Sponsored Link: Legally "Eavesdrop" on this Private Gathering of Top Technology CEOs

GM’s Bankruptcy Good for Dow

by The Investment U Research Team

It’s a sad, sad day for many who are watching the historic bankruptcy of General Motors (NYSE: GM). It’s a bitter medicine that has been a long time in coming. We’ve been waiting a long time to get to this point.

And the markets have rallied on the news – up almost 3% before noon. GM is up over 14%.

Granted, you could say today’s movement is more about optimism, but we’d like to think its on certainty. The market craves certainty and it hates uncertainty. It doesn’t care if it knows a stock is headed to zero – as long as it knows about it.

Knowledge truly is power in this environment. So knowing what they have to deal with, the traders and institutions are going to be more confident in their movements – and that translates to purchases.

The Dow Industrials Average (.DJI) used this opportunity to kick out GM and Citigroup (NYSE: C) from the 113-year-old average – replaced by Cisco (Nasdaq: CSCO) and The Travelers Companies (NYSE: TRV). The changes will go into effect on June 8.

Now an interesting takeaway here is that as these two companies are rotated in, there should be a substantial amount of institutional and index purchasing as funds look to rebalance and maintain DJIA holdings.

When Kraft Foods (NYSE: KFT) was added to the DJIA last year, its stock price climbed 5% in the weeks before and another 5% in the weeks that followed.

Symbols mentioned in this article: GM, .DJI, C, CSCO, TRV and KFT.

Related Investment U Articles:

Sign Up now and receive this Free report:

Collect 122% in the Next 12 Months From Gold's Surge.




The Single Best Investment for 2009

Forget another stimulus package. Or retreating into "safe-havens" like cash and gold. All you need in 2009 is a small exposure to the "secret" White Cap Index.

It's up as much as 171% straight through Wall Street's meltdown. And one of the latest stocks to be added - an Internet-related venture capital company - is up over 100% since its inclusion into the Index.

Just weeks from now, we'll add another White Cap stock to this market-trouncing index. To get a sneak peek, click here for full details.

Share Investment U:
  • email
  • Print
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • Propeller
  • StumbleUpon
  • Technorati
  • Yahoo! Buzz
  • Reddit
  • NewsVine
  • SphereIt
  • Twitter

Comments

**By submitting your comment you agree to adhere to our Comment Policy and Privacy Policy.

Check out our selection of daily Investment Research:

IU Blackboard IU Archives




We Respect Your Privacy



What is Investment U?

Since 1999, Investment U has provided impartial, no-nonsense investment advice on how to build long-lasting wealth.



Recent Articles

 

Search Investment U


 

Platinum Services

Oxford Club
The Oxford Club
is an exclusive, global network of investors, who collectively participate in the pursuit of prosperity and wealth. The Club is renowned for its market-beating, tried-and-true investment principles.

White Cap The White Cap Report exclusively identifies companies, White Caps, which - by being among the earliest to gain traction - have secured dominant positions within untapped, billion-dollar markets.

XPR With an elite trading team at the helm, the Xcelerated Profits Report shows any investor how to "invest like a pro," using high-level, yet easy-to-execute strategies that "xcelerate" profits while minimizing risk.




What Readers Are Saying...

"Always enjoy what you have to say, and learn something new (and useful) almost every time. Thanks again for your outstanding work." Jeff K.

"I just want to say a quick thank you to Alexander Green for not only his sage advise, but his reassuring words of encouragement that we all need right now." Bryan W.