Beta
×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

Apple Too Big For the Dow Jones Industrial Average

samzenpus posted more than 3 years ago | from the we're-gonna-need-a-bigger-stock-ticker dept.

Businesses 218

An anonymous reader writes "Apple is clearly the hottest tech stock on the market right now and the company is clearly at the vanguard of technological innovation. Consequently, many have wondered why Apple isn't part of the Dow Jones Industrial Average (DJIA). As it turns out, Apple's astronomical share price effectively prohibits the company from joining the DJIA as it would disproportionately influence the index."

Sorry! There are no comments related to the filter you selected.

Who really looks at the DJIA? (3, Informative)

Anonymous Coward | more than 3 years ago | (#37473900)

The only people who really pay attention to the Dow are the talking heads. The money runners look at the S&P 500 when benchmarking market returns.

The Dow is an archaic measure that for some reason sticks around.... tradition?

one other reason (-1, Flamebait)

Anonymous Coward | more than 3 years ago | (#37473904)

The other reason they're not part of the Dow is because Apple is overvalued by about 30x.

Re:one other reason (1)

siddesu (698447) | more than 3 years ago | (#37473916)

How so? I am genuinely curious, as I don't follow US stocks closely.

Re:one other reason (1)

fuzzyfuzzyfungus (1223518) | more than 3 years ago | (#37474028)

I assume that he is either trolling or has some sort of longer-term issue in mind(presumably being linked to the fact that they are just another consumer electronics vendor, so all it would take is a failure of taste on their part to tank them...); because their P/E is only 16.3(definitely higher than some; but the assertion that a P/E of .54 is correct is bold... Even someone like RIM, about which optimism is pretty limited, is at 3.95)...

Re:one other reason (0)

khallow (566160) | more than 3 years ago | (#37474166)

He's probably referring to the health of Steve Jobs and the fact that Apple doesn't have anyone who currently can replace him. A bad successor can turn that nice P/E ratio to a really bad one. All they have to do is start losing money.

Re:one other reason (3, Funny)

Goaway (82658) | more than 3 years ago | (#37474258)

Um, I've got some news for you...

Re:one other reason (1)

flaming error (1041742) | more than 3 years ago | (#37474068)

GP is claiming that speculators gambling on what other speculators will later pay have driven the stock price up 30 times over what they would be worth to someone who was simply investing in the company itself.

Re:one other reason (1)

siddesu (698447) | more than 3 years ago | (#37474264)

I understand the claim, I was only curious about the specific logic behind the round number :)

Re:one other reason (5, Insightful)

larry bagina (561269) | more than 3 years ago | (#37474478)

Apple has a market cap of $382 billion and $70 billion in net asset value, so even if they appointed a no-talent ass clown like Michael Dell as CEO and he immediately liquidated everything, they're less than 6x overpriced.

Re:one other reason (0)

TWX (665546) | more than 3 years ago | (#37473942)

The other reason they're not part of the Dow is because Apple is overvalued by about 30x.

Don't worry, with Jobs leaving as the day-to-day brains behind the company, and especially on his eventual death, that will change.

Re:one other reason (1)

bonch (38532) | more than 3 years ago | (#37473970)

Um, Jobs hasn't been CEO since January. But please, go on reassuring people not to "worry," because Steve Jobs will die.

Re:one other reason (2, Funny)

Anonymous Coward | more than 3 years ago | (#37474072)

Patience. All good things take time.

Re:one other reason (1)

johndierks (784521) | more than 3 years ago | (#37473996)

The other reason they're not part of the Dow is because Apple is overvalued by about 30x.

Apple has about 10% of its market cap in the bank as cash. With that said I'd be happy to buy any $20 bills you have in your wallet for $2 each.

Re:one other reason (1)

LynnwoodRooster (966895) | more than 3 years ago | (#37475098)

With that logic, Microsoft should be worth around $520 billion, given their $52 billion in cash on hand and short term investments...

Re:one other reason (1)

johndierks (784521) | more than 3 years ago | (#37475162)

I'm not saying that companies should be worth X times their cash, but the grandparent was claiming that Apple should be worth less than it's cash, which is ridiculous.

