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Listen to this episode of Planet money in 2013: Despite all the celebration, the Dow Jones industrial average has not hit record highs recently. If you adjust
by bamdadd 10y ago
Listen to this episode of Planet money in 2013:
Despite all the celebration, the Dow Jones industrial average has not hit record highs recently. If you adjust for inflation, the highs just aren't as high as they seem.
And even if it does hit a real, inflation-adjusted high in the next few weeks, it won't mean much. The Dow is a seriously flawed stock index, and it's certainly not a good way to measure what's going on in the overall economy.
On today's show, we rain on the Dow's parade and explain why a lot of very smart people say we should ignore the Dow.
http://www.npr.org/sections/money/2013/03/12/174139347/episode-443-dont-believe-the-hype http://www.npr.org/sections/money/2013/03/12/174139347/episo...
The Dow Isn't Really At A Record High (And It Wouldn't Matter If It Were) http://www.npr.org/sections/money/2013/03/05/173515767/the-dow-isnt-really-at-a-record-high-and-it-wouldnt-matter-if-it-were http://www.npr.org/sections/money/2013/03/05/173515767/the-d...
- wtvanhest 10y agoYes, the dow is a flawed index. That said, the S&P 500 & Russell 1000 are also at all time highs. https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7KIeejAHlwZq4Cw https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7K... https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIWJnQNof7jAG74ar4Cw https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIW... None of these data points mean anything on their own. People that look at a chart a conclude anything at all are not doing enough analysis.
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- i_cant_speel 10y agoI listened to that podcast when it got rebroadcasted. Even the people who are in charge of the Dow admit it's not a great tool for measuring the economy. They don't change it because the only thing it has going for it is the fact that the algorithm has been around for over a century. If they changed it, they wouldn't gain much and they would lose the only thing it has going for it, which is its standing as the oldest economic measurement used today.
- acchow 10y agoAlso, the stock market isn't the economy.
- ryandrake 10y agoTHANK YOU for pointing this out. The stock market is not the economy. Stocks going up is not objectively good, and stocks going down is not objectively bad. Same for housing prices and cost of living. When the pie grows, often the result is I have a shrinking portion of it.
- seanp2k2 10y agoYes, true, but unfortunately for all of us who don't have our billions yet, many of those making policy decisions have a thumb or three in that pie and much of their wealth tied to it. What I've learned is that you can either be part of the "tide which lifts all ships" or be drowned by it. TL;DR get some index funds :)
- WorldMaker 10y agoDon't forget too that 401(k)s force your hand to care about the stock market to get any sort of retirement in the modern era.
- mortehu 10y agoIt makes no sense to inflation adjust the DJIA price index. Because the index discards cash dividends, by adjusting for inflation but not dividends you're ending up even further from the real returns of a DJIA portfolio then you were before. The same goes for S&P 500.
- loafa 10y agoA better and more meaningful question than whether the Dow is at an all-time high is whether the US economy is at its all-time largest. And it is. It usually is, in fact, and when it's not it means things are going very badly. But hey, nobody thinks Dow 20000 is anything but an arbitrary milestone. I don't know why people want to shit on it like people standing around at NYE parties loudly pointing out the arbitrariness of the celebration.