Very OT: Learn something about the stock market...

[DavidinNaples]

I wrote this basic summary for clients. Thought some on the BY might enjoy. Yes, I'm very bored waiting for this season to start...

When the “stock market” reaches a new record high, not every stock goes along for the ride. This is especially true for the Dow Jones Industrial Average, commonly called the Dow. In early August, the Dow set an all time record by reaching 22,179. The average has backed off only 1.6% since that high, but many of the 30 stocks that make up the Dow are doing far worse. For example, G.E. currently sits at $24.49 per share, a full 24% off its’ highest levels of the last 12 months. Cisco Systems is off 9.1% over that same period and Pfizer is down 5.2%. So how is the Dow setting and holding close to record highs with stocks like G.E., Cisco and Pfizer doing so poorly ?


The 30 stocks in the Dow are “price weighted” and impact the average very differently. For example, Apple has a price of $159.86 per share and represents 5% of the Dow. Intel, on the other hand, has a price of $34.67 and is only 1.8% of the Dow. The highest priced stock in the Dow is Boeing, at $235.89 per share, and it represents a whopping 7.5% of the total of the Dow average. Boeing is up 53% so far in 2017, more than offsetting the lousy performance of the three smallest Dow components (GE, Cisco & Pfizer), which together total only 2.72%. So if the biggest stocks in the Dow do well, it kind of doesn’t matter what the tiny ones do. Apple is the 5th largest Dow stock and it is up 38% this year. 3M is the third highest priced stock, at $202 a share, and it has climbed 13% since January. The story is the same with the 6th largest stock in the Dow, McDonald’s, which is pennies away from the all time high of $159.98 and up 30.3% for the year. Together, these big Dow stocks have raised the whole average by 10.6% for 2017, even with some smaller stocks underperforming.


The better a stock in the Dow performs, the more impact it has on the whole Dow average. For example, Boeing was only priced at $131 a year ago, making it the 10th largest stock in the Dow. As the top performing stock in the Dow this year, BA has now risen to #1. The more the price goes up, the more it influences the Dow. The reverse is true for poor General Electric. Priced at $24, it has 1/10th the influence of Boeing, on any particular day. Most days, some of the Dow’s 30 stocks go up, while others fall in price. What matters most is which ones are up for the day, and which are dropping. Friday, the Dow was up only 31 points despite 22 stocks rising and only 8 falling. That was because Boeing fell over 1%, Goldman Sachs slipped just over 2/10ths of 1% and United Health was off 2/10ths as well. Those three are all in the top four largest stocks in the Dow. Together, they nearly offset the 22 stocks that had a good day on Friday.


With oil rising to $48 per barrel, the 10 year U.S. Treasury yield falling again to 2.16% and Washington gearing up for a tax reform push, the stock market may be ready to try for a new high. Then again, that will depend on how well the top 15 stocks in the Dow perform. Those stocks, which include Boeing, Goldman, 3M, UNH, Apple, McDonald’s, Home Depot, IBM, J&J, Travelers, Caterpillar, UTX, Chevron, Visa and Disney make up 71% of the Dow. The bottom 15, together only represent 29% of the Dow average. In the Dow, size matters…

Go Dow..!!

 

[UcMiami]

Fun facts!
I have always enjoyed the 'dogs of the Dow' investment strategy - not sure how it is doing recently but it used to be a pretty solid investment strategy.

While 100 years ago the concept of a 30 stock bell weather probably made sense, it strikes me now as a pretty silly concept - with computers being able to instantaneously compile the broader market numbers and any subset desired the need to have such a select 'index' is less important. And the economy has become so diversified that the 30 limit leaves a lot of the 'market' out of the calculations.

 

[Scud49]

Thank you David - I had been wondering about your point #4. In regard to that, do you have a mid cap ETF that you like?

 

[KnightBridgeAZ]

Interesting. I had no idea, really, about the Dow, except that I knew it was 30 stocks. I don't handle my IRA or investment account directly, but I do glance how the "market" is doing.

 

[Jim]

Another tidbit is the origins of why markets are called "bull" or "bear" markets. When a bull attacks, it rises up with its horns. When a bear attacks, it stands on its hind legs and attacks downward with its paws. Hence bull markets attack upward, bear markets attack downward.

