Pumping Up The Dow

Looks like the Dow Jones is looking for some speculative boost to the topsy-turvy, overall-sagging fortunes of Wall Street. Altria (aka Phillip Morris) and Honeywell are off of the Dow Jones Industrial Average. Chevron and Bank of America are in. The Wall Street Journal alert says, "The change is the first in four years and reflects the index's continued shift away from industrial firms and into other sectors such as energy and financial services." Odd, isn't it? The "industrial average" moving away from "industrial firms." Hmmm.

What do banks and oil companies have in common? Profits from speculative, virtual
activity, not real production. Oil and gasoline are both commodities pegged at artificially high values, leaps and bounds above actual production costs. The subprime crisis is proving the fallout goes well beyond a sector of the economy when the bubble and bad bets are big enough. Big Oil's bounty comes from a secretive, open-to-manipulation speculative market that reminds us of the Enron-era accounting. In with the oil and banks, out with the folks who really make something. Hold onto your nest-eggs, shareholders, any short term inflation in the Dow is prone to a big Kaboom.

At the beginnning of the year, speculators ginned up alarm over Nigerian gang violence, Pakistani unrest and shaky predictions on future OPEC capacity to drive crude oil prices to $100 a barrel without any evidence of imminent shortage. Unregulated energy markets are an international Wild West of speculative gambling. A modest Washington fix for the problem, oversight of energy traders by Senators Feinstein and Carl Levin, has languished in D.C. (Read more here about that.)

It's time a presidential candidate took on the speculative monster that's eating the economy, and answer the tough question of how to steer clear of this trouble in the future.