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The Dow Is a Sham

George Washington's picture




 

Wim Grommen has been claiming for years that the Dow Jones Industrial Average is a sham, because it is manipulated to push up the market.

Investment manager and writer Barry Ritholtz notes today:

The venerable Dow … remains deeply flawed in its methodology, driven rather arbitrarily by the price weightings of its constituents rather than their market values.

 

You can see how this affects the weighting of each component in the index. Companies with higher stock prices such as Visa and Goldman Sachs have a 9.7 percent and 6.7 percent weight, respectively, while lower-priced stocks such as Cisco Systems and General Electric are merely 1.05 percent 0.91 percent, respectively. Why Goldman Sachs, with an $84 billion capitalization, matters more to the Dow than General Electric, with a $257 billion capitalization, is rather mystifying. A high-priced, smaller company carrying more weight than a lower-priced, bigger company makes no sense.

 

Not only that, but it is an actively selected — though not actively traded — portfolio, managed by a group of editors. Originally these editors were employees of Dow Jones, the company, but since 2012 the index has been 73 percent owned by McGraw Hill Financial. The CME group, which had purchased the index from Dow Jones in 2010, owns 24.4 percent; Dow Jones retains the remaining 2.6 percent stake.

 

***

 

What qualifies a company to be included in the Dow? According to the DJ Index fact sheet, a “stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors.” (The full history of additions and deletions can be seen here). But that description is so broad as to be almost useless. There are hundreds of companies with those qualifications.

 

***

 

Based on their track record, the editors in charge of selecting Dow components don’t really seem to have a firm grasp on what stocks are worth watching or are reflective of the state of U.S. financial markets and the economy.  That’s why investors pay less and less attention to the Dow index.

 

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Tue, 03/10/2015 - 18:43 | 5875437 Quantum Nucleonics
Quantum Nucleonics's picture

The joke will be on the Dow if, as appears may be the case, they "bought into" Apple at the top of the cycle.  Yesterday's watch presentation certainly seemed like a calling-the-top moment.

Tue, 03/10/2015 - 18:17 | 5875329 blindman
blindman's picture

a sham, but to what purpose?
that is the critical question.
the problem is the evil and stupid purpose.
it has become, the purpose, murder, cheating,
stealing and the greater gorging of imbalance
to impoverish the many for the feeding of the
vicars to morons of incest.
no?
.
apologies to the truly innocent .....
.
John Trudell - What Happened to the Tribes of Europe (4x3)
https://www.youtube.com/watch?v=rbCar3aGadc
.

Tue, 03/10/2015 - 20:03 | 5875790 WhackoWarner
WhackoWarner's picture

oh I just don't know anymore,  Lies?/fiction?/schematics?/ warnings?/ OR simple and flexible statement of a company growth plan?. 

 

20. Economic crises have been produced by us for the GOYIM by no other means than the withdrawal of money from circulation. Huge capitals have stagnated, withdrawing money from States, which were constantly obliged to apply to those same stagnant capitals for loans. These loans burdened the finances of the State with the payment of interest and made them the bond slaves of these capitals .... The concentration of industry in the hands of capitalists out of the hands of small masters has drained away all the juices of the peoples and with them also the States .... (Now we know the purpose of the Federal Reserve Bank Corporation!!)

21. The present issue of money in general does not correspond with the requirements per head, and cannot therefore satisfy all the needs of the workers. The issue of money ought to correspond with the growth of population and thereby children also must absolutely be reckoned as consumers of currency from the day of their birth. The revision of issue is a material question for the whole world.

22. YOU ARE AWARE THAT THE GOLD STANDARD HAS BEEN THE RUIN OF THE STATES WHICH ADOPTED IT, FOR IT HAS NOT BEEN ABLE TO SATISFY THE DEMANDS FOR MONEY, THE MORE SO THAT WE HAVE REMOVED GOLD FROM CIRCULATION AS FAR AS POSSIBLE.

TYRANNY OF USURY

30. What also indeed is, in substance, a loan, especially a foreign loan? A loan is - an issue of government bills of exchange containing a percentage obligation commensurate to the sum of the loan capital. If the loan bears a charge of 5 per cent, then in twenty years the State vainly pays away in interest a sum equal to the loan borrowed, in forty years it is paying a double sum, in sixty - treble, and all the while the debt remains an unpaid debt.

31. From this calculation it is obvious that with any form of taxation per head the State is baling out the last coppers of the poor taxpayers in order to settle accounts with wealthy foreigners, from whom it has borrowed money instead of collecting these coppers for its own needs without the additional interest.

