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>
> > Obviously not all large cap stocks are in the Dow, but the point is
still > > valid.
>
> Nope. It's not. I'm shocked in fact that the variable composition of the
> Dow has been ignored in this post. <<SNIP>>
>The Dow drops its losers and replaces them with winners, it thus is prone
to >'inflation' in its own right, not just in relation to the Russell 2000.
Hugh, apparently the fact that I was using "Dow stocks" purely as a
figurative term for large cap stocks went right over your head. If this is
confusing you, then replace every reference to Dow stocks in my original
message with "Russell Top 200 Index" (which is comprised of the 200 largest
companies as measured by market cap and is completely objective). Guess
what you'll find? Everything I said is still true...
>Makes me wonder what the purpose of the post was.
That's funny, I was just thinking the same thing about your response (and
why I'm bothering to respond to it) when you consider that even if we stick
with your literal interpretation/use of the Dow, everything you just said
about it only REINFORCES my original point. The fact that the Dow is a
"subjective" index and can "drop its losers" only adds to the potential
disparity between the Dow and the Russell. If the Dow does an unusually
good job of picking winners, the disparity gets bigger. If it doesn't shed
its losers, the disparity could get smaller. The important thing is that
the disparity (whether its growing or shrinking) SAYS NOTHING ABOUT THE
OVERALL HEALTH OF THE STOCK MARKET (I hope it sunk in this time).
>
> Is there somebody out there who has the data, time and interest to plot
and > post to the group a graph of the Dow using its definition, say a week
before
> the day of the crash in 1987, and carrying it out to the present day
without
> any daily redefinition against the 'official' Dow. That might help put
the > issue to rest as to whether it is really of any significance.
>
> Hugh [yes, in Denmark and lurking]
>
Please, be my guest, and don't let the fact that the results of such an
endeavor will be completely irrelevant to the point of my original message
stop you. It is the CURRENT value of the Dow (based on its current
composition) relative to the CURRENT value of the Russell 2000 that has so
many people worried about the stock market as a whole. The point is they
shouldn't be.
Hugh, I'm more than open to constructive criticism, but in this response
you've challenged me and then given evidence that only supports me. If I
seem too harsh it's probably because I'm jealous of the fact that you're in
Denmark right now and I'm not (you should spend less time lurking and more
time at Legoland).
Bruce
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