CNNMoney: Dow should replace AIG with Apple

“A blowup at AIG could have an even bigger impact on the stock market than Lehman, WaMu and even Fannie Mae and Freddie Mac have already had,” Paul R. La Monica, editor at large, writes for CNNMoney. “That’s because AIG is a component of the venerable Dow Jones industrial average.”

“A further plunge in the value of AIG would threaten to drag the Dow deeper into bear market territory since there is still a long way to go down. AIG, with a current market value of $32.6 billion, is worth nearly five times more than Lehman and WaMu combined,” La Monica writes. “In addition, AIG is a company that more average consumers deal with than Lehman, since the firm has a massive life insurance business and retirement planning unit.”

“With this in mind, it might be time for the editors of The Wall Street Journal, who manage the Dow Jones indexes, to start thinking about replacing AIG in the Dow,” La Monica writes. “Now, the editors at the Journal typically do not make rash decisions about removing and adding companies to the industrial average. In addition, it’s rare for them to just remove one company at a time.”

“But as I’ve argued in several previous columns, I also think that it may be time for General Motors (GM, Fortune 500) to get booted from the Dow,” La Monica writes. “Analysts expect GM to lose $10.2 billion this year and another $5.1 billion in 2009, and now has a market value of only $7.4 billion, making it by far the smallest Dow component based on this measure.”

La Monica writes, “So if AIG and GM are both removed from the Dow, who could replace them? …In the world of technology, an industry that the U.S. has continued to hold its own, either Apple or Cisco could be an intriguing addition.”

La Monica writes, “Apple dominates the consumer electronics market with its iPod and iPhone and is expected to generate $40.4 billion in sales in its next fiscal year – higher than the estimated revenue for Dow components Coca-Cola, Walt Disney and Alcoa.”

Full article here.

[Thanks to MacDailyNews Reader “MacDoc” for the heads up.]

44 Comments

  1. “Apple dominates the consumer electronics market with its iPod and iPhone and is expected to generate $40.4 billion in sales in its next fiscal year – higher than the estimated revenue for Dow components Coca-Cola, Walt Disney and Alcoa.”

    Even 8 years ago I would have never imagined I’d read such words.

  2. Even Apple is being affected by this post real estate bubble recession

    There is a large demand for PC repair techs right now. That’s what I’m making a killing on right now. People are cutting back and having their cheap computers fixed rather than buying a new one.

    Just look at the latest Dell losses.

    Of course Apple has those god awful glossy screens, which the majority of online polls (search: “glossy vs matte”) show that people DON’T WANT THEM!!

    What the heck is the use of a computer if you can’t see what’s on the screen?

    Stupid choices in Cupertino lately, must be the California smog and the heat.

    MacBook Pro: OS X, VISTA, XP (and soon Linux ” width=”19″ height=”19″ alt=”smile” style=”border:0;” /> )

  3. Wait a minute, Raver. Let me fix that for you.

    It should be those “Dam glossy liberal socialists working for the AT&T/NSA that are the real problem.”

    The last thing we need is for someone to think you have any credibility.

  4. American International Group, Inc. (AIG) (NYSE: AIG) is a major American insurance corporation based in New York City. The UK headquarters are located on Fenchurch Street in London, England, UK, Continental Europe operations are based in La Defense, Paris and its Asian HQ is in Hong Kong. According to the 2008 Forbes Global 2000 list, AIG was the 18th-largest company in the world. It became a component of the Dow Jones Industrial Average on April 8, 2004. As of March 16, 2007, AIG Investments, a division of AIG, completed the purchase of 100% of the stock of P&O;Ports North America from Dubai-based DP World.

    AIG’s history dates back to 1919 by when Cornelius Vander Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese. After his business became successful in Asia, he expanded to other markets, including Latin America, Europe, and the Middle East.

    AIG owns ILFC (International Lease Finance Corporation), the world’s largest aircraft leasing company, with hundreds of aircraft ranging from Airbus A319s to Boeing 747s.

    Through various subsidiaries, AIG owns almost 100% of 21st Century Insurance Group.

    AIG owns American International Assurance known as AIA. It is an insurance company based in Hong Kong and has offices in the Asia-Pacific region.

    AIG directly owns 9.9% of People’s Insurance Company of China (PICC). Through three subsidiaries plus its direct ownership, AIG actually owns 19.8 percent.

    AIG owns Stowe Mountain Resort. AIG’s connection to Stowe started when C.V. Starr, the company’s founder, invested in the resort in 1946. It is AIG’s sole ski business. At Stoic Old Stowe, a New Era

    As of August 2007, AIG Investments (through its member company AIG Capital Partners, Inc.) acquired a 90% stake in Bulgarian Telecommunications Company (BTC) from Viva Ventures Holding GmbH (“Viva”) and certain minority shareholders. Then, in May 2007, Novator and Viva signed an agreement for AIG Investments to acquire Viva’s 65% stake in BTC.

    AIG also owns AIG American General, a life insurance company based out of Houston, Texas. American General Life Insurance Company owns Matrix Direct Insurance Services, one of the largest direct marketers of Term Life Insurance which it aquried from Protective Life Corporation in 2007.

    AIG owns Ocean Finance[5] a UK based company providing home owner loans, mortgages and remortgages.[6]

    AIG also owns a share in London City Airport.

    (source: wikipedia)

  5. @G Spank,

    Britain has had 10 years of Labour – read Democrat – and it is in far worse a stae than the US. Accoding to the OECD and EU Britain is likely to be the only developed nation to be in recesssion by the end of the year. Labour spent every penny and it has nothing left in the kitty.

    You might be arguing instead that the greedy buggers on Wall Street are reaping what they sowed. I’d have thought you’d like that…

  6. @MikeR

    I agree, not to make it a political war… im independant….The economy isn’t suffering JUST because a republican has been in office for 8 years. Its not only USA thats suffering either.

  7. Mike R:

    6 of the last 8 years were Republican rule; the Democrats margin is too slim presently, to prevent Republican filibusters or to override the inevitable Bush veto. This mess is all due to Bush and his Republican cronies ill-advised war on Iraq, which is costing this nation over 300 million dollars per day. Don’t try to blame the Democrats for that.

  8. 8 years of Republican leadership and we have an economy that is on the edge of collapse.

    8 years of Clinton did nothing to prevent it either.

    It’s GLOBAL ECONOMICS!

    These series of problems extend back even further than the Reagan years.

    For example, the FDIC insured deposit amount is only a pitiful $100,000. A lot back when it was incorporated, but has not kept up with inflation.

    The anti-inflationary policies of the 70’s have reduced inflation to nearly below 1% on two occassions in the 90’s, the Federal Reserve drastically lowered the prime interest rate to stimulate the economy, thus causing a real estate bubble.

    We are currently going through a post real estate bubble recession. A depression will occur if the Democrats increase taxes, which they will on everyone because the rich alone can’t pay for everything our government needs.

    China draining the world of oil for the Olympics is the PRIMARY reason for the oil bubble. Increased demand with little supply. The Saudi’s have new fields to come online in 2009 which will prevent this from occuring again.

    Now oil is dropping because China’s exports have shrunk because of the global economic slowdown caused by the post real estate bubble recession in the US.

    Think globally, get your information from CNBC. Not MNCB where all they can talk about is hating George Bush.

    Hate doesn’t solve problems, it’s just a political tool by the ignorant to get the angry vote. Just like envy of the rich gets the poor vote.

    Most rich people I know are working hard to keep people employed, they feel it’s the right thing to do. They could lay around and do nothing, but it bores them, so they start a business to keep busy and keep people fed.

    Top Democrats love to attack the rich, but they have more money than most.

    Maybe they should feast on themselves instead.

    Socialism has FAILED everywhere it has been tried.

    People don’t work if everything is handed to them on a silver platter.

  9. The financial health of a business directly reflects the choices it has made. The failing enterprises were not instructed by the Congress or the President to invest in securities of dubious value. The failing businesses purchased those securities in search of higher returns. The failing businesses made bad choices.

    If you believe the Congress or the President should be able to call your company and tell it what to do, please consider relocating to the fine nations which offer this method of government. Examples of these exotic nations include China, Cuba, Venezuela, and North Korea. There you will be able to explore the many desirable career opportunities that await you.

    The financial health of Apple is a direct reflection on the choices made by its management and employees. They have my every respect and gratitude.

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