Re:one other reason (5, Interesting)

Oxford_Comma_Lover (1679530) | more than 3 years ago | (#37473998)

They have $69 Billion in equity, $23 billion in annual income (generously taking the four most recent quarters), and market cap of 382 Billion. That means it would take 13.6 years of income, at present rates (which are MUCH higher than historical rates) to break even. Around 207-230 Billion would be a fairly safe price, assuming they can keep up this level of income--and is a tad under 60% of their current market value.

They're not overvalued by 30x -- that would imply they were worth $12 billion, and their equity alone is better than five times that. But they are overvalued by at least 20-30% from the standpoint of a prudent investor.

Re:one other reason (4, Funny)

Oxford_Comma_Lover (1679530) | more than 3 years ago | (#37474006)

Although come to think of it, being overpriced has never bothered Apple in the past. :)

Re:one other reason (1)

Ihmhi (1206036) | more than 3 years ago | (#37474630)

They're not overpriced, it's just a convenience fee on their stock price for investors who have the good taste to buy iStock.

Re:one other reason (1)

Shag (3737) | more than 3 years ago | (#37474674)

Yeah, but dang it, I can get HPQ or DELL stock for under $25!

So? (3, Informative)

Oxford_Comma_Lover (1679530) | more than 3 years ago | (#37473918)

*Shrugs*

So? If they want to be in the Dow they can run a few stock splits.

Re:So? (1)

siddesu (698447) | more than 3 years ago | (#37474318)

Perhaps you mean a few company splits.

Re:So? (1)

Oxford_Comma_Lover (1679530) | more than 3 years ago | (#37474576)

DJIA ranks by share price, not market value, which is why there's a problem. If they split the stock a few times, the nominal stock price would drop, meaning that it wouldn't be a too-large component of the DJIA. (Not weighting it more than by share price is silly, but here we are.)

Price Weighted Average (2)

alexander_686 (957440) | more than 3 years ago | (#37474746)

The Dow Jones is not exactly a price weighted average.

When it first started it was. They averaged 12 stocks and there you go. No fancy market cap calculations. (Or course, back then it was hard to figure out a companies market cap, but that is something else.)

Then, as stocks issued dividends, spit, and companies were replaced, Dow switched over to weighing each stock price with a factor. So, it does not matter how high Apple's price is when it introduced into the Dow, it's stock will be given a factor that will make the change invisible. For the first few months, a 5% change in Apple's price will basic the same influence as any other company - kind of. Of course, as time goes on, the "winners" (i.e. those who have been around a long time and have had a large price increase) will tend to dominate. But that would come latter.

The Dow is a poor index. It was great when you had to calculate a index in a hour and all you had was pencil and paper - it's simple. However, as soon as people got a second rate spreadsheet they could do something better - like the market cap weighted S&P. (Well, mostly market cap - they adjust for float). The one good thing you can say is that it's been around forever so you got a lot of data to work with. The S&P has been around for only 1/2 as long.

Re:So? (1)

Jeff DeMaagd (2015) | more than 3 years ago | (#37474768)

I don't understand why that should be necessary. The DJIA is a weighted system, if they think AAPL's price is too heavy, give it a weight that's less than one. They alter a company's weighing to follow when an indexed stock splits (or reverses a split), so it doesn't change the DJIA figure.

You mean the DJIA? (0)

Anonymous Coward | more than 3 years ago | (#37473920)

I've never heard it called the DOJA. And apparently neither has google [google.com] .

That seems dumb. (2)

RyanFenton (230700) | more than 3 years ago | (#37473922)

So they don't want to split their stock - that's a horrible thing now? The trades are too granular now?

If it's really a problem, get enough of your fellow traders together, make a giant offer to buy Apple, then set the prices what you want them to be. Business decisions are made for worse reasons, I guess.

Why is this a story?

Ryan Fenton

Re:That seems dumb. (3, Interesting)

TWX (665546) | more than 3 years ago | (#37474000)

There's something to be said for having a high share price if the company is big and successful- those who tend to buy tend to hold on to it for a long period of time, and the day to day operations of the company are directed toward a long-term profit mindset. When a company is traded constantly and when shareholders are only buying it to look for a short to medium term profit (like a year or two) then they don't are how the company performs down the road, and the board will reflect that, making decisions that make money now but could cost the company everything long term as they didn't invest in the long term.

