Some of the members of this board (paging Conrad and Jeff) are much more knowledgable about this than I, so I'll ask: In layman's terms what is the Dow an indicator of? What does the number mean?
The Dow goes up, the Dow goes down. Means nothing to me since I don't know what that number translates to in regards to the economy. I have never owned any stock in my life so that explains my ignorance.
Look, I'm not a financial guru, but I can see the writing on the wall. We're screwed. Our debt is unsustainable.
Just wondering I guess what the Dow means to us average joes and how is it's rising or falling going to affect those of us who own no stock.
The Dow is a mathematical weighing of the stock prices of 30 of the largest public companies, which are selected to cover the widest spectrum of industries (manufacturing, food, tech, etc). Corporations like Kraft Foods, Exxon, 3M, Alcoa and Cisco to name a few are included. Depending upon how each of the 30 stocks are doing moment to moment, it's possible to come up with a number which "supposedly" reflects the economic health of the nation.
It's a ruler to gauge investor sentiment and give people a quick snapshot of where you are in relation to the past.
If you don't own stock, it's basically as meaningful as looking at European soccer stats - you can tell by looking at the standings who's probably good or crappy - without having to spend a lot of time and effort in looking at all the players, coaches and whatnot.
My feeling is that the Dow numbers today are somewhat meaningless, in the very same way that baseball stats became distorted during the steroid years. The Fed is printing dollars at a massive clip and those large sums are going into the stock market and commodities and whatever, which hugely distorts the Dow. But if the vast majority of the people get their only insight into the economic health of the county by looking at whether the Dow is up or not, then you can see why they would want this number to go up. There is a reason that Obama pointed to the Dow when he gave his State of the Union speech, because it resonates with the people - even if they don't really care to know what it means.
But the number has very little to do with the national debt, unemployment, or almost anything else for that matter - it is just an indicator. The stock market has gone up in bad times and underperformed in good. In the end, it's just like Dylan said "that you don't need a weatherman to know which way the wind blows" - you don't need an abstract number to tell you if the economy is healthy or not, because you can see that just driving around town.
JTS
