Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (45615)	1/22/2009 5:28:42 PM
From: TobagoJack	Read Replies (2) \| Respond to of 217906

lots of unlikely figuring has come to pass, and particular to nz, step back, take a look at the reflection, then realize the truth of where the water level must settle at; it is easy. <<4 million people here, average IQ pretty good, passable work ethic, reasonable GDP per capita>> you do not get out much, do you? ... the very fact that you wrote the above and mentioned gdp convinces me you know not what you are talking about. on dow 16k, i alert you to material truth, that it does not matter materially, just like gdp Bianco: The Dow is Distorted January 21, 2009 Guest commentary by James A. Bianco, Chief Executive Officer, of Bianco Research, LLC Comment - The Dow Jones Industrial Average (DJIA) is a price weighted index. The divisor for the DJIA is 7.964782. That means that every $1 a DJIA stock loses, the index loses 7.96 points, regardless of the company's market capitalization. Dow Jones, the keeper of the DJIA, has an unwritten rule that any DJIA stock that gets below $10 gets tossed out. As of last night's close (January 20), The DJIA had the following stocks less than $10... Citi (C) = $2.80 GM (GM) = $3.50 B of A (BAC) = $5.10 Alcoa (AA) = $8.35 If all four of these stocks went to zero on today's open, the DJIA would lose only 157.3 points. The financials in the DJIA are... Citi (C) = $2.80 B of A (BAC) = $5.10 Amex (AXP) = 15.60 JP Morgan (JPM) = $18.09 If every financial stock in the DJIA went to zero on today's open, it would only lose 331.25 points, less than it lost yesterday (332.13 points). If you want to add GE into the financial sector, a debatable proposition, then: GE (GE) = $12.93 If the four financial stocks above and GE opened at zero today, the DJIA would only lose 434.24 points. The reason the DJIA is outperforming on the downside is the index committee is not doing its job and replacing sub-$10 stocks and the financials are so beaten up that they cannot push the index much lower. So what is driving the index? The highest priced stocks: IBM (IBM) = $81.98 Exxon (XOM) = $76.29 Chevron (CHV) = $68.31 P&G (PG) = $57.34 McDonalds (MCD) = $57.07 J&J (JNJ) = $56.75 3M (MMM) = $53.92 Wal-Mart (WMT) = $50.56 For instance if all the sub-$10 stocks listed above, all the financials listed above and GE opened at zero, the DJIA loses 528.63 points. To repeat if C, BAC, GM, AA, JPM, AXP and GE all open at zero, the DJIA loses 528.63 points. If IBM opens at zero, it loses 652.95 points. So, the DJIA says that IBM has more influence on the index than all the financials, autos, GE and Alcoa combined. The DJIA is not normal as the Index committee is not doing their job during this crisis, possibly because to the political fallout of kicking out a Citi or GM. As a result, this index is now severely distorted as it has a tiny weighing in financials and autos.