As much as I dislike Apple sometimes, they do seem to have the development cycle down and they don't rest on their laurels as far as trying to make each product line last as long as possible before being forced to replace it. Many companies won't change unless they're forced to by consumer-driven market choices. Apple changes faster than just about everyone else, and enough people buy into the hype with it that they keep selling products for the long term.

It'll be interesting to see how this plays out in the next decade or so, as Jobs becomes less and less relevant.

Re:That seems dumb. (1)

maxume (22995) | more than 3 years ago | (#37474182)

I bet most of the volume comes from people trading blocks of shares worth tens of thousands of dollars, people that don't care at all about whether the price of each share is big or small.

Re:That seems dumb. (0)

Anonymous Coward | more than 3 years ago | (#37475360)

Less and less relevant? How relevant will he be in a few months when he's stone cold dead?
 
Christ, these fanbois are really creeping me out. Lenin and Stalin had less cult of personality than this terminal motherfucker.

Who cares about stock splits? (1)

alexander_686 (957440) | more than 3 years ago | (#37474882)

There used to be downside to having a high stock price because of odd lots. Nobody cares about that anymore. Here is a quick history lesson.

Jargon - a odd lot is any sale where the number of shares bought / sold is not divisible by 100.

Prior to the 70's when you traded stocks you traded stocks. When you sold stock you would take you stock certificate down to your broker, they would send it to the main office, they would send it to the company to be registered, the company would send it to the new broker, who would send it onto the person who bought it. Took 21 days. Lots of fancy paperwork. And I mean fancy - you should see the old stock certificates. Anyway, dealing with small change was a headache.
    Market Makers could put you at the end of the line because you were not a "real" trader - so a worse price.
    Extra fees would be applied - both by the exchange and by the broker.
    etc.

So, from a historical perspective, different industries tended to have an optional price. Electric Utilities would tend to be in the 15 to 25 range because people looking to retire could save $2,000, buy a 100 shares, and not get hammed by fees. If the company every got out of this range it would split to get back in.

This lasted until the late 90's. NYSE would charge an extra fee for odd lots. Legacy computer systems from the brokerage houses would charge an extra fee - and some still do.

And then the internet came along - and Internet brokers - not limited by a legacy computer system - no longer cared it you bought a 100 or some odd lot.

Google, at $500, has as much granularity as most people need. (Unless you are looking to buy less then $100). Look at a daily stock chart and you really have to zoom in to see granularity. The only stock I can think of that has that issue is Berkshire which trades at 100k

Re:Who cares about stock splits? (1)

larry bagina (561269) | more than 3 years ago | (#37475328)

Berkshire Hathaway has class B stock that trade for ~$70/share (after a 50:1 split in 2010 ... used to be ~$4,000/share).

Interesting story. Used to be, when people complained about the high price and asked for a stock split, Buffett told them to fuck off -- his stock was for pensions and mutual funds. So a mutual fund was set up which owned nothing but berkshire hathaway stock, just like he said. That pissed him off, so he issued the lower price B class.

Apple is overpriced.... (1)

Anonymous Coward | more than 3 years ago | (#37473926)

Its importances is over valued. Put it this way, If Exxon shut its doors there would be an enormous impact to the western world's energy supply, disrupting the economies of many countries. If Apple closed its doors, well.... one less consumer products company...

Re:Apple is overpriced.... (-1, Offtopic)

bonch (38532) | more than 3 years ago | (#37473990)

How many anonymous cowards are going to post this?

Re:Apple is overpriced.... (0)

Anonymous Coward | more than 3 years ago | (#37474636)

As many as it takes. 5 years ago, GP's comment would have been +5, and the reason for posting AC would have been to avoid karma whoring. Today the reason for posting AC is to avoid the wrath of the fanbois.

Re:Apple is overpriced.... (0)

Anonymous Coward | more than 3 years ago | (#37474022)

I think you're confusing value with importance.

DOJA != DJIA (5, Informative)

spazdor (902907) | more than 3 years ago | (#37473958)

Dow Jones Industrial Average (DOJA)

Reasonably sure that no one in the world abbreviates it like that. In fact, Googling "dow jones" and "doja" together, brings up... This exact news story. And no others.

