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"Serial”-izing The Dow’s New Highs
By Nick Colas of ConvergEx
“Serial”-izing the Dow’s New Highs
Another day, another record for the Dow Jones Industrial Average, Main Street’s favorite measure of Wall Street stock performance. How did we get here? The answer sits in a comfortable blend of good returns from a range of industry sectors. Seven of the Dow 30 names have added over 100 points to the total 1,303 point gain for the Average this year: Visa (251 points), UnitedHealth (185), Nike (136), 3M (129), Disney (116), Johnson & Johnson (111) and Home Depot (106). By contrast, there is just one 100 point loser: IBM (negative 137 points). The collapse in energy stocks hasn’t hurt the Dow very much – just 113 points year to date related to declines in ExxonMobil and Chevron. And to satisfy the most common “What if” scenarios we hear: adding Apple on its split day this June would have added an estimated 166 points, and Facebook’s whole-year 2014 performance would have pushed the Average higher by 162 points.
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America’s hottest entertainment property at the moment isn’t a movie, a TV show, or Netflix/Amazon streamed content; it is a podcast. “Serial” is an offshoot of Chicago public radio’s WBEZ “This American Life” and it is a murder mystery narrated by long time radio and print journalist Sarah Koenig. Episodes come once a week, and over 1.5 million listeners now download the shows as they become available. Major news outlets such as People, Variety, Entertainment Weekly, and the Wall Street Journal have covered Serial’s success in recent days.
If you want a sense of Serial’s tone and narrative flow, think of it as equal parts hard boiled “Dragnet”-style storytelling and folksy, Granola-crunchy public radio. For those of you in a younger age cohort, the former was a highly popular radio and then TV show that started in 1951. All the storylines came directly from Los Angeles Police Department cases in what was the first mass media “True Crime” show. The public radio part comes from the narrator, who interviews scores of people associated with the case in a calm and approachable manner. The crime itself – a 1999 murder of a high school senior in Baltimore – seems simultaneously straightforward (the boyfriend did it, and went to jail) and elusive (the primary witness was a self-described drug dealer with a penchant for never telling the same story twice). There are three more episodes for Serial on tap, and in real life the convicted murder has an appeal hearing in January.
Capital markets have their own mysteries, of course. “How did everyone get the bond trade wrong this year” or “when will oil finally turn higher?” Or the big one: “How are we still rallying past the end of the Federal Reserve’s bond buying/QE program?” After all, that liquidity was the go-juice behind the move for U.S. stocks. Without it we were supposed to stagnate. Or, like the old Monty Python skit about the questionable existence of flying sheep: “Notice that they do not so much fly as… plummet.”
The easiest way to analyze what’s taking us higher is, surprisingly, with the oldest stock market measure still in use: the Dow Jones Industrial Average, which set a new all-time record close today. The Dow’s 30-stock list allows us to analyze exactly which names took us to that new high, and which stocks are persistent drags. Yes, other indices like the Russell complex or the S&P products are far more complete, but we are left making broader generalizations about industry groups rather than individual companies and their performance year to date.We’ve included a table after this note with the requisite math, but here are the key takeaways:
- The Dow’s 1,303 point move thus far in 2014 is the result of moves in several names across a few different industry sectors. In total, seven Dow components have added more than 100 points to the Average: Visa (251 points), UnitedHealth (185), Nike (136), 3M (129), Disney (116), Johnson & Johnson (111) and Home Depot (106). Loosely identified, you could call this a consumer/health care rally.
- Only one name has dinged the Average for more than 100 points: IBM (negative 137 points). It’s not that Big Blue has been such a dismal performer, down 13% rather than 30-40%... But its return year to date is the worst of any Dow 30 stock and its high stock price means a high weighting at 5.8%.
- A few names fall into the “Almost 100 point” club. Travelers’ positive 15% YTD return adds 88 points to the Dow, and tech companies Microsoft (up 30% YTD, or 78 points) and Intel (at 45% the best YTD performer in the Average, or 92 points) also help. Unlike the S&P 500, where technology is clearly a leading sector (up 17.6% as of today), in the Dow the group plays more of a supporting role.
- The reversal of fortune in the energy sector hasn’t been much of a headwind for the Dow year to date. ExxonMobil and Chevron are just 7.4% of the Average, and together comprise only a 113 point YTD hit (0.6%) to the Dow. Put another way, Visa alone has more impact on the Dow than the energy names, at a 9.3% weighting.
- There is a Wall Street parlor-style game that goes “What if Apple or Facebook were in the Dow?” Here’s the math. Facebook’s contribution would have been 162 points this year, since the stock is up 38% YTD. Apple is a little trickier, since before its June split it would have been too high priced to enter the Dow (remember, this is a price weighted measurement). However, counting from the June 9th split, Apple is up 24% and would have been worth another 166 points to the Dow.
A few points to sum up. The Dow may lag the S&P 500 by 7.9% to 11.8% YTD, but both are doing yeoman’s work since the October market selloff (10% up in each case). The overall strength in the Dow for the year is fairly broad, with 10 names in a variety of sectors (all listed above) making up essentially the entire 1,300 point move in 2014. Lower than expected interest rates obviously help, but the fact that U.S. markets are powering higher after the end of the Fed’s bond buying is a hopeful sign. As for whether that continues – or how Serial will end – well, the mystery continues.
