New Additions: Dow Jones Listens to Bloggers

In the WSJ, John Prestbo explains why they decided to replace GM and Citigroup (C) with Cisco (CSCO) and Travelers (TRV) today. Here are some highlights:

Did the fact that Travelers used to be part of Citigroup play a role in choosing that particular insurance company?

No. Citigroup spun off Travelers in 2002, so it has been operating independently for going on seven years. And it was independent prior to becoming part of Citigroup in 1998. We were committed to restoring the insurance sector to the Dow after ejecting American International Group, Inc. (AIG) last September after the government takeover. Travelers is a property and casualty insurer, as AIG is, and it is certainly a leader in that industry.

Why choose a tech company, Cisco, to replace an automaker?

We did not need another consumer goods company after adding Kraft Foods when we removed AIG. In looking around, we were struck by the fact that Cisco makes products that pave the Information Highway - computer networking equipment, things that enable high-speed data and video transmission, and so on. We saw Cisco helping the economy and culture adjust to the digital age, much as automobiles influenced economic and social changes in the 20th Century.

Well, why not Apple (AAPL) or Google (GOOG)?

Those companies certainly qualify as blue chips, but we chose Cisco this time.

This part really caught my attention:

Cisco has been on bloggers' suggestion list for a long time. Do you pay any attention to these kibitzers?

Yes. They and many others take the Dow seriously enough to complain when they think we are doing something wrong and to offer their ideas. So, we take them seriously in return. However, most of these folks are looking at things from an investor's point of view, as though the Dow was a portfolio they owned (and maybe some of them really do). But our goal is to maintain an index to accurately reflect the market as whole, and by extension the U.S. economy. That is a different purpose, which sometimes leads us in a different direction.

Good for them! I'm glad they did two things. One, they listened to bloggers. Two, they said they listened to bloggers.

This is pretty big news for financial blogs. We're talking about a 113-year-old index and one of the best brand names around.

Now... about Bing.

Comments

[tech man:]

where will citi go from here. will it go to another exchange or what. please answer that question please. i have several shares it citi and do not know what to do. thanks

Jun 02 01:08 PM

[MarkGillCPA:]

tech man,
Citigroup will continue to trade on the New York Stock Exchange under the symbol "C". It just will not be included in the 30 stocks that make up the Dow Jones Industrial Average.

Jun 03 11:10 AM