 

[DaddyChoc]

Another tidbit is the origins of why markets are called "bull" or "bear" markets. When a bull attacks, it rises up with its horns. When a bear attacks, it stands on its hind legs and attacks downward with its paws. Hence bull markets attack upward, bear markets attack downward.

now thats interesting

 

[DaddyChoc]

I love money talk but could/can't understand the stock market at all... maybe that's a good thing for me.

I was recently looking into BitCoin but Kiplinger told me to back away

 

[DavidinNaples]

UMiami - Dogs of the Dow is still around, often working brilliantly, other times not at all. The theory, as you know, is to pick the worst Dow stocks to buy, assuming they will outperform the next year. All 30 Dow stocks are quality companies w/ strong balance sheets. If one of them is a "dog", the thought is that company will turn their business around and the stock price will outperform. G.E. has been an exception to that trading strategy.

Scud - My favorite mid-capitalization ETF is one called MDY. It is a 400 stock basket of companies with marekt capitalization of between $2-$10 billion. The fees are low at 0.25%. Because it is an ETF, it trades during the trading day just like a stock.

Daddy Choc - Some people love BitCoin. I'm not a fan of anything that exist only on the internet. Physical certificates have been replaced for stocks and bonds, but the companies that issue these securities exist in real life. BitCoin and other crypto currencies are imaginary. Rather be safe than sorry, even though some investors have done well with BitCoin and similar investments.

Probably the best measure of the stock market is the S&P 500. Rather than 30 stocks, the S&P 500 has 500 companies. (Hence the name) Obviously, more diversity and better representation of the economy.

 

[rugbymate]

UMiami - Dogs of the Dow is still around, often working brilliantly, other times not at all. The theory, as you know, is to pick the worst Dow stocks to buy, assuming they will outperform the next year. All 30 Dow stocks are quality companies w/ strong balance sheets. If one of them is a "dog", the thought is that company will turn their business around and the stock price will outperform. G.E. has been an exception to that trading strategy.

Scud - My favorite mid-capitalization ETF is one called MDY. It is a 400 stock basket of companies with marekt capitalization of between $2-$10 billion. The fees are low at 0.25%. Because it is an ETF, it trades during the trading day just like a stock.

Daddy Choc - Some people love BitCoin. I'm not a fan of anything that exist only on the internet. Physical certificates have been replaced for stocks and bonds, but the companies that issue these securities exist in real life. BitCoin and other crypto currencies are imaginary. Rather be safe than sorry, even though some investors have done well with BitCoin and similar investments.

Probably the best measure of the stock market is the S&P 500. Rather than 30 stocks, the S&P 500 has 500 companies. (Hence the name) Obviously, more diversity and better representation of the economy.

I agree with you on Bitcoin/other crypto currencies. There is a terrific editorial in the WSJ editorial section that does a reasonably good job of defining Bitcoins theoretical valuation limits. The same analysis could probably have been done for tulips.
Be interested in your take on some of the macro dynamics effecting valuations. With all the money leaving hedge funds and actively managed funds and finding its way to passively managed vehicles, do you see certain market segments (large cap, dividend payers etc) perhaps being in a bubble?
Also, how do you find value in small caps given the above and also given that analyst coverage is going the way of dinosaurs?

 

[VAMike23]

The Worst-Case Scenario for Passive Investing

 

[DavidinNaples]

rugbymate,
I'm not smart enough to predict when the next correction will occur, or even if stocks are "overvalued" at these prices. Some are, other aren't. I do know that in the history of the stock market, every disaster and correction was followed by a new reocrd high, EVENTUALLY. In other words, the longer the time frame, the better the odds that quality equties will go up. Diversify and follow what you own...

As far as small cap stocks, we use an ETF called VB. Basket of 600 small stocks picked by Vanguard, 0.06% expense, yield of 1.46%.

 

[arty155]

"... why markets are called "bull" or "bear"..."
-Outstanding offer to share that with us, Jim.
-Both also yield preferred brown stock, on their margins, if roasted.

 

[Roger G]

I worked for about a year at the Pacific Stock Exchange in San Francisco. During that period was Black Monday, which scared the bejesus out of me. My boss remained calm, I remember. It was an interesting experience. My father has always been deathly afraid of investing in the stock market, since my grandfather had lost all of his investments in the crash of '29. I was afraid he was right. Fortunately, we bounced back and have risen and risen and risen and overcome the setbacks time and again. It seems so chaotic and frenetic watching traders yell out bids on the floor, but it is a great example of capitalism in action and how prices are set in a market economy. It would be well for us all to have some understanding of markets and how they function. Educating students in the workings of the market as part of a high school curriculum would serve us well.

