The Dow

  • 21 Feb 2012 at 6:46 PM

The Smart Indexes Are Even Worse Than The Dumb Ones*

You may have heard that the Dow hit 13,000 today before subsiding to a shameful 12,965.69. You may not have heard this, or cared, because the Dow is for morons, being a price-weighted index of thirty semi-random companies that, gah, aren’t even “industrial” any more.** There are alternative theories but those theories are wrong:

Joe Weisenthal in defense of the Dow has been noting its very high correlation with other, broader, more sensible indexes. I see this as further undermining the Dow’s legitimacy. If it’s very different methodology were leading to some kind of meaningfully different result, then we could perhaps argue that it’s adding value in some kind of way. But instead what’s going on is that the Dow’s creators are hand-picking which stocks to include in the index specifically with an eye toward constructing an index that mirrors the other, better indexes out there. Apple and Google, for example, aren’t in the Dow and aren’t doing to get in any time soon because their very high share prices would skew the index in weird ways. This just goes to show that the Dow’s creators already “know” the right answer (from looking at the S&P 500 and the Wilshire 5000) and then are trying to assemble an index to create the predetermined result.

Maybe! An alternative theory is maybe suggested by [Occam's razor and] this piece from the Journal this weekend about index funds that I just loved and so am now going to inflict on you at unnecessary length: Read more »

  • 08 Oct 2010 at 12:40 PM

Call The Close, Other Things

Oh look, the Dow hit 11k. As this is marginally exciting news for at least one, perhaps two people, we’re going to play Call the Close. Closest without going over wins, and as a bonus question, please also guess how much Dealbreaker friend Gianna Beamers took in in tips last night. Nail both and you’ll score yourself a choice of one “idea dinner” with Lenny Dykstra or a series of lunches with Charlie Gasparino, who will read aloud to you from his new book.

  • 27 Feb 2009 at 3:29 PM

Call The Dow

Yes, on a day like today (we’ve seen over 2% down on the S&P 500, about break even, and back to 1.25% down) we figured it would be the prefect time to play “guess today’s Dow close.”
It’s 7138 right now. What say you, Dealbreaker?
Same rules as always. Closest without going under.
Go.