Re:DOJA != DJIA (0)

Anonymous Coward | more than 3 years ago | (#37474024)

That's the problem with the "me too" mentality of news sites.

Many times, there is no further information to a story because all roads lead back to the OP.

Apple is the next Netflix (0)

Anonymous Coward | more than 3 years ago | (#37473960)

time for the stock to split! (0)

Joe_Dragon (2206452) | more than 3 years ago | (#37473962)

time for the stock to split!

Really? Why? (2)

jamrock (863246) | more than 3 years ago | (#37474544)

Out of curiosity, why should Apple split the stock? Their revenues aren't impacted by their valuation, and by keeping the price high they're deterring the day traders. Only serious institutional investors will be willing to buy the stock, and they're more likely to hold it long term, making it much more stable. Day traders and speculators tend to make a company's market cap gyrate wildly since so many of them base their stock picks on hearsay, gut feelings, the phase of the moon etc. The only reason they'd have to split the stock is because they have a burning desire to be on the Dow, which is a pretty piss poor reason in my opinion.

My eldest brother is the majority shareholder of a privately-held financial company, and over the years he's been bombarded with queries about when he's offering an IPO. His answer? "Never. I refuse to have the stock price of my company set by know-nothing day traders. They're busy watching the fluctuations on the scoreboard, not the developments on the field."

Re:Really? Why? (0)

Anonymous Coward | more than 3 years ago | (#37474676)

Your post is why I fear Flash Trading systems.

Notice the Dow goes up and down 300-600 points a day now? Mostly because of Greece which has 1/10th the economy of Germany. Please like America is going to lose 10% of proportional wealth because of that country. It is totally out of wack, due to speculation, and high frequency trading algorithms where people short it when it goes down and sell it one it goes up and make revenue either way.

By law people should only make revenue when it goes up. As our parents and grandparents are the ones who lose money to a billionaire's supercomputer shorts a stock.

The less variation in price the better and I am glad Apple has some sense.

The Stock Market is a Joke (4, Interesting)

cosm (1072588) | more than 3 years ago | (#37473978)

It is white collar gambling and no more about company valuations than Full Tilt was about legit poker playing. Sure you can make money if you're smart/lucky/know the right people/have the right fiber connection/have the best and brightest market manipulation master from the major STEM universities, but other than that the house is stacked against you. The distribution of wealth in the country (and world for that matter) among individuals is reflective of those at the top of the game rigging it to their advantage, politically, technologically, and otherwise.

Or am I just another FUD spewing pinko-commie?

Re:The Stock Market is a Joke (0)

Anonymous Coward | more than 3 years ago | (#37474014)

Guess where the assets of most people's retirement funds and pensions are.............

Re:The Stock Market is a Joke (1)

geekoid (135745) | more than 3 years ago | (#37474222)

You are spewing FUD.

Yes, there are things you can do better if you have money, but that doesn't mean the 'house' is stacked against you..also, there isn't a house in the casino sense.
If you had invested in the DOW in Apr 2009, you would have made money.
Something the GOP doesn't point out...the DOW has gotten a lot better, in fact it's at 2006 levels, and still climbing.*

*AS a trend, some days it's lower then others.. but it's trending upward. Even with Obamas economic plan being castrated by the GOP, it's still helping.
And that's numbers, math and fact, not political rhetoric.

Re:The Stock Market is a Joke (1)

dave562 (969951) | more than 3 years ago | (#37474346)

Come back in three months and let me know how the market is doing compared to 2006. There is a HUGE correction on the way.

Re:The Stock Market is a Joke (1)

Billly Gates (198444) | more than 3 years ago | (#37474730)

"Come back in three months and let me know how the market is doing compared to 2006. There is a HUGE correction on the way."

Why do you say that? I am a fan of Peter Schidmt who predicted the housing crash and the great recession back in 2006 and says another one is coming ... or continuation of the same one.

I fail to see how? The banks in 2006 had no liquidity and counted houses as liquid assets that count as cash. When it crashed there goes the liquidity and assets as they went bankrupt with no cash. Today the banks have liquidity and cash, but the shareholders and people are scared. I fail to see why unless I am highly overlooking something. They even have a stress test where if another bad event happened could they survive?