 

[pacific 44]

As Jay leno would say:"The stock market took a dive today.Goldman Sachs had to lay off three congressmen".

 

[DaddyChoc]

I dived into crypto-currency... I didnt bet the house tho, just got my toes wet

 

[JustinesGuy]

Anyone have any good stock tips for 2018? I've started growing a stock portfolio this year to add too my sep Ira which I've been contributing since graduation. Needless to say it's been a great year with IRA up 25% and post stocks up as well. Any interesting suggestions?

 

[rugbymate]

I dived into crypto-currency... I didnt bet the house tho, just got my toes wet

good thing you didn't listen to Kiplinger...hope your purchase was late summer/early fall....congrats!!! But remember Baron Rothschilds famous notion....he never lost money by selling too soon

 

[Jim R]

I wrote this basic summary for clients. Thought some on the BY might enjoy. Yes, I'm very bored waiting for this season to start...

When the “stock market” reaches a new record high, not every stock goes along for the ride. This is especially true for the Dow Jones Industrial Average, commonly called the Dow. In early August, the Dow set an all time record by reaching 22,179. The average has backed off only 1.6% since that high, but many of the 30 stocks that make up the Dow are doing far worse. For example, G.E. currently sits at $24.49 per share, a full 24% off its’ highest levels of the last 12 months. Cisco Systems is off 9.1% over that same period and Pfizer is down 5.2%. So how is the Dow setting and holding close to record highs with stocks like G.E., Cisco and Pfizer doing so poorly ?


The 30 stocks in the Dow are “price weighted” and impact the average very differently. For example, Apple has a price of $159.86 per share and represents 5% of the Dow. Intel, on the other hand, has a price of $34.67 and is only 1.8% of the Dow. The highest priced stock in the Dow is Boeing, at $235.89 per share, and it represents a whopping 7.5% of the total of the Dow average. Boeing is up 53% so far in 2017, more than offsetting the lousy performance of the three smallest Dow components (GE, Cisco & Pfizer), which together total only 2.72%. So if the biggest stocks in the Dow do well, it kind of doesn’t matter what the tiny ones do. Apple is the 5th largest Dow stock and it is up 38% this year. 3M is the third highest priced stock, at $202 a share, and it has climbed 13% since January. The story is the same with the 6th largest stock in the Dow, McDonald’s, which is pennies away from the all time high of $159.98 and up 30.3% for the year. Together, these big Dow stocks have raised the whole average by 10.6% for 2017, even with some smaller stocks underperforming.


The better a stock in the Dow performs, the more impact it has on the whole Dow average. For example, Boeing was only priced at $131 a year ago, making it the 10th largest stock in the Dow. As the top performing stock in the Dow this year, BA has now risen to #1. The more the price goes up, the more it influences the Dow. The reverse is true for poor General Electric. Priced at $24, it has 1/10th the influence of Boeing, on any particular day. Most days, some of the Dow’s 30 stocks go up, while others fall in price. What matters most is which ones are up for the day, and which are dropping. Friday, the Dow was up only 31 points despite 22 stocks rising and only 8 falling. That was because Boeing fell over 1%, Goldman Sachs slipped just over 2/10ths of 1% and United Health was off 2/10ths as well. Those three are all in the top four largest stocks in the Dow. Together, they nearly offset the 22 stocks that had a good day on Friday.


With oil rising to $48 per barrel, the 10 year U.S. Treasury yield falling again to 2.16% and Washington gearing up for a tax reform push, the stock market may be ready to try for a new high. Then again, that will depend on how well the top 15 stocks in the Dow perform. Those stocks, which include Boeing, Goldman, 3M, UNH, Apple, McDonald’s, Home Depot, IBM, J&J, Travelers, Caterpillar, UTX, Chevron, Visa and Disney make up 71% of the Dow. The bottom 15, together only represent 29% of the Dow average. In the Dow, size matters…

Go Dow..!!

I wrote this basic summary for clients. Thought some on the BY might enjoy. Yes, I'm very bored waiting for this season to start...

