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Old 01-03-2009, 11:24 PM
 
Location: Marietta, GA
7,858 posts, read 15,195,854 times
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Quote:
Originally Posted by DesertRich View Post
Those companies are not on the DOW but NASDAQ I believe.
Companies like Microsoft and Intel are traded on the NASDAQ but part of the Dow average.

Here is the list of the current Dow Jones Industrial Average components....and they do change (example: AIG was recently removed):

COMPANY NAME
3M Co.
Alcoa Inc.
American Express Co.
AT&T Inc.
Bank of America Corp.
Boeing Co.
Caterpillar Inc.
Chevron Corp.
Citigroup Inc.
Coca-Cola Co.
E.I. DuPont de Nemours & Co.
Exxon Mobil Corp.
General Electric Co.
General Motors Corp.
Hewlett-Packard Co.
Home Depot Inc.
Intel Corp.
International Business Machines Corp.
Johnson & Johnson
JPMorgan Chase & Co.
Kraft Foods Inc. Cl A
McDonald's Corp.
Merck & Co. Inc.
Microsoft Corp.
Pfizer Inc.
Procter & Gamble Co.
United Technologies Corp.
Verizon Communications Inc.
Wal-Mart Stores Inc.
Walt Disney Co.
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Old 01-03-2009, 11:27 PM
 
Location: Marietta, GA
7,858 posts, read 15,195,854 times
Reputation: 3566
Found this....interesting to see the how the Dow components have changed over the years. Illustrates my point to some degree.

http://www.djindexes.com/mdsidx/downloads/DJIA_Hist_Comp.pdf (broken link)
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Old 01-03-2009, 11:31 PM
 
Location: Los Angeles Area
3,306 posts, read 3,553,414 times
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I think its best to look at price/earnings ratios rather than simply looking at the price movements. But looking at PE paints the same sort of picture. The whole "information economy" idea doesn't explain any of what is seen in the charts. Why does a transformation from manufacturing to "information" cause worse PE ratios? It shouldn't...

Anyhow, the ratio was about 8 in the early 1980's, right now its around 22 or so. Seems the average, if you exclude the dot-com bubble is around 11~12. So from this perspective there is still a bubble in equities.

Since the history here (link toward the bottom):

S&P | Indices > Equity Indices - S&P 500 - Earnings

Anyways, whenever I look at graphs/data I can't help but thinking its one big bubble. Right now I have virtually no equities, but I'm undecided what I'm going to do more long term. Will the US equities market behave much like the Nikkei? So far...it seems to be which means we could have another 10~15 years slow declines/stagnation.

It is a bit odd, that this "bubble" seems to have start to form when 401(k) started to become widespread... Within 10 years we've seen two major collapses in equities and the 10 year return has been pretty bad. Will younger folks invest in equities given this?
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Old 01-04-2009, 12:52 AM
 
706 posts, read 1,186,953 times
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Quote:
Originally Posted by neil0311 View Post
Think about companies like Microsoft, Cisco, Google, Apple etc. None existed before the late 1970s. Think about the market cap of these companies and others like them and all the spin off and downstream effects of their businesses.

Just because something isn't manufactured in a big factory by a bunch of blue collar union guys doesn't mean that it's less valuable or unimportant. The transition to the Third Wave economy was the most important event of the 20th century, perhaps only behind the atom bomb.
Agreed that it was important but the technology companies could never absorb the number of workers that were employed in industrial expansion. The great gains in productivity also led to an excess of workers who were ill prepared for the next wave. These people moved down the economic ladder, as any credible economic data shows on wage stagnation for the economic middle class. Heavy manufacturing was the largest employer by far of the great middle class. Not all of these people were capable of being software engineers or programmers, so they were forced to move down the economic ladder. You don't have to like it, but it's a fact. And when this industrialization moved offshore and people moved down the economic spectrum, they began to absorb more and more credit in an attempt to maintain a lifestyle that they couldn't afford. The numbers are readily available on credit expansion, decline in industrial output, wage stagnation et al. The period around 1980 going forward has been the economic decline of the US. We haven't even had GDP growth since 2000 if you factor in inflation (was included in Clinton days but not currently).
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Old 01-04-2009, 01:00 AM
 
Location: Los Angeles Area
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Quote:
Originally Posted by jimmyP View Post
Not all of these people were capable of being software engineers or programmers, so they were forced to move down the economic ladder.
I'm not so sure if its a matter of what they are "capable" of doing, instead of a matter of not being able to become knowledgeable in such things due to more or less social/financial issues. How exactly does a 35~40 year old guy with a family stop working for 4 years to go back to school? This is not to mention, most universities don't deal well with adult students.

