On September 20th the Dow Jones Industrial Average will shake-up its roster of names—the biggest change since 2004. The move says a lot about where the country stands today and also the casino mentality of the market. Let’s talk about the casino first.
The pit bosses at the Dow are basically timing the market to put the odds in their favor. The Dow is a price-weighted index meaning the higher priced stocks have a greater influence. Bank of America which closed at $14.64 yesterday is being replaced by Goldman Sachs which closed at $165.30. The financial sector was up 29% last year and is on another run this year. But this is a “horse out of the barn” move by the pit bosses and tells you that even after the bailouts Wall Street still runs America.
The replacement of Alcoa by Nike is truly breathtaking. In Nike, we’re talking about a company that runs sweat shops in Asia and sells the crap back in the U.S. It’s another sector bet by the Dow bosses with Alcoa closing at $8 and Nike at $66.55. And for a nation built on credit Visa will replace Hewlett-Packard.
All in all the new Dow names reflect the world we live in—a poster child for the Wall Street bailouts, low wage sweat shops in Asia, and I.O.U. Nation. What a waste of a storied franchise such as the Dow.
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