The Dow is Cooked for Now

Considering GE slashed its dividend 68% Friday, and Citigroup shares now trade for less than a 12 ounce can of Spam, you would have expected the Dow to fall more than 119 points yesterday. However, The Dow Jones Industrial Average -- the 30 companies that reflect the US economy -- has too many companies on deathwatch. Citigroup, the bank that the US government basically nationalized yesterday, currently has a market cap of US$8 billion. GM sports a cap of US$1.37 billion -- roughly three times Oprah's salary -- and trades at $2.25. By comparison, the Royal Bank of Canada has a market cap of US $32.5 billion, while the BCE takeover that never happened was priced at $51 billion.

Look for a redo of the Dow components later this year. In the meantime, the S & P will provide a better gauge of the market. And investors who used Dogs of the Dow Strategy -- the clever theory that suggests buying the ten Dow stocks whose dividends provide the highest yield -- might want to wait and see. Last year's Dog picks included Citigroup, Pfizer, GM, JP Morgan Chase and General Electric, among others --companies that are either staving off bankruptcy or shoring up balance sheets, while slashing dividends.