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1.Market Observations, 8.Was Sticky

27 Jan 2017 (AFR) – Why the Dow hitting 20,000 is ‘fake news’

(27 January 2017, AFR, p27, by John Authers)

‘Dow 20,000 is here at last. No regular reader – or indeed, any sentient and sensible human being – should base any investment decision on the Dow. Its methodological flaws are irremediable. And in any case, round numbers should not matter. A brief illustration of the Dow’s primitive methodology will suffice. Just five of its stocks – Goldman Sachs, IBM, Boeing, UnitedHealth and JPMorgan – account for fully half of the Dow’s rise since election day. Thanks to its ludicrous weighting by share price rather than market capitalisation, Goldman accounts for eight times the weighting…’

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