Sunday, January 29, 2017

Donal Mahoney writes

A Memory Returns as the Dow hits 20,000

When Fred was a boy, he heard his mother  
talk about Grandpa going to town during WWI 
to sell the bounty of his harvest.  

On his farm he had eggs, butter and milk,
vegetables and meat. He’d buy sugar, coffee,
a few other things he couldn’t grow or raise.  

When WWI ended Grandpa lost everything. 
He had barns full of grain the government no longer 
wanted. They cancelled his contract.

The Depression struck and farmers like Grandpa 
were devastated. They lost everything. 
A few years later Grandpa died without a cent.  

As a boy Fred stood at Grandpa's grave and listened 
to his mother talk about the times when Grandpa’s yard 
was full of buggies pulled by horses on a Sunday afternoon.  

Grandma cooked for hours to feed the families 
who came to visit, quite a contrast from the empty yard 
after Grandpa lost everything.  

Fred thought about Grandpa when the Dow hit 20,000 
and investors everywhere were giddy with glee.
But Grandpa’s life taught Fred things go up and down.

When Grandpa had money, everyone wanted to see him.
They pulled up in buggies for a meal on Sunday afternoons. 
Then poverty made him a pauper his friends no longer knew.


  1. The Dow Jones Industrial Average hit 20,000 for the first time ever on 25 January 2017. It had been approaching that milestone for two months, beginning days after the election of Donald Trump as president of the US (the index grew by some 6% during that period); earlier in the month it had come as close as 19,999.63 but faied to hit the mark. But it's jut a number (like one's 60th birthday or a couple's 25th anniversary) and, by itself, does not have a great deal of meaning; it is a statistical snapshot of a moment and does not even have predictive power. It moved from 19,000 points in only 64 days, but the only 1,000 point rise that was faster was in 1999, when it only took 35 days to get to 11,000 -- when overly-high valuations ushered in the end of the "dot-com" bubble. "The Dow" a price-weighted index (meaning that stocks with higher prices have greater influence) of 30 important publicly traded companies that are used as a barometer of the stock market and the overall US economy. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor which changes whenever one of the component stocks has a split or dividend; since the divisor is currently less than 1, the value of the index is larger than the sum of the component prices. Goldman Sachs stock, the highest-priced on the Dow, rallied about 30% since the election, and a 1% move represents a 16-point move on the Dow. (In contrast, the larger S&P [Standard & Poor's] 500 index is weighted by market capitalization and is more influenced by its components' actual value.)

  2. The index was created by "Wall Street Journal" editor Charles Dow on 26 May 1896 and named after him and statistician Edward Jones. (The oldest US market index, the Dow Jones Transportation Average, had appeared in 1885, with nine railroads and two industrial companies, in the "Customer's Afternoon Letter," a daily two-page financial news bulletin which was the precursor to "The Wall Street Journal," but it dropped the Central Pacific Railroad and Central Railroad of New Jersey in 1886; though both Dow indices had a dozen stocks, only one appeared on both.) The list has changed 51 times in its history, and only one of the original 12 members continues to hold a spot on it: General Electric, formed in 1892 in a merger that included a business owned by Thomas Edison, was dropped in 1898 for a year, restored between 1899 and 1901, and brought bac permanently in 1907. The other 11 original companies were: 1) American Tobacco Company was founded in 1890 after taking over 200 competitors but was renamed Fortune Brands after the Supreme Court ordered its dissolution; it was dropped in 1985. 2) Distilling & Cattle Feeding Co. (renamed American Spirits Manufacturing) was also dropped from the Dow in 1899; it evolved into Millennium Chemicals. 3) Laclede Gas Co. provided natural gas for home and street lighting; It was dropped in 1899 but is currently the largest distributor of natural gas in Missouri. 4) American Cotton Oil Co. formed as a trust after mill owners in Texas and Arkansas combined syndicates to regulate the price of seeds and then became a corporation in 1889 after the trust was dissolved through a lawsuit; it was dropped from the Dow in 1901 and evolved into a company that became part of Unilever. 5) Tennessee Coal, Iron and Railroad Co. was formed in 1852 and was dropped in 1907 when it merged with its main competitor US Steel. 6) Chicago Gas Co. was founded in 1887 but was acquired 10 years later by Peoples Gas and evolved into a subsidiary of Integrys Energy Group; it was dropped in 1915. 7) National Lead Co. was founded in Philadelphia in 1772 and created Dutch Boy Paint in the early 1900s; it was dropped in 1916 and is now NL Industries, a lead-smelting firm based in Houston, Texas. (That year American Telephone & Telegraph Co. was added to the list; it was established in 1885 as a subsidiary of Bell Telephone Co., which it acquired in 1899.) 8) US Leather Co. was dropped in 1928 and liquidated in 1952. 9) United States Rubber Co. was also dropped in 1928; it changed its name to Uniroyal after a merger and was acquired by French tire-maker Michelin in 1990. (That year, Standard Oil of New Jersey, modern ExxonMobil, was added.) 10) American Sugar Co. was established in 1891 with $50 million in capital but was dropped in 1930; it is now part of American Sugar Refining Inc. 11) North American Co., which owned public utilities and railroads, was also dropped in 1930 and was broken up by the Securities and Exchange Commission in 1946.

  3. Other companies that remain on the index include Chevron (from 1930 to 1999, re-added in 2008), Coca-Cola (from 1932 to 1935, re-added in 1987), IBM (1932-1939, re-added in 1979), Procter & Gamble (since 1932), DuPont (on the list from 1924 to 1925 and re-added in 1935), United Aircraft since 1939 (now United Technologies), Minnesota Mining and Manufacturing (now 3M) since 1976. Merck (since 1979), American Express (since 1982), McDonald's (since 1985), Boeing (since 1987), Caterpillar, JPMorgan Chase, and Walt Disney (since 1991), Wal-Mart (since 1997), Johnson & Johnson, The Home Depot, Intel, and Microsoft (since 1999), Pfizer and Verizon (since 2004), Chevron, Bank of America, and Kraft Foods replaced Altria Group, Honeywell, and American International Group (AIG) in 2008, General Motors and Citigroup were replaced by Cisco Systems and The Travelers Companies in 2009, UnitedHealth Group replaced Kraft Foods (after it split into Mondelēz International and Kraft Foods Group) in 2012, Goldman Sachs, Nike, and Visa replaced Alcoa, Bank of America, and Hewlett-Packard in 2013, and Apple replaced AT&T in 2015.


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