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Money Morning

Why Apple Inc. (Nasdaq: AAPL) is Too Rich For the Dow Jones

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Assuming the Dow Jones Industrial Average represents the biggest, most influential companies in America, Apple Inc. (Nasdaq: AAPL) easily qualifies.

With its massive market cap, trend-setting products, and global brand recognition, it is easy to argue Apple belongs as much or more than any of the current tech companies in the index.

In fact, Apple has superseded all of them, particularly Hewlett-Packard Co. (NYSE: HPQ) and Microsoft Corp. (Nasdaq: MSFT).

Yet the Dow Jones has ignored Apple while letting far weaker companies like, Bank of America Corp. (NYSE: BAC)and Alcoa Inc. (NYSE: AA) remain.

So what gives?…

In a nutshell, Apple stock is too rich for the Dow Jones Industrial Average.

Because the Dow Jones is price-weighted, Apple’s current $565 share price would simply overwhelm the index.

If included, Apple stock would account for about 25% of the Dow Jones. That’s more than double the 11.5% of current leader International Business Machines Corp. (NYSE: IBM).

“It wouldn’t be the Dow Jones Industrial Average,” Nicholas Colas, chief market strategist at ConvergEx Group told the Associated Press. “It would be the Apple Plus Some Other Stuff Index.”

In this case, a price move of just 5% in Apple stock could push the DJIA up – or down – about 200 points.

Looking at it another way, had Apple been added to the Dow Jones in 2009 instead of Cisco Systems Inc. (Nasdaq: CSCO), the Dow would now be over 15,000.

That’s well above the Oct. 2007 record of 14,164 and 2,500 points higher than where it stands today.

With that kind of heft, it’s no wonder the Dow has shunned Apple.

How the Dow Jones Industrial Average Works

But it’s not just Apple. Other Dow candidates trade high in the triple digits as well.

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Contributors- Economic and Financial, Money Morning, Must Read

Here is What’s Wrong With Bank of America (NYSE: BAC)

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If you have a mortgage with Bank of America (NYSE: BAC) and want to refinance, don’t bother.

You are not worth the bank’s time. Or at least I wasn’t.

That’s what I learned first-hand last week when I called Bank of America to refinance a home mortgage I’ve had with them for years.

My jaw practically hit the floor when Alejandro from BofA’s mortgage department told me this over the phone.

“Because of excessively high demand,” Alejandro said, “we can’t accept your refinancing application. But we can take a reservation and have an agent call you in 90 to 120 days.”

Huh?…You can’t be serious.

I really have to wait three or four months to even apply for a lower interest rate when I’ve been an existing customer for years?

Yeah, I bet, I thought to myself…

They’ll call me when interest rates are much higher or when BofA works its way through its part of the $25 billion robo-signing settlement reached over its abuses in the foreclosure process.

Of course, all of this is after BofA received $45 billion in taxpayer bailout funding.

And after they reportedly shifted the risks associated with $75 trillion in derivatives from its investment banking and trading units to BofA’s depository arm, a unit flush with FDIC-insured deposits.

But that is another story for another day.

How Bank of America Treats its Customers

Suspecting something wasn’t quite right, I made a second call to BofA to inquire about a new loan.

Not ten minutes later I was put through immediately to an underwriter who was all too happy to help a new, unknown prospect – a.k.a. me – take on more debt. Imagine that.

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