When the “stock market” reaches a new record high, not every stock goes along for the ride. This is especially true for the Dow Jones Industrial Average, commonly called the Dow. In early August, the Dow set an all time record by reaching 22,179. The average has backed off only 1.6% since that high, but many of the 30 stocks that make up the Dow are doing far worse. For example, G.E. currently sits at $24.49 per share, a full 24% off its’ highest levels of the last 12 months. Cisco Systems is off 9.1% over that same period and Pfizer is down 5.2%. So how is the Dow setting and holding close to record highs with stocks like G.E., Cisco and Pfizer doing so poorly ?


The 30 stocks in the Dow are “price weighted” and impact the average very differently. For example, Apple has a price of $159.86 per share and represents 5% of the Dow. Intel, on the other hand, has a price of $34.67 and is only 1.8% of the Dow. The highest priced stock in the Dow is Boeing, at $235.89 per share, and it represents a whopping 7.5% of the total of the Dow average. Boeing is up 53% so far in 2017, more than offsetting the lousy performance of the three smallest Dow components (GE, Cisco & Pfizer), which together total only 2.72%. So if the biggest stocks in the Dow do well, it kind of doesn’t matter what the tiny ones do. Apple is the 5th largest Dow stock and it is up 38% this year. 3M is the third highest priced stock, at $202 a share, and it has climbed 13% since January. The story is the same with the 6th largest stock in the Dow, McDonald’s, which is pennies away from the all time high of $159.98 and up 30.3% for the year. Together, these big Dow stocks have raised the whole average by 10.6% for 2017, even with some smaller stocks underperforming.


The better a stock in the Dow performs, the more impact it has on the whole Dow average. For example, Boeing was only priced at $131 a year ago, making it the 10th largest stock in the Dow. As the top performing stock in the Dow this year, BA has now risen to #1. The more the price goes up, the more it influences the Dow. The reverse is true for poor General Electric. Priced at $24, it has 1/10th the influence of Boeing, on any particular day. Most days, some of the Dow’s 30 stocks go up, while others fall in price. What matters most is which ones are up for the day, and which are dropping. Friday, the Dow was up only 31 points despite 22 stocks rising and only 8 falling. That was because Boeing fell over 1%, Goldman Sachs slipped just over 2/10ths of 1% and United Health was off 2/10ths as well. Those three are all in the top four largest stocks in the Dow. Together, they nearly offset the 22 stocks that had a good day on Friday.


With oil rising to $48 per barrel, the 10 year U.S. Treasury yield falling again to 2.16% and Washington gearing up for a tax reform push, the stock market may be ready to try for a new high. Then again, that will depend on how well the top 15 stocks in the Dow perform. Those stocks, which include Boeing, Goldman, 3M, UNH, Apple, McDonald’s, Home Depot, IBM, J&J, Travelers, Caterpillar, UTX, Chevron, Visa and Disney make up 71% of the Dow. The bottom 15, together only represent 29% of the Dow average. In the Dow, size matters…

Go Dow..!!

Thanks for some "general" market advice we can all do well to heed! It's a good way to fill time until we're back in action, and a build up to the Sooners matchup.
The Bitcoin craze...let's hope the landing is soft for those brave souls!

 

[j66kicker]

Anyone have any good stock tips for 2018? I've started growing a stock portfolio this year to add too my sep Ira which I've been contributing since graduation. Needless to say it's been a great year with IRA up 25% and post stocks up as well. Any interesting suggestions?

Interviewer: “Do you have any advice for investing in stocks?”
Will Rogers: “Buy a stock when its price is low. When the price goes up, sell it.”
Interviewer: “What if the price doesn’t go up?”
Will Rogers: “Don’t buy it,”

 

[BroadwayVa]

I wrote this basic summary for clients. Thought some on the BY might enjoy. Yes, I'm very bored waiting for this season to start...

When the “stock market” reaches a new record high, not every stock goes along for the ride. This is especially true for the Dow Jones Industrial Average, commonly called the Dow. In early August, the Dow set an all time record by reaching 22,179. The average has backed off only 1.6% since that high, but many of the 30 stocks that make up the Dow are doing far worse. For example, G.E. currently sits at $24.49 per share, a full 24% off its’ highest levels of the last 12 months. Cisco Systems is off 9.1% over that same period and Pfizer is down 5.2%. So how is the Dow setting and holding close to record highs with stocks like G.E., Cisco and Pfizer doing so poorly ?


