This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Would the Dow Dump General Motors?

General Motors (GM - Get Report) may get dumped by the Dow Jones Industrial Average if the nation's biggest carmaker strikes the wrong kind of bailout deal with the government.

Just like American International Group (AIG - Get Report), membership in the Dow may depend on the kind of deal it strikes with the government, said John Prestbo, editor and executive director of Dow Jones Indexes.

"We took out AIG because the government took a big stake in that company, and now GM has its hand out and we'll be taking a close look at what form it takes," Prestbo said. "If it comes at all, then we'll look at replacing GM."

Chrysler got the boot in 1979, when it faced its bankruptcy days. So, the writing is on the wall for GM, which has said it doesn't have enough cash to last another year.

That means that all the ETF's and index funds pegged to the DJIA will need to change accordingly, putting GM in a potential death spiral.

Here's how it goes. Government helps out to save the company. Dow drops GM. Funds and ETF's engage in full-scale selling that drives the value of the stock down even further from its current historic lows.

The assistance that most financial firms have received isn't quite so problematic because the government didn't take an ownership position.

American Express (AXP - Get Report) is in the Dow and will get huge relief from the Federal Reserve by putting up credit card payments as collateral in exchange for loans.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AIG $59.45 0.59%
AXP $75.26 0.43%
F $13.84 -0.22%
GM $29.11 -0.34%
HMC $30.94 0.42%

Markets

Chart of I:DJI
DOW 16,374.76 +23.38 0.14%
S&P 500 1,951.13 +2.27 0.12%
NASDAQ 4,733.4970 -16.4820 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs