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Relevant episode of Planet Money: http://www.npr.org/sections/money/2017/01/04/508261371/episode-443-dont-believe-the-hype http://www.npr.org/sections/money/20

Relevant episode of Planet Money: http://www.npr.org/sections/money/2017/01/04/508261371/episode-443-dont-believe-the-hype http://www.npr.org/sections/money/2017/01/04/508261371/episo... "It's no secret that we here at Planet Money think the Dow is a terrible economic indicator. We don't like that it only looks at thirty companies. We don't like the way it does its math. We think it does a bad job reflecting the overall economy. Honestly, we're not sure why everyone is still talking about it."

paulpauper 9y ago
Terrible? Hyperbole. The 30 companies are pretty big and relevant, so still it works out well. Also, the DJIA pays a sightly larger dividend than the S&P 500. Also it's not an economic indicator.
- kcanini 9y ago
  > it's not an economic indicator Can you explain this statement? It's almost synonymous with the stock market, and is one of the most common headline numbers that people mention in business and economy news reports.
  - acchow 9y ago
    The stock market is not the economy.
    - pyromine 9y ago
      Capital markets are crucial indicators of economic activity
      - milesrout 9y ago
        Only because we use them as indicators of economic activity. When stock markets plunge people panic and that panic is what causes economic instability. That's what causes issues. Economics is purely a product of human minds acting in unison or opposition.
        dnadler 9y ago
        I think it's the other way around, no? People panic, and then sell their equity.
        AnimalMuppet 9y ago
        I think it's both. That is, it's a feedback loop. Some people sell their stock, so the market declines, so more people sell their stock, so the market declines more, so more people sell their stock... For this to happen, though, enough people must be thinking that the market is poised for a big fall, so they're on a hair trigger, ready to sell right at the start of the drop.
    - paulddraper 9y ago
      It basically is. It represents the state of capital investment, which as it is turns out is important in a capitalist economy. The stock market would not be the economy in say, a Marxist system.
      - srssays 9y ago
        For a counterexample see Brexit. The FTSE 100 went up after Brexit, when other economic indicators were negative, because it primarily contains large multinationals which are insulated from the local economy. So a stock market index is only correlated with the local economy if there are few multinationals.
        pacaro 9y ago
        Well, arguably the FTSE went up because the pound plummeted.
tempodox 9y ago
> Honestly, we're not sure why everyone is still talking about it. It's like telling a compulsive gambler their favourite “system” won't predict luck. They just don't want to hear that.
- hueving 9y ago
  Not really, it's not predicting the future like a gambling system. It's just a measurement people are familiar with because they have reference points in mind.
  - kazagistar 9y ago
    The phases of the moon are also a familiar measurement system for which people have reference points in mind.
    - grogenaut 9y ago
      The phases of the moon are pretty good for predicting moon rise, moon set, time of month, days of the year, days, and the tides.

paulpauper 9y ago

Terrible? Hyperbole. The 30 companies are pretty big and relevant, so still it works out well. Also, the DJIA pays a sightly larger dividend than the S&P 500. Also it's not an economic indicator.

kcanini 9y ago
> it's not an economic indicator Can you explain this statement? It's almost synonymous with the stock market, and is one of the most common headline numbers that people mention in business and economy news reports.
- acchow 9y ago
  The stock market is not the economy.
  - pyromine 9y ago
    Capital markets are crucial indicators of economic activity
    - milesrout 9y ago
      Only because we use them as indicators of economic activity. When stock markets plunge people panic and that panic is what causes economic instability. That's what causes issues. Economics is purely a product of human minds acting in unison or opposition.
      - dnadler 9y ago
        I think it's the other way around, no? People panic, and then sell their equity.
        AnimalMuppet 9y ago
        I think it's both. That is, it's a feedback loop. Some people sell their stock, so the market declines, so more people sell their stock, so the market declines more, so more people sell their stock... For this to happen, though, enough people must be thinking that the market is poised for a big fall, so they're on a hair trigger, ready to sell right at the start of the drop.
  - paulddraper 9y ago
    It basically is. It represents the state of capital investment, which as it is turns out is important in a capitalist economy. The stock market would not be the economy in say, a Marxist system.
    - srssays 9y ago
      For a counterexample see Brexit. The FTSE 100 went up after Brexit, when other economic indicators were negative, because it primarily contains large multinationals which are insulated from the local economy. So a stock market index is only correlated with the local economy if there are few multinationals.
      - pacaro 9y ago
        Well, arguably the FTSE went up because the pound plummeted.

tempodox 9y ago

> Honestly, we're not sure why everyone is still talking about it. It's like telling a compulsive gambler their favourite “system” won't predict luck. They just don't want to hear that.

hueving 9y ago
Not really, it's not predicting the future like a gambling system. It's just a measurement people are familiar with because they have reference points in mind.
- kazagistar 9y ago
  The phases of the moon are also a familiar measurement system for which people have reference points in mind.
  - grogenaut 9y ago
    The phases of the moon are pretty good for predicting moon rise, moon set, time of month, days of the year, days, and the tides.