So GE got the boot from the Dow
moncler factory outlet The S Dow Jones Indices said General Electric will be Moncler Outlet dropped from the Dow Jones industrial average the following week, ending the industrial conglomerate’s more than 100 year run in the 30 company blue chip index. GE’s slot will go to drugstore chain Walgreens Boots Alliance. moncler factory outlet
GE, of course, has been troubled for years. Its stock has fallen sharply recently, and its reputation as a well run company which in hindsight, it didn’t deserve is in tatters. As are people moncler outlet online who bet heavily on GE stock.
moncler outlet online But instead of joining the GE’s a mess crowd, let’s look at what GE’s ouster from the Dow actually means. https://www.moncleronlineoutlet.com Which is almost nothing. moncler outlet online
moncler outlet That’s because although the Dow matters a lot to buy moncler jackets ordinary people, who have grown up hearing about the Dow every day that financial markets are moncler outlet sale open, the Dow is less than an afterthought to big time Wall Street types and money managers. moncler outlet
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Here’s why: The Dow is an average that’s based on the share prices of its components. People often call it an index, but it’s an average. You add up the stock prices of the 30 stocks, run the total through something called the Dow Divisor (which I’ll discuss another day), and voil you get the Dow average.
cheap moncler jackets sale By contrast, the Standard Poor’s 500 stock index and the various total stock market indexes in which people invest through mutual funds are based on companies’ stock market values, not their share prices. cheap moncler jackets sale
That distinction between market value and share price is why trillions of dollars of investments are tied to the S and total market indexes, and virtually nothing is linked to the Dow. Total market value matters. Share prices, as we’ll see in a bit, can be sort of random.
cheap moncler The reason GE moncler mens jackets became a Dow dumpee is that its share price, which was $12.95 at Tuesday’s market close, was an insignificant factor in the Dow, whose share prices totaled $3,587.31. cheap moncler
moncler sale outlet However, when it comes to the real financial world rather than Dow World, GE, with a stock market value of about $110 billion, has more impact than at least five companies that aren’t being kicked out of the Dow: Travelers, American Express, Caterpillar, Goldman Sachs and United Technologies.[Is this tax avoidance? No, think of it as tax revenge.] moncler sale outlet
moncler jackets outlet For that matter, GE’s stock market cheap moncler sale value is substantially higher than that of Walgreens, the moncler sale company replacing it in the Dow. moncler jackets outlet
But when it comes to share price, as opposed to stock market value, GE isn’t in the same league as the other Dow stocks. GE’s share price, about $13 cheap moncler outlet when last I looked, was less than a fifth of the $67.50 that Walgreens shares were fetching. In fact, GE’s share price was less than half that of the Dow’s second lowest priced stock, Pfizer.
cheap moncler jackets But when all you look at is share price, neglecting market value, you end up with distortions which is why I have little respect for the Dow, and why you should have little respect for it, too. cheap moncler jackets
moncler sale For instance, cheap moncler GE’s market value is about triple that of Travelers, the Dow’s lowest valued component. But Travelers’ stock price, about $125, is more monlcer down jackets than nine times GE’s price. moncler sale
moncler outlet store In the Dow, a $1 (less than 1percent) move in Travelers stock has the same weight as a $1 (8 percent) move in GE’s stock. But in the moncler outlet real world, a $1 move changes GE’s market value by $8.7 billion, more than 30 times the $270 million impact that a $1 move has on Travelers. moncler outlet store
The reason the Dow is an average, of course, is that when it was launched in 1896, the only way to get a timely number for the Dow’s value was to add up the stock prices of its components and divide by the number of components.
Now, with vast computing power in the world, calculating second to second changes in the value of a 500 stock index or even a multi thousand stock index is child’s play. (At least for children who, unlike me, don’t have fat fingers when it comes to using a computer.)
[The company that carried the Dow to its new record]
Now, let me show you one last strange thing.
Had GE really, really, really wanted to stay in the Dow, it could have done a 1 for 10 reverse split of its stock. That would have left it with about 870 million shares outstanding, rather than 8.7 billion and its stock price would have been about $130, rather than about $13. Its stock market value, however, would have been unchanged.
moncler jacket sale At $130, GE’s share price would have accounted for about 3.5 percent of the total Dow moncler sale outlet prices (adjusted for the reverse split) as of Tuesday’s close, rather cheap moncler jackets than its moncler outlet store actual 0.36 of 1percent. moncler jacket sale
cheap moncler outlet I can’t imagine a $130 per share GE getting kicked out of the Dow. But kicking out a $13GE, which had virtually no influence on the average, was an easy call. Symbolism over substance. And that, my friends, is the bottom line cheap moncler outlet.