to buy Dow Jones for $60 a share is displayed under the Dow Jones logo in Times Square in New York in this May 1, 2007 file photo.   (AP Photo/Peter Morgan, file)
A trader works on the floor of the New York Stock Exchange, Thursday, Sept. 4, 2008 in New York.   (AP Photo/Mary Altaffer)
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The Dow is not a mutual fund and should not be managed just because of stock price. But the evaporation in the market values of AIG and GM are the result of a severe deterioration in their actual business. - Paul R. La Monica

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Financial Crisis • Dow Jones • Wall Street Journal • AIG • Wells Fargo • insurance companies • American International Group


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