Captain's Blog, stardate 7/2/07

NEW YORK (Fortune) -- DECONSTRUCTING THE DOW: Nice second quarter, right? S&P up 5.8 percent, best tally since Q4 of '06. Naz up 7.5 percent, best since Q4 '04. And as for the Dow, it truly rocked! Up 8.5 percent, best since way back in '03. Why did the big daddy index rule? You would think the answer would be one simple phrase: Sheer energy! (I love energy - tee hee.)

The S&P energy index climbed 14.3 percent in the quarter as the sector is gettin' another major pop. (Um, did you notice oil is back at $70 a barrel.) And the Dow is a small (30 stocks) index of big cap stocks, so it must contain, say, three oil stocks, which gave it that big boost, right? WRONG! The only oil stock in the Dow is Exxon (Charts, Fortune 500), (which was a barnburner), but that's it! No Chevron (Charts, Fortune 500) ($181 bil mkt cap), or ConocoPhillips (Charts, Fortune 500) ($128 bil). Or BP (Charts) or Royal Dutch (Charts) either. (Never mind Valero, etc...) It's surprising isn't it? The Dow has gone all techie, and servicey, and financie over the past decade. (BTW, one huge Dow winner in Q2 was Honeywell (Charts, Fortune 500), which climbed from $46 to $56, - market cap of $48 bil.) Imagine how high the Dow, if it had COP or CVX?

Of course the issue shouldn't be about chasing performance, it's supposed to be about accurately reflecting the economy. Which I think is the reason the Dow needs to add some more big oil to address that issue. (Psst, I bet adding COP and CVX wouldn't hurt the Dow's performance over the next decade either!) The problem is, unlike at previous junctures, you don't have any obvious weak sisters, (ie Woolworth) to throw out. What is the lamest company on the Dow now? From a stock market performance standpoint you could argue it's GM (Charts, Fortune 500)! But can you imagine throwing it out? (Ford's not a Dow stock, btw...) Cold reality: GM has a market cap of $21 billion, (the smallest of the 30), and at $37 the stock hasn't budged in FORTY YEARS! Unthinkable? Or not.....

iPHONE: Do you remember those commercials for the first pre-made whipped cream products (like Reddi-wip)? They showed a dinner party with the hostess in the kitchen making homemade whipped cream, it was taking forever, and the voice-over went "And they waited, and they waited, and they waited...." And the image changed over to a shot of the dinner guests falling asleep.

Well, that's exactly how I felt as I waited for my iPhone to get activated. I mean, Holy Mother of Cork, it took a long time!! After I upgraded my OSX and iTunes software in the AM, my activation sped right along....until what seems to be the last step. At 11 a.m. on Sunday I received a message that my "activation requires additional time to complete." I called T to ask 'em about it because the problem seemed to be on their end. T rep told me I had been assigned a phone number etc, but they were just jammed. This was about 5 p.m.. Then... he dropped a bomb on me, baby! Told me it could take from 24 to 48 hours to complete the activation! (Fortunately, it didn't take that long - I got an e-mail saying it was activated around 9 p.m.) So we reputable journos don't get nooo special treatment. In fact...maybe??? Nahhhh....

NORM'S BOOK: Norm Pearlstine, my former boss, who's now a major private-equity honker with the Carlyle Group, has written a book, "OFF THE RECORD The Press, the Government, and the War Over Anonymous Sources." Now I'll be honest with you here. When I first got a copy, I groaned gently. Does the world need this? (Well, does the world need Captain's Blog, Norm might ask?) So I read the acknowledgements, looked through the index for pals, and then, just read the first page. And then another, and before you know it, I was digging it! Groovin' it! It's a very engaging read. Really. Norm's pretty honest, calls people out. Calls himself out. It's just good stuff to know... it's complex and important, and you ain't going to get a better read of it than this.

Had a great lunch with Dan DiMicco, CEO of steel supa-star Nucor (Charts, Fortune 500). Dan is an incredibly thoughtful CEO. And NUE's had a AMAZING run since '03, up SIX-FOLD... but it has a P/E of ten. DiMicco told me the Street thinks the steel cycle is over. He totally disagrees. Let's check back in five years, what do you say?... What a fantastic time I had the other night at Radio City at the KD Lang/Lyle Lovett show with Tim Arango and Victoria W. KD's voice is a bell, actually liked her as much as Lyle who is an American Original....

If everything is online, than why is it that Time Out New York, with all of its great listings etc, is more indispensable than ever? Because it "aggregates" (love that right?) all the info in one place. And its capsule reviews are on target. Kind of like the Bloomberg, right?... Thanks to Jim Speros of Marsh for coming over for breakfast. There's a good dude.... Finally saw "Knocked Up." Sweet movie, so much better than "Wedding Crashers." My poor wife, whom I made watch both, agreed. I find that whole, Will Farrell, Wilson Brothers, Ben Stiller scene soooo tired. The new star is Judd Apatow (I know he has many links to the previously mentioned crew)....

Thanks Dick Parsons for having us out to dinner. I don't know how he can stand the company: business journalists!... I bet you are totally jealous of my HP-12c, 25th anniversary platinum edition. Oh. My. God. It is so Hottttt. (And still no equal sign, after all these years!)... HAPPY FOURTH OF JULY!!!!

E-mail me at aserwer@fortunemail.com