When Does GM Get Kicked Out of the DJIA?
Let's start a pool: At what point in the future will General Motors (GM) ignominiously join Eastman Kodak (EK), Woolworth and others and get tossed out of he Dow Jones Industrials?
And, who will replace them?
I am betting this happens within 5 years, and perhaps even within 3.
As to the replacement, I might have said Google (GOOG) -- but I assume the DJ Editors learned their lesson top ticking Microsoft (MSFT) and Intel (INTC).
Instead, my bet will be Cisco (CSCO).
What say ye?
(Ignore the $38B write down -- thats primarily a tax issue):
GM Will Book $39 Billion Charge Write-Down of Tax Credits
Indicates That Profits Won't Come in Near Term
JOHN D. STOLL
WSJ, November 7, 2007; Page A3
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As far as the writedown being primarily a tax matter, I'm going to differ with you. In line with your post yesterday about the banks/brokers and they're "fictitious" earnings, GM's total earnings since 1993 are a little over $40 billion. This writedown essentially means they've been profitless for a very long time, and if you look at what's happened to their balance sheet over that period--well, it ain't pretty.
This is also a recognition that there are no earnings forthcoming for them in the forseeable future. Accounting rules require that you can't hold deferred tax assets on your books indefinitely if you have no reasonable expectation of ever producing profits against which to apply them. That's what's going on here, and I'm sure this decision was forced on management by the auditors.
PS You don't think Baidu or Alibaba replaces them in the Dow? How about PetroChina?
Posted by: Scott Frew | Nov 7, 2007 8:14:16 AM
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