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Weaving the Strands: Business, Economics, and Tax Policy 2.0

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Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

FlagDUDE08 said:
Now you know Wall Street is just trying to inflate the numbers. http://www.dividend.com/news/2015/03/06/apple-to-join-dow-30/
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The DJIA has a formula in place so that the inclusion of a new company with a differing stock price doesn't artificially inflate its current numbers. The only change Apple could have on the DJIA relates to future performance. Given AAPL's market cap, and the purpose of the DJIA in the first place, it only make sense that AAPL joins the DJIA.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

St. Clown said:
The DJIA has a formula in place so that the inclusion of a new company with a differing stock price doesn't artificially inflate its current numbers. The only change Apple could have on the DJIA relates to future performance. Given AAPL's market cap, and the purpose of the DJIA in the first place, it only make sense that AAPL joins the DJIA.
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Don't stop him. He's on a roll...
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

St. Clown said:
The DJIA has a formula in place so that the inclusion of a new company with a differing stock price doesn't artificially inflate its current numbers. The only change Apple could have on the DJIA relates to future performance. Given AAPL's market cap, and the purpose of the DJIA in the first place, it only make sense that AAPL joins the DJIA.
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I'm well aware that the DJIA doesn't inflate when companies are switched. However, given the tear that Apple has been on, it makes me think they're just trying to inflate that number for the future in order to make the sheeple feel good about the economy.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

FlagDUDE08 said:
I'm well aware that the DJIA doesn't inflate when companies are switched. However, given the tear that Apple has been on, it makes me think they're just trying to inflate that number for the future in order to make the sheeple feel good about the economy.
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Even if that were the case, the DJIA board would've been better off finding a different company. AAPL's growth rate has been so strong for so long now that it can only go so much higher without some great new innovation - I'm not including the watch in the innovation list.

And IF The DJIA board was looking to artificially inject some excitement into its figures, that would completely defeat the point of the DJIA. It was designed to be a stock average that could be used to track and measure the broader US economy. The WSJ's editors were to pick the thirty large cap companies that best represent the US economy as a whole. This was a great tool back when it coming into such data was much more time consuming and data wasn't nearly as complete. If there's a shift in philosophy as to why the DJIA exists, then it become far less meaningful to investors.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

St. Clown said:
Even if that were the case, the DJIA board would've been better off finding a different company. AAPL's growth rate has been so strong for so long now that it can only go so much higher without some great new innovation - I'm not including the watch in the innovation list.

And IF The DJIA board was looking to artificially inject some excitement into its figures, that would completely defeat the point of the DJIA. It was designed to be a stock average that could be used to track and measure the broader US economy. The WSJ's editors were to pick the thirty large cap companies that best represent the US economy as a whole. This was a great tool back when it coming into such data was much more time consuming and data wasn't nearly as complete. If there's a shift in philosophy as to why the DJIA exists, then it become far less meaningful to investors.
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Apple's iPhone 6 was a pracitcal clone of a two-year old Samsung product, but because the dudes at Apple are marketing geniouses (you have to give credit where credit is due), sheeple thought it was the next best thing. That's why Apple is going to continue its run.

And you hit the nail on the head. To an investor, the indexes mean nothing with exception of an ETF or mutual fund, as the modern computer has made data so much easier to track. The non-investor sheeple, however, are still hooked to the DJIA thinking it means something about the economy, and probably couldn't tell you 10 of the 30 companies in said index. However, sheeple are happy when that number is up, and sad when it is down. Why not boost the confidence of the sheeple?

Also, with Apple coming in over AT&T, the 30 seems a bit top-heavy on tech, especially with Intel, IBM, and Microsoft already in there. I understand that times change with what is important, as there used to be a lot of railroads in the index way back in the day. If you're trying to strike a balance, consider getting a clothing retailer or supplier in therel not sure Nike really has much on that market.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

St. Clown said:
Even if that were the case, the DJIA board would've been better off finding a different company. AAPL's growth rate has been so strong for so long now that it can only go so much higher without some great new innovation - I'm not including the watch in the innovation list.

And IF The DJIA board was looking to artificially inject some excitement into its figures, that would completely defeat the point of the DJIA. It was designed to be a stock average that could be used to track and measure the broader US economy. The WSJ's editors were to pick the thirty large cap companies that best represent the US economy as a whole. This was a great tool back when it coming into such data was much more time consuming and data wasn't nearly as complete. If there's a shift in philosophy as to why the DJIA exists, then it become far less meaningful to investors.
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The S&P 500 Index seems to have taken over that role now, thought some look at the total stock market index.