32. So long as loans were internal the GOYIM only shuffled their money from the pockets of the poor to those of the rich, but when we bought up the necessary persons in order to transfer loans into the external sphere, (Woodrow Wilson and F.D. Roosevelt) all the wealth of States flowed into our cash-boxes and all the GOYIM began to pay us the tribute of subjects.

33. If the superficiality of GOY kings on their thrones in regard to State affairs and the venality of ministers or the want of understanding of financial matters on the part of other ruling persons have made their countries debtors to our treasuries to amounts quite impossible to pay it has not been accomplished without, on our part, heavy expenditure of trouble and money.

Tue, 03/10/2015 - 20:15 | 5875821 WhackoWarner
WhackoWarner's picture

shite

11. THIS HATRED WILL BE STILL FURTHER MAGNIFIED BY THE EFFECTS of an ECONOMIC CRISES, which will stop dealing on the exchanges and bring industry to a standstill. We shall create by all the secret subterranean methods open to us and with the aid of gold, which is all in our hands, A UNIVERSAL ECONOMIC CRISES WHEREBY WE SHALL THROW UPON THE STREETS WHOLE MOBS OF WORKERS SIMULTANEOUSLY IN ALL THE COUNTRIES OF EUROPE. These mobs will rush delightedly to shed the blood of those whom, in the simplicity of their ignorance, they have envied from their cradles, and whose property they will then be able to loot.

Tue, 03/10/2015 - 20:17 | 5875827 WhackoWarner
WhackoWarner's picture

http://www.jewwatch.com/jew-references-protocols-full-text-2-protocols-1-2-3.html#PROTOCOL No. 1

 

I read without judgement until I make up my own mind.  But,  this I read 20 years ago and now am revisiting.

 

Tue, 03/10/2015 - 18:47 | 5875460 Comte d'herblay
Comte d'herblay's picture

Incest???  Can you say that here?

Tue, 03/10/2015 - 18:50 | 5875481 blindman
blindman's picture

https://www.youtube.com/watch?v=OaeXqEnq2R4

Van Morrison The Philosophers Stone - Live

.

sure.

Tue, 03/10/2015 - 18:10 | 5875307 blindman
blindman's picture

core belief of complete bullshit
does tend to skew the logical interpretation
of events and "real" circumstance.
tangential trivialities multiply like
bacteria and rabbits.
.
that's life.
.
John Trudell: We are power
https://www.youtube.com/watch?v=WNr4Lw4XBHU
.
Secrets in Plain Sight 1-23 (Full video)
https://www.youtube.com/watch?v=L777RhL_Fz4
.
Van Morrison - That's Life
https://www.youtube.com/watch?v=-LpvReFxXvA

Tue, 03/10/2015 - 17:23 | 5875162 kaiserhoff
kaiserhoff's picture

The Dow is a better reflection of the way stock pickers experience the market.

The S & P 500 is a better reflection of the way stock funds perform.

The shams are everything in DC, and everything in Jew York.

Tue, 03/10/2015 - 16:19 | 5874877 SilverMoneyBags
SilverMoneyBags's picture

Dow has been this way for a very long time, why change the methodology now?

Tue, 03/10/2015 - 16:11 | 5874825 mastersnark
mastersnark's picture

Implying there are people that thought the DJIA was a legitimate method of measuring the market.

Tue, 03/10/2015 - 15:18 | 5874528 quinnman
quinnman's picture

Well, of course the Dow is a sham, but WTF is up with the Russell? At least the Dow kind of reflects real values but the Russell????????????

Tue, 03/10/2015 - 15:07 | 5874454 g speed
g speed's picture

The first book I ever read on DOW theory has a big big chapter on "price weighting" ---Use your Excel to show you the curve ------

Murphy or Kirkpatrick/Dahlquist --I forget which---

Tue, 03/10/2015 - 14:54 | 5874410 TheAntiProgressive
TheAntiProgressive's picture

C'mon all ZHers. This should be absolutely no surprise. They manipulate the raw materials markets, the bond markets, the interest rates, the stock markets, GDP numbers, unemployment and on so I am shocked, shocked I tell you that they would stoop to manipulating the world wide "message" of the US stock market. You all know better already.

Tue, 03/10/2015 - 14:28 | 5874257 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Goldman Sachs has more control over GE than GE has over Goldman Sachs. And the DOW is all about controlling interests such as Goldman Sachs, plain and simple. The DOW is theater of the abSURD.

Tue, 03/10/2015 - 13:43 | 5874024 eyesofpelosi
eyesofpelosi's picture

Dang it, you mean all these years I've been lied to!!?

