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Breaking News: The Dow goes above an arbitrary number! I know we as humans have a tendency to assign meaning to things like this, but the truth is it doesn't m
by tghw 13y ago
Breaking News: The Dow goes above an arbitrary number!
I know we as humans have a tendency to assign meaning to things like this, but the truth is it doesn't make much difference.
Especially the Dow. Stop paying attention to it. It's a terrible measure of anything but what the Dow weightings are. First, it's only 30 companies, which is a tiny slice of the economy. Second, it's based on share price, not market cap, so companies that split less frequently tend to have a much larger effect on the average. Finally, it's not adjusted for inflation, so all of this "first time ever" business is meaningless.
If you're going to use a common index, at least use the S&P 500. Or better yet, the Wilshire 5000.
- cylinder 13y agoIt matters because it matters to people. It's completely arbitrary, but sometimes humans just work that way. Like it or not, there are going to be individuals watching the nightly news tonight and will hear about the Dow crossing 16,000, and they will think "Wow, it's going up, I need to get in on this," and/or it will affect their confidence as consumers going into an important time of year for consumer spending.