Thursday, July 9, 2009

Dow Jones Composition Changes make it Cheap

I keep looking at the djaverages website to know the P/E of Dow Jones Industrial Average. The recent changes to replace Citi with The Travelers Company and GM with Cisco has resulted in P/E decline from 19 to 13 (needs registration). Citi's TTM losses were around USD 20 Billion and that of GM were around USD 33.6 Billion. This has been replaced by profits of USD 2.6 Billion of The Travelers Company and USD 7 Billion of Cisco. A net addition of USD 63 Billion in DJIA profits while the total market cap of DJIA has remained almost similar at USD 2750 Billion. The profits with a P/E of 19 were USD 144 Billion which has increased to USD 210 Billion and P/E has come down to 13. What a great financial jugglery? Does DJIA look very cheap to you now and do you still see it going down to 5500?
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1 comment:

shaq said...

good observation...have been a regular reader and the posts here are very good..thanks for writing

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