Comments on: Charles Dow Rolls in His Grave: The Distortion of the Average He Made Famous

By: Claudia Powell

Claudia Powell — Tue, 02 Feb 2010 20:23:59 +0000

I discovered your website when I was browsing for something else, but this page was one of the first sites listed in Yahoo, your site must be so popular! Keep up the good work!

By: Дмитрий

Дмитрий — Thu, 04 Jun 2009 10:55:32 +0000

Разное

By: Miiguel Martinez

Miiguel Martinez — Sun, 08 Mar 2009 15:42:04 +0000

Why GM is now in huge troubles? I believe it is not beacause the flawed application of the Dow theory, it has to be because the bad managment of the company, CEO and executives with millionare and abusive salaries and privileges for all the company workers, finnally who paid this money?? the end consumers. Credit, abuse in the subprime mortgages and dreaming all the time with speculations are the cause of this disaster.

By: Niles Lesh

Niles Lesh — Sun, 08 Mar 2009 12:25:08 +0000

So, let me see if I got this straight. 1982 begins the entry of financial sectors to the DOW. The financial sector’s valuation is total speculative(non-durable). A futures based price index that is co opted by dollar values, inflation and interest rates. Alan Greenspan starts to roll back interest rates in the Reagan supply side consumer driven economy. Credit flows and the dollar soars against foreign currency, which drives the financial sector and the DOW to record highs. 1987 the market begins to realize that the dollar is inflated and needs a place to go. Hello NASDAQ and Microsoft! The shift to tech stocks allows the dollar/DOW to suck wind for a few more years until they can get the GLASS-Stegall ACT repealed, then comes CITIGROUP and the DOW party is on again! AIG with some prescient airline and insurance stock shorting in the summer of 2001vaults into a post Glass-Stegall giant. Now its 2004 and the mortgage market is ripe for the plucking, AIG welcome to the DOW, good friends Merril and BOA take on risk and profit. 2007 the smart money starts to leave the market and the less smart money starts to ask “hey are these stocks & mortgages really worth anything” ?
Charles Dow says” I tried to tell you but…”

By: chartingstocks1

chartingstocks1 — Sat, 07 Mar 2009 15:56:28 +0000

DAN: the divisor is another change which is relevant. very good point..The original Dow had no complicated divisor..it was a simple average calculation…the focus of the article was the adding of financial stocks…but definitely a good point..thank you..

Joe S: GE still remains (though who knows for how long)….i did a piece on here a few months ago, when the dow was 8,000 and calculated the average annual return is 4% or so for 100 years….but that estimated is actually OVERSTATED as most of those stocks aren’t around anymore

By: Joe S.

Joe S. — Sat, 07 Mar 2009 15:35:42 +0000

Very good information. Thanks. I notice also that almost all the companies on Dow’s original list are gone now. So much for ‘Buy and Hold’ philosophy! I also wonder about how price inflation and stock splits can be readily calculated for a meaningful average, and it occurs to me that they can’t. It’s all just a propaganda tool, isn’t it?

By: Dan

Dan — Sat, 07 Mar 2009 15:10:44 +0000

The most important element of all this you unfortunately left out. The Dow-Jones Industrial Average — IS NOT A TRUE AVERAGE ! ! ! It is a factored — or weighted average. If you actually add up the closing price of the Dow 30 stocks and divide by 30 you will not get the same number that is published as the D-J Ind. Average. The divisor number in the formula is a highly manipulated figure that changes every day to suit the taste of the people who produce it. It is like Alice in Wonderland: Those numbers mean what I want them to mean.