Tue, 03/10/2015 - 13:17 | 5873871 Gringo Viejo
Gringo Viejo's picture

Why anyone at ZH would take time to read an article titled "The Dow Is A Sham" is beyond me.

NEXT!

Tue, 03/10/2015 - 13:40 | 5874014 KnuckleDragger-X
KnuckleDragger-X's picture

What? You don't like situation comedies?

Tue, 03/10/2015 - 13:47 | 5874045 eyesofpelosi
eyesofpelosi's picture

Nah, this is Party of Five fused with A Nightmare on Elm Street.

Tue, 03/10/2015 - 13:02 | 5873778 disabledvet
disabledvet's picture

If you're a magabank masquerading as an actual company you're in.

Tue, 03/10/2015 - 12:52 | 5873705 SoDamnMad
SoDamnMad's picture

Why isn't Mustang Ranch or Bunny Ranch listed in the DOW?

Tue, 03/10/2015 - 13:42 | 5874020 eyesofpelosi
eyesofpelosi's picture

Because their patrons know that they are going to be fucked.

Tue, 03/10/2015 - 18:51 | 5875483 Comte d'herblay
Comte d'herblay's picture

Ironic that, the Business of Prostitution is likely the most honestly run of enterprises in the entire world.  You pay for exactly what you want, or need and that's precisely what you get.

A purer example of capitalism can not be found anywhere else on Earth or Ceres.

 

Tue, 03/10/2015 - 16:06 | 5874779 weburke
weburke's picture

eyes, ask her royal P if she will ask a question next time she kisses stone, "how many people will be left? the written of  200 mil,  or more. Is a billion too much to ask? " It will be understood. devils all. 

Tue, 03/10/2015 - 12:48 | 5873679 the grateful un...
the grateful unemployed's picture

the market is manipulated to go higher, come on. the problem with cherry picking DOW components is that when they add a high cap name and that name takes a serious loss it can take down the average. i will guess that in the next ten years you will see at least one gold mining company stock, and maybe two added to the DOW because there is a second serious component to these things, they have to be politically correct. the pressure to go onto some form of gold standard in the next decade will drive DOW component directors to pressure reluctant monetary agencies to recognize gold as a form of wealth insurance. they will do this by adding gold mining companies to their 30 stocks.

Tue, 03/10/2015 - 18:58 | 5875530 Crisismode
Crisismode's picture

 

 

You are totally delusional.

Time to go back on your meds.

Maybe even have a drink before you fall asleep.

 

Tue, 03/10/2015 - 12:46 | 5873665 KnuckleDragger-X
KnuckleDragger-X's picture

Your insulting good, honest sham's everywhere by making that comparision....

Tue, 03/10/2015 - 12:44 | 5873662 VWAndy
VWAndy's picture

Moving the goal posts. One of TPTB favorite scams. Changing the measurement or value of things.

Tue, 03/10/2015 - 16:24 | 5874851 Radical Marijuana
Radical Marijuana's picture

AFTER private banks can legally make the public "money" supply out of nothing as debts, the measurement or value of everything becomes based on enforcing frauds, in hyper-complicated ways, since those who benefit the most from those frauds are also those who least have to pay for enforcing those frauds.

The goal posts have been moved to be on a nearly vertical cliff playing field, which is the most opposite to a level playing field it could possibly be. Those at the top of the cliff can almost automatically score, while for those at the bottom of that cliff it is practically impossible to score.

Of course, it is NOT just that the "Dow is a sham."

EVERYTHING IS BASED ON A

FOUNDATION OF ENFORCED FRAUDS,

TO THE DEGREE TO WHICH IT IS ALMOST

IMPOSSIBLE TO COMPREHEND HOW RIGGED IT IS!

It is even more theoretically important that most of the opposition to TPTB is controlled to stay within the same bullshit frame of reference. The Dow Jones is a bunch of numbers ALL based on the entrenched systems of legalized lies, backed by legalized violence. The only way that the economic statistics could NOT be a sham is IF those economic numbers were based upon the existence of energy systems, so that human energy systems were integrated with environmental energy systems. However, that raises apparently insurmountable problems, which I just reviewed in a commment under this article, where it is relevant to remember that the Dow Jones is a list of corporations, which are fundamentally able to operate as "legal fictions:" Next Mega-Bailout On Deck: White House Studying "New Bankruptcy Options" For Student-Loan Borrowers

 

Tue, 03/10/2015 - 21:57 | 5876174 VWAndy
VWAndy's picture

It takes a ton of trickery to stay this course. We did not get here by chance. So it stands to reason removing the tricksters would be the key. The truth is that key to finding THE trickster.

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