I met a money manager years ago who told a very interesting story (probably 25 years ago now). He had read an article about some pension fund manager in California who decided that they couldn't merely invest in the S&P 500 Index, that they had to do their "due diligence" and research every one of the 500 stocks that comprised the index back then. They found something like 18 or 22 companies that they "shouldn't" invest in.

Naturally, the money manager then put together a portfolio that included only those 18 or 22 stocks, which then proceeded to outperform the S&P 500 Index by a wide margin.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

St. Clown said:
The DJIA has a formula in place so that the inclusion of a new company with a differing stock price doesn't artificially inflate its current numbers. The only change Apple could have on the DJIA relates to future performance. Given AAPL's market cap, and the purpose of the DJIA in the first place, it only make sense that AAPL joins the DJIA.
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The one thing that the ongoing switching of companies into and out of the various indexes does, in my humble and quite possibly erroneous opinion, is that it overstates historical return. Quite a few of companies that once were in the DJIA (Polaroid or Eastman Kodak for example, I forget which one) have gone bankrupt. Using the DJIA as a proxy for the total market can be useful in tracking day-to-day or month-to-month changes, but when used from 1925 to 2015 to show how well the "market" has done since then, it introduces a substantial upward bias, as all the failed companies (those with an IRR of -100%) are excluded.

Marketers of investment products can say, "historical DJIA has been 9.5% or whatever but actual investor experience, which would include the failed companies as well, might be more like 8.0% or whatever.

Of course, since the introduction of index funds, that bias is mitigated substantially, the broader point is that the guy / gal who is touting this historical returns is less concerned with accuracy than with action. They need investors active in the markets because the pros make their money off of price changes, as long as there is volatility and volume they are happy.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

FreshFish said:
The one thing that the ongoing switching of companies into and out of the various indexes does, in my humble and quite possibly erroneous opinion, is that it overstates historical return. Quite a few of companies that once were in the DJIA (Polaroid or Eastman Kodak for example, I forget which one) have gone bankrupt. Using the DJIA as a proxy for the total market can be useful in tracking day-to-day or month-to-month changes, but when used from 1925 to 2015 to show how well the "market" has done since then, it introduces a substantial upward bias, as all the failed companies (those with an IRR of -100%) are excluded.

Marketers of investment products can say, "historical DJIA has been 9.5% or whatever but actual investor experience, which would include the failed companies as well, might be more like 8.0% or whatever.

Of course, since the introduction of index funds, that bias is mitigated substantially, the broader point is that the guy / gal who is touting this historical returns is less concerned with accuracy than with action. They need investors active in the markets because the pros make their money off of price changes, as long as there is volatility and volume they are happy.
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You're right, your impression is erroneous. The stock market isn't like some microwaveable TV dinner - you don't just set it and forget it. The same goes with any single person's portfolio. The reason those companies exit the DJIA is that they no longer represent the direction of the economy. Kodak stuck with analog photography and picture prints for so long that technology left them behind and Kodak became irrelevant. Your stock portfolio should've done the same thing or suffer Kodak's fate.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Fishy its called "surivorship bias" and yes you need to pay attention to it when comparing historical returns. Furthermore your index beating friend tapped into a trick known the world over for portfolio managers. Buy the S&P, dump Sears lets say and overweight Apple. Voila! I've beaten my benchmark! Give me all your money, baby!
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

I love the apple steeple comments. I don't like Apple products for the most part but the iPhone is the best phone on the planet. It just works. Everyone I know who switches from droid says the same thing, "while I don't like that I can't do X anymore, I love that my phone is stable and works when I need it to."
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Cheese!!

@nbcwashington: BREAKING: Kraft Foods Group and H.J. Heinz have announced that they will merge to create The Kraft Heinz Co. http://bit.ly/1xy0YYk
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

joecct said:
Cheese!!

@nbcwashington: BREAKING: Kraft Foods Group and H.J. Heinz have announced that they will merge to create The Kraft Heinz Co. http://bit.ly/1xy0YYk
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I know a lot of people already like to put ketchup on their mac and cheese, so are we going to see ads specifically featuring that disgusting taste?
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

$121k to be considered out of the middle class in Minnesota? That seems crazy low.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

dxmnkd316 said:
$121k to be considered out of the middle class in Minnesota? That seems crazy low.
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It's state-wide, remember. I would guess the Norwegian bachelor farmers in the rural towns aren't exactly killin' it.
 
Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0

Kepler said:
It's state-wide, remember. I would guess the Norwegian bachelor farmers in the rural towns aren't exactly killin' it.
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Yeah, leave it to us Norwegian bachelor engineers to bring everyone else up. :D :p
 
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