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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…’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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