The Mac-and-Cheese Economy

Kraft, the world's second-largest food company, will soon be added to the Dow Jones Industrial Average, an event that normally would be something for the firm to crow about. This week, maybe not so much.

The index had to give the boot to insurance giant AIG, which has lost about 96 percent of its market value in the past year, and most of that in the past few days. The company was essentially nationalized on Tuesday when the federal government capitalized it to save it from collapse.

Usually, that's what happens when a company is elevated to the Dow—another company has to be dropped; and that has to happen for a reason. But this is a particularly odious situation, one that has to put a bit of a damper on Kraft's jubilation.

MarketWatch's Matt Andrejczak writes that the change "now leaves the battered blue-chip index under-weighted in financial stocks."

That might be just fine for now. It may make the Dow even less representative of the stock market than it already was, but what's the difference? Even if it were as perfectly balanced among American industries as it could possibly be, it would still essentially be a meaningless number if what you're looking for is a gauge of how the market is doing. (As a gauge of the 30 stocks it indexes, it works great.)

It's even more meaningless in terms of how the economy is doing, though the folks at the Wall Street Journal who manage the index want everyone to think otherwise. So, too, do the people who sell funds based on the index or portions thereof. Choosing "a food company makes the index even more representative of the U.S. economy," said Frank Ingarra, co-portfolio manager at Hennessy Funds, in an interview with U.S. News. Ingarra manages two big funds that invest in Dow stocks exclusively.