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Sept. 16, 2010, 7:56 p.m. EDT · Recommend (4) · Post:
By Jeff Reeves
ROCKVILLE, Md. (MarketWatch) "” You might think companies would fall over themselves to join the Dow Jones Industrial Average, and that shareholders would find stability in the index's ranks. But the truth is that joining the list of 30 components can be a stomp on the neck rather than a stamp of approval.
The reason appears to be that Wall Street "experts" in charge of the index focus on the latest fad investments, stocks that are peaking rather than corporations that are truly representative of the U.S. economy.
Apps for mobile platforms like iPhone and Android are booming. But publishers and advertisers remain interested in the mobile Web, which has its own advantages.
That's pretty disturbing if those in the ivory towers of investing make the rookie mistake of believing today's dominant companies will be relevant "” or even exist "” a few years down the road. Read about two ways to trade volatility.
For a great example, let's turn back the clock to 1999. In March, the Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,612, +17.64, +0.17%) closed above the 10,000 mark for the first time as the dot-com bubble was rapidly inflating and then crested 11,000 a few months later. In order to reflect the newfound prosperity, four of the biggest names of the day joined the Dow component list. As of this writing, here's how those dot-com era additions have fared since joining the index on November 1, 1999:
AT&T Inc. /quotes/comstock/13*!t/quotes/nls/t (T 28.07, -0.04, -0.15%) (SBC Communications at the time): down 45%
Home Depot Inc. /quotes/comstock/13*!hd/quotes/nls/hd (HD 29.97, +0.02, +0.05%) : down 38%
Intel Corp. /quotes/comstock/15*!intc/quotes/nls/intc (INTC 18.84, -0.13, -0.69%) : down 50%
Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 25.16, -0.17, -0.67%) : down 47%
The Broader Dow since Nov. 1, 1999: up 1%
Stubborn skeptics could write that off as just a trick of timing. After all, a bubble like the dot-com crash doesn't come along very often"¦ current market mayhem notwithstanding, of course.
Well, then let's look at the next reformulation on April 8, 2004. The Dow kicked out laggards AT&T (remember, it was SBC added in 1999), International Paper /quotes/comstock/13*!ip/quotes/nls/ip (IP 23.58, +0.80, +3.51%) and Eastman Kodak /quotes/comstock/13*!ek/quotes/nls/ek (EK 3.87, -0.04, -0.90%) . In their places we got Pfizer Inc. /quotes/comstock/13*!pfe/quotes/nls/pfe (PFE 17.08, -0.09, -0.50%) , Verizon Communications Inc. /quotes/comstock/13*!vz/quotes/nls/vz (VZ 31.65, +0.23, +0.72%) and that gem of the financial sector, American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 35.58, -0.13, -0.36%) . Here are the returns.
AIG: down 97%, when adjusted for its 1-for-20 stock split in 2009
Treasury Secretary Timothy Geithner gave a timid nudge to China to do more on its undervalued currency. More than that is needed.
10:59 a.m. Today10:59 a.m. Sept. 17, 2010 | Comments: 22
- JohnChisum | 2:53 a.m. Today2:53 a.m. Sept. 17, 2010
"Silver sets 30-year high; gold closes winning week at record level http://on.mktw.net/dkD8dY" 1:52 p.m. EDT, Sept. 17, 2010 from MarketWatch
"If you think you can hold your beer, read on http://bit.ly/dk4oQ1" 1:33 p.m. EDT, Sept. 17, 2010 from MarketWatch
"What does your #smartphone say about you? http://bit.ly/as7Ivt" 1:00 p.m. EDT, Sept. 17, 2010 from MarketWatch
"Fiscal fight colors tight Pa. House race http://bit.ly/bgcEXy" 12:49 p.m. EDT, Sept. 17, 2010 from MarketWatch
"U.S. stocks struggle as anxiety helps gold, bonds http://bit.ly/cDGW8F" 12:12 p.m. EDT, Sept. 17, 2010 from MarketWatch
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