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When the crash comes, it will be colossal.
just the facts ma'am..
bankers suck.
The CNBS "Dow 18,000" hype Friday was relentless. Almost as if their paychecks hinged on whether the mark was reached.
Cornell professor: time for white "race suicides" in wake of Ferguson, NYC
http://tinyurl.com/p99wxz9
RE: The collapse in energy stocks hasn’t hurt the Dow very much....
Right, because it is the sudden low oil price that is powering this bubble and Putin knows it. In classic Sun Tzu style, Putin is allowing the Western system to blow itself up. Use your enemy's power against himself. It will be the most colossal crash of all time. The SS De-Dollarization is full speed ahead.
The fact is that two-thirds of the stocks in the Dow Jones Industrial Average are not even industrials. That means that the Dow Jones Industrial is not a true index, just a mish-mash of what remains of a now hollowed out and financialized US. The index should be relabeled the Dow Jones 30 Bankers Index.
The main objective of the Federal Reserve is to get stocks ever higher. They translate it as the wealth effect and it makes Wall Street, insurance companies and bankers enormously wealthy. It doesn't matter that it's all a wealth transfer.
Yellen's speech about the 99% should become the 1% is clear it's intentional. Devalue the dollar is the theme.
The BRICS will eventually de-thrown the US dollar.
I figured thw DOW would 18,000 around Christmas, it will be before that obviously. Just a pit stop on the way to 20,000 and beyound. The FED is eating itself now.
All we need is MOAR! That'll fix it.
American Exceptionalism in the stock market is fueled by fraud and chicanery and the best economic numbers that can be generated by the US BLS. The powers that be know that the stock market is key to generating wealth since neither jobs or wages are growing. Fraud has always been the easiest way to generate profits and wealth. Unfortunately, it always ends badly.
Nick Diamond did some good music for serial, which I havent followed though...
Fukushima update:
Strontium 90 Bequerel per liter in ground water test hole.
Nov 2013: 2.1
Nov 1 2014: 490,000
Nov 27 2014: 990,000
http://enenews.com/deadly-strontium-spikes-record-levels-fukushima-react...
Projected to continue for 10s of thousands of days: http://enenews.com/study-finds-giant-strontium-90-release-into-body-of-w...
"According to a Japan Atomic Energy Agency document, the contaminated underground water is spreading toward the sea at a rate of about 4 meters (13 feet) a month. At that rate, “the water from that area is just about to reach the coast,” if it hasn’t already, said Atsunao Marui, an underground water expert [...] on a government committee studying the contaminated water problem. “We must contain the problem as quickly as possible.”'
Stock markets don't do "yeoman's work", they churn. "As the World Churn's" would be a better title.
There is nothing hopeful about markets hitting all time highs, they are cotton candy - not meat and potatoes.
I grew up watching Dragnet in the 50's. It was a treat for me because normally I had to be in bed by 8PM. Dragnet began at 8:00PM.
Of course this was back when parents could make "rules" for their own kids and "enforce" them as they saw fit.
Unlike today where kids do whatever the fuck they want, giving their parents the finger if they object, or even beatin' the shit out of them, sometimes killing them.
The non violent, smart-ass type punks just sue their parents for whjatever they feel they deserve.
"Hopeful" bitchez.
And just how are some of these new billionaires using the money they’ve ZIRPed and QEed from American producers’ store of labor, the stored wealth of savers, pensioners, insurance recipients, homeowners and wage earners? Home Depot founder Bernard Marcus is an example.
According to Philip Weiss of “Mondoweiss” website and Eli Clifton of “Salon”, a war party think tank, Foundation for Defense of Democracy (FDD), in 2011 took in $19 million from five rabidly pro-Israel givers.
Writes Pat Buchanan in Midterms a Vote for More War?: Grand Old War Party appears eager to ignite powderkegs in Ukraine, Iran: “They included Home Depot’s Bernard Marcus, who gave $10.7 million, hedge fund billionaire Paul Singer who handed over $3.6 million, and Sheldon Adelson, the Vegas-Macau casino kingpin, who chipped in $1.5 million.”
"Another day, another record for the Dow Jones Industrial Average, Main Street’s favorite measure of Wall Street stock performance. How did we get here? "
A record credit bubble that has yet to burst. But it will.
OT:
JP Morgan's Dimon says "no evidence of cancer"
https://finance.yahoo.com/news/jpmorgans-dimon-says-no-evidence-15343706...
Must have just been the demon inside of him scratching its ass.
The "Dow Jones Industrial Average" is pure marketing hype. It began as marketing hype to sell a newsletter, and 100+ years later it's still marketing hype to sell newsletters, magazines and newspapers.
It's not an average. An average is @sum divided by @count. Read this to see how they do the math. Then ask yourself, wtf?
https://drive.google.com/file/d/0B51-74tGswAXcTY0b3hxNlBUeGM/view?usp=sh...
Call your broker and see if he can explain how the Dow is calculated. For that matter call anybody. Call CNBC, call FOX, anybody. See if they can explain it. I can guarantee nobody has a clue. Yet it is plasterd non stop, tick by tick, minute by minute, on every financial channel.
.