Thursday, January 8, 2009

The Federal Government’s ‘Model Portfolio’

Posted by David Gaffen on the Wall Street Journal's MarketBeat:

A popular assertion these days is that the government is already making money off the investments it has made to various companies through the Troubled Asset Relief Program, to say nothing of other facilities. But are shareholders making money?

One way to track this has been introduced by Nasdaq OMX Group, which runs the Nasdaq Stock Market. The exchange has introduced the Nasdaq OMX Government Relief Index, which allows investors to track the gains and losses of U.S. stocks that are benefiting from the government’s largesse, be it through the TARP or other lending programs.

A look at the index’s components shows that the Nasdaq probably could have named this the “Struggling Bank Index” without changing the make-up all that much. Most of the 24 components are financial-services names, primarily commercial banks and the surviving investment banks, but the list includes General Motors and insurer American International Group.

So far, the index — which trades under the symbol QGRI — has been lackluster, falling 7% since the initial introduction on January 5 at a value of 1000. It traded at 932.05, down 13% on the day. Wayne Lee, spokesman for Nasdaq OMX, says over time membership in the index could be altered to include more components if other major companies accept government bailout money in one way or another.

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