The 30 stocks in the Dow are “price weighted” and impact the average very differently. For example, Apple has a price of $159.86 per share and represents 5% of the Dow. Intel, on the other hand, has a price of $34.67 and is only 1.8% of the Dow. The highest priced stock in the Dow is Boeing, at $235.89 per share, and it represents a whopping 7.5% of the total of the Dow average. Boeing is up 53% so far in 2017, more than offsetting the lousy performance of the three smallest Dow components (GE, Cisco & Pfizer), which together total only 2.72%. So if the biggest stocks in the Dow do well, it kind of doesn’t matter what the tiny ones do. Apple is the 5th largest Dow stock and it is up 38% this year. 3M is the third highest priced stock, at $202 a share, and it has climbed 13% since January. The story is the same with the 6th largest stock in the Dow, McDonald’s, which is pennies away from the all time high of $159.98 and up 30.3% for the year. Together, these big Dow stocks have raised the whole average by 10.6% for 2017, even with some smaller stocks underperforming.


The better a stock in the Dow performs, the more impact it has on the whole Dow average. For example, Boeing was only priced at $131 a year ago, making it the 10th largest stock in the Dow. As the top performing stock in the Dow this year, BA has now risen to #1. The more the price goes up, the more it influences the Dow. The reverse is true for poor General Electric. Priced at $24, it has 1/10th the influence of Boeing, on any particular day. Most days, some of the Dow’s 30 stocks go up, while others fall in price. What matters most is which ones are up for the day, and which are dropping. Friday, the Dow was up only 31 points despite 22 stocks rising and only 8 falling. That was because Boeing fell over 1%, Goldman Sachs slipped just over 2/10ths of 1% and United Health was off 2/10ths as well. Those three are all in the top four largest stocks in the Dow. Together, they nearly offset the 22 stocks that had a good day on Friday.


With oil rising to $48 per barrel, the 10 year U.S. Treasury yield falling again to 2.16% and Washington gearing up for a tax reform push, the stock market may be ready to try for a new high. Then again, that will depend on how well the top 15 stocks in the Dow perform. Those stocks, which include Boeing, Goldman, 3M, UNH, Apple, McDonald’s, Home Depot, IBM, J&J, Travelers, Caterpillar, UTX, Chevron, Visa and Disney make up 71% of the Dow. The bottom 15, together only represent 29% of the Dow average. In the Dow, size matters…

Go Dow..!!

David---I'm having trouble finding the questions you are asking in this test. The MATH has my feeble brain swirling around and around. Which team does Dow Stock play for--and it's obvious her smaller sisters are underperforming--WBB is for the bigs.
I hope you realize this forum is for UConn not some other team called Dow--are you sure that isn't an AAU group??
I'm happy to see you aren't loafing during this lull in the UConn Women's actions!!
\

 

[j66kicker]

Anyone have any good stock tips for 2018? I've started growing a stock portfolio this year to add too my sep Ira which I've been contributing since graduation. Needless to say it's been a great year with IRA up 25% and post stocks up as well. Any interesting suggestions?

1) The market has enjoyed a exceptionally long bull run that defies all logic (stocks are way overpriced relative to historical norms, but with interest rates so low there is nowhere else for the money to go). We’re getting to the stage where some investors start to feel the good times will just go on forever. They won’t - be careful.

2) Meanwhile, the Republican tax plan will likely benefit small and mid cap companies more than large cap. (The largest companies have already globalized to get their tax rates down. And beyond that they will probably now be dis-incentivized to continue their shenanigans). Good time to rebalance the stock portion of your portfolio a little more toward small/mid cap. For example, covert your S&P500 index fund (100% large cap) to a Total Stock Market index fund (includes a weighted mix of small & mid cap stocks).

 

[Phil]

If you are thinking about Bitcoin, read this

 

[Phil]

There is a famous story about Joe Kennedy:

(FORTUNE Magazine) – JOE KENNEDY, a famous rich guy in his day, exited the stock market in timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good, a theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash:

I'll provide a modern update:

When people are pushing Bitcoin in a women's basketball forum, it's too popular for its own good

I'm not calling the top. It may go up, it may double, but if you don't have the ability to get out quickly (and if you don't have a dedicated T-1 line link to the currency exchanges, you won't be quick enough) then you will take a bath

 

[Rixxx]

Phil, I believe bitcoin BTC has doubled in the last three months.

 

[DaddyChoc]

online trading... which platform do you use?

TDAmeriTrade, Fidelity, Ally, E-Trade