Thanks for the facts.

Dr. J-

Astute clarification;)

Chris – I don’t think the world revolves around it but mainstream media certainly reports on it because, as Dr. J. said, that’s what people know.

The Dow isn’t necessarily a very good indicator of the overall condition of the market even though its the index that most people know and look too.

The 1929 example, and others like it, foster a giant misconception that colors the decision-making of many investors. Mark Hulbert wrote an excellent article on this subject last year, in which he made several crucial points. One was that looking only at the price of the Dow over those 25 years, rather than its total return, leads to a distorted conclusion:

“Dividends also played a big role in stocks’ recovery from the 1929 Crash and subsequent bear market. Consider the stock series constructed by Jeremy Siegel, a finance professor at the Wharton School of the University of Pennsylvania, and author of the classic book ‘Stocks for the Long Run’. He shows that, for all intents and purposes, stocks on a total-return basis in late 1936 and early 1937 had risen back to their September 1929 high, before entering into another bear market. This puts the recovery time at a little more than four years from the stock market’s July 1932 bottom.”

Hulbert went on to point out that the 30 Dow stocks really weren’t representative of the stock market as a whole:

“It turns out that the particular stocks that were included in the Dow in the 1930s and 1940s performed significantly less well than the overall market. Perhaps the most celebrated example of how unrepresentative the Dow was then: The now-infamous decision Dow Jones & Co. made in 1939 to remove International Business Machines from the list of the 30 Dow stocks. (IBM was not added back to the list until decades later.) According to Norman Fosback, the DJIA would be more than double its current level if Dow Jones & Co. had not made that decision.”