This is a classic error though, much like what the IMF/World bank does all over the world. Try to dramatically change the nature of an economy without ever putting much effort into thinking how people are going to move from doing X to doing Y within a relatively short period of time.

I think the US economy could've switched gears, but only if the powers that be put serious efforts into supporting the change with education grants etc etc. Instead they let the "free market" do it...pretending as if the invisible hand would do what they wanted.... But it really has a mind of its own.
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Old 01-04-2009, 01:09 AM
 
706 posts, read 1,186,953 times
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Quote:
Originally Posted by Humanoid View Post
I'm not so sure if its a matter of what they are "capable" of doing, instead of a matter of not being able to become knowledgeable in such things due to more or less social/financial issues. How exactly does a 35~40 year old guy with a family stop working for 4 years to go back to school? This is not to mention, most universities don't deal well with adult students.

This is a classic error though, much like what the IMF/World bank does all over the world. Try to dramatically change the nature of an economy without ever putting much effort into thinking how people are going to move from doing X to doing Y within a relatively short period of time.

I think the US economy could've switched gears, but only if the powers that be put serious efforts into supporting the change with education grants etc etc. Instead they let the "free market" do it...pretending as if the invisible hand would do what they wanted.... But it really has a mind of its own.
Agreed on all points.
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Old 01-04-2009, 03:10 AM
 
Location: Keller, TX
5,670 posts, read 5,364,671 times
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Why are we wasting time on a linear chart?

100 Year Dow Chart (http://www.lowrisk.com/djia100year.htm - broken link)
StockMarketTiming.com Historical Charts DJIA
Global Finance: Dow Jones 1900-2008 Charts (More Updates) (http://www.globalfinance.net/2008/12/dow-jones-1900-2008-charts-more-updates.html - broken link)
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Old 01-04-2009, 11:39 AM
 
Location: Los Angeles Area
3,306 posts, read 3,553,414 times
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Quote:
Originally Posted by Nepenthe View Post
Why are we wasting time on a linear chart?
A linear chart is just as important as a logarithmic chart, they are showing different things. The two show the same story....with regard to the topic though.
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Old 01-04-2009, 12:53 PM
 
Location: Keller, TX
5,670 posts, read 5,364,671 times
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Quote:
Originally Posted by Humanoid View Post
A linear chart is just as important as a logarithmic chart, they are showing different things. The two show the same story....with regard to the topic though.
I think from a historical perspective, as touched on in this thread, a logarithmic chart is more useful. I'm not even saying it isn't somewhat bubble-like or that there haven't been bubble periods. But periods like this (and I'm not disparaging jimmyP's comment itself)...
Quote:
Originally Posted by jimmyP View Post
Interesting how it really took off in the Clinton / Gingrich days.
...that are observed when looking at a chart like this: Linear Chart

...could be seen in a different light when looking at a chart like this: Logarithmic Chart

On the arithmetic/linear chart, a 20% move from 500 to 600 hardly registers, while a 20% move from 10,000 to 12,000 looks like absurdly irrational exuberance. A linear chart that has to show price movements from 20 to 14,100 is necessarily going to exaggerate movements at the top end of the scale and completely obscure similar percentage movements at the bottom end of the scale.
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Old 01-04-2009, 01:19 PM
 
Location: Los Angeles Area
3,306 posts, read 3,553,414 times
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Quote:
Originally Posted by Nepenthe View Post
I think from a historical perspective, as touched on in this thread, a logarithmic chart is more useful.
I think looking at the PE ratios is the most useful, but really looking at the linear chart isn't really a problem so long as you keep in mind what you are looking at.
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