Even if Greece defaults it is tiny and wont bring the banks down like it did before even if they own Greek treasury bonds. Or are you suggesting European banks will all go under one by one which will then hit American banks at home? I do not think its that bad compared to the percentage of complex financial instruments with mortgages in them a half decade ago.

Re:The Stock Market is a Joke (1)

hedwards (940851) | more than 3 years ago | (#37474864)

The liquidity that the banks have now, is primarily the result of quantitative easement. They don't really have any more assets than they did in 2006, but they were able to suck up nearly all the money that the Fed injected into the economy. Which is why you haven't seen much, if any, inflation even though the Fed injected literally trillions of dollars into the economy.

Ultimately, it's a false sort of liquidity, because they can't use those funds to buy things, the funds are primarily there as security in case people decide to remove their assets from the bank. Most of it is already spoken for and if by some chance they were able to use the funds, you'd rapidly see significant inflation.

The assets themselves are still greatly inflated over what they're really worth. The housing market still has fictitious pricing as a result of government meddling. And we're already well into another bubble spurred on by incompetent policy set by the Fed to make sure that investors don't flee the scene. Literally the market is awash in capital with no place to spend it, even as the consumers and workers that are needed to pull things out of the toilet are worried about having a job next month.

So, yes, there's a huge correction on the way. Theoretically we could avoid it with a long term period of stagflation stretching into the distant future. I'm guessing that it will end up with a correction, there's just way too much competence and discipline necessary for the stagflation option and the Fed is still tinkering with the economy as if it has any clue as to fix it.

Re:The Stock Market is a Joke (1)

Billly Gates (198444) | more than 3 years ago | (#37475138)

Thanks for the explanation.

I was under the impression that the Fed just purchased bonds and the banks were given full cash. The lifeline was the bailout in which the banks just loanded some debt with 0% interest back to the government for 5% in order to build their assets long term. The more I learn the more I realized how awkward the situation is and how maybe no one really knows the answer?

If the banks got full cash that would help their books and this is what hte mainstream media is saying. But if the bond market crashes that liquidity is no longer tha liquid. I do agree houses are still too expensive and that the government now wants stagflation as the easement was there to fight deflation which happend in late 2008 and early 2009.

Part of me thinks that deflation would be the answer and of course the government/people start repaying our debts. 90% of our money supply is created out of thin air with debt. If people started saving and paying off loans then long term they would pay for things again. That is not a bad thing like the Fed says it is. Interest will kill anyone who lives with 30 year mortgages, student loans, credit cars, and other forms of debt.

Re:The Stock Market is a Joke (3, Interesting)

mattack2 (1165421) | more than 3 years ago | (#37474904)

If you believe that, short it and make money.

Re:The Stock Market is a Joke (2)

BasilBrush (643681) | more than 3 years ago | (#37474526)

If you had invested in the DOW in Apr 2009, you would have made money

Everybody can make money in hindsight.

Re:The Stock Market is a Joke (2)

bill_mcgonigle (4333) | more than 3 years ago | (#37475186)

Something the GOP doesn't point out...the DOW has gotten a lot better, in fact it's at 2006 levels

That it was at these levels in 2006 isn't really what most people go by. It first reached these levels in 1999. Of course, that's just nominally.

If you figure in inflation, by current government CPI metrics, it would need to be at $15,100 to be at the same 1999 levels. If you use the 1950-1990's government inflation calculations, it would need to be nearer to $20,000 to be equivalent. That doubling would line up with all of the commodity prices as well.

Just going by CPI, we're closer to 1997 levels presently.

and still climbing... but it's trending upward.

Depends on your timescale, of course. It is up for the month, I'll grant you that. It's also down for the week, the quarter, and the year. The longer-term trends are usually more significant - making the case that this month's performance represents a turn-around is a more difficult argument.

Re:The Stock Market is a Joke (1)

blue trane (110704) | more than 3 years ago | (#37474352)

According to Chris Hellman, the defense budget is more like $1.2 trillion. Link: http://www.tomdispatch.com/blog/175361