Perspective On Dow Changes, CNNfn

David Haffenreffer
1,030 words
1 April 2004
CNNfn: Money & Markets
English
(c) 2004 FDCH / eMedia, Inc. All Rights Reserved.
 

DAVID HAFFENREFFER, CNNfn ANCHOR, MONEY & MARKETS: Welcome back to MONEY & MARKETS. I`m David Haffenreffer; recapping today`s action for you on Wall Street.

The people who decide which companies make up the Dow Jones industrial average like to take their time between announcements. Don`t they? Dow Jones announcing three new additions and three new subtractions to the Dow 30 today. The first reshuffling since 1999. Coming out of the Dow, AT&T , Eastman Kodak and International Paper . Going into the Dow 30, insurance giant AIG , the drug firm Pfizer and the telecom company Verizon .

The Verizon Chairman and CEO Ivan Seidenberg told CNNfn today about the significance of being added to the Dow

IVAN SEIDENBERG, CHAIRMAN & CEO, VERIZON: It is a recognition of what we`ve been trying to build over the last four or five years. I think Dow Jones said it well in their press release. This represents a set of companies that show leadership the space.

HAFFENREFFER: Here with his take on the Dow changes, is Jack Schannep, he is editor of the newsletter The Dow Theory.com. He joins us from Tucson, Arizona.

How are you? Welcome to the program.

JACK SCHANNEP, EDITOR, THEDOWTHEORY.COM: Fine, David. Thank you.

HAFFENREFFER: Conversely, to what the Verizon chairman said, is it a blemish on the record of a chairman of a company who gets taken off the Dow? I notice here that International Paper came out with a statement today saying that the move has no bearing on the company`s continuing focus on adding value for customers and shareholders?

SCHANNEP: I`m sure they wouldn`t want to think of it as a blemish, but certainly it`s a plus for those companies that are included. There is so much more worldwide attention to the 30 Dow stocks than there are to the others, as you know.

HAFFENREFFER: Is there a trend that you see developing here with the addition of AIG, Verizon and Pfizer?

SCHANNEP: Well, there is. It`s rather subtle. Perhaps it would be a little more obvious if we went back five years to the last change. And even seven years before that when you see Walmart and homedepot coming in and Woolworth and Sears going out. Hewlett-Packard in, Microsoft in, and Intel in. So there`s obviously an effort to modernize, if you will.

HAFFENREFFER: What is the goal of the board of the group here that assembles these companies to make the Dow 30? Is it to have a stock index that reflects something, or are they just looking to assemble a bunch of companies that give them the best possible performance?

SCHANNEP: Oh, no. It`s an index to show the public the performance of the market as a whole. And it`s really quite incredible over the long term. The S&P 500, which, of course, has 500 stocks, and the Dow Jones industrials, which is only 30 stocks, have a rather parallel record, and even in a 10- year decade, there would only be a percent or so difference in the result. So it`s a very good indicator of what the market as whole is doing. Quite amazing for only 30 stocks.

HAFFENREFFER: Based on the current makeup, with these new changes in mind, are we going to have to strike that word "industrial" from the title of the index at some point?

SCHANNEP: Well, it`s true that if you look back at the original 12, and it`s really kind of fun to do that, and I won`t name them, but there was U.S. Leather. There was Tennessee Coal & Iron, American Cotton Oil, American Sugar. The only name you`d recognize would be General Electric . It was there in, what?, 1896, and it`s there today, although it was out for a while. But the point being, if those 12 stocks, and this index was started by Charles Dow, only had 12, they expanded it to 20 and finally to 30, to be indicative of American business. It is called the industrial, that`s true. And they did change the name some years back on the rail average. Which initially was only rail stocks and now is only four rails, six airlines, airfreight, sea container, et cetera.

HAFFENREFFER: And they call it the transportation average?

SCHANNEP: They call it the transportation average, exactly.

HAFFENREFFER: And again, the Dow Industrials was born, May 26, 1896.

Jack Schannep, thanks for being with us today.

SCHANNEP: My pleasure.

HAFFENREFFER: His employer, there, The Dow Theory.com.

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