Dow index should not be in use any more

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Should the DOW still be used?

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Dow index should not be in use any more

Post by Investor101 » Tue Oct 17, 2017 2:47 pm

It was made in the 1800’s with 12 companies representing various industries to somehow provide a big picture of the overall US economy. Only one of the original members still holds a spot - General Electric.
Now with 30 companies it hardly represents even a friction of the complex economy. Why complex? The ultra low interest, FEDs, GDP, currency risk, PE, QE, stock buy back, industry forecast, the earning surprises, street expectation, crypto currency… You name it. How can it be used for forecasting?If you know how I am all ears.

Does it even provide a historical perspective?
Let's see, the professionals decide which stocks to include and which to remove, being the ones making livings out of this and what a living! This process repeats for 100 years.
What does that give you when you look back and compare the DOW of 1975 with the DOW today?

Is it still useful? Of course - To make headlines like “The DOW reached 23000 for the first time”. Sounds familiar? Of course we heard about 20000 just a few months ago.

In this era of information overload, there is no lack of data. What is lacking? Meaningful data!Not just by definition, also how it is measured and against what standards or by what scales?
We don’t understand how unemployment is measured. What if one has to work because he/she lives hand to mouth or to maintain healthcare because one can not even afford basic medical services? What does that say anything about our good jobs? Do we feel that we are living a better life than our parents? Is financial freedom more reachable now than 30 years ago?

To not be easily influenced, one needs more than ever to think independently. For better or worse, I can hope that the massive are well informed and not just constantly misled so that only the top 1% benefit from this information century.

Go All Cash

Re: Dow index should not be in use any more

Post by Go All Cash » Thu Nov 02, 2017 11:10 am

While it might agree with the conclusion that the Dow index lost most of its value, I think you have some problems with your arguments:
1. The fact that it is "professionals" that decide the stocks in the Dow has nothing to do with its value. Would you prefer amateurs? Should an amateur doctor operate on you?
OK, maybe just one argument.
Even there, I think you are half right: the problem is not that they are "pros" but that their interest is not in the "massive" (sorry I couldn't help it :-) but making money for themselves and those that pay them.
They pretend to be objective but they aren't.
Indeed, it's very hard to get to the real interpretation of the statistics because we don't have the real data AND even if we did, it's hard!
Maybe all the "massive" should go all cash until laws are made that level the playing field (the opposite has been happening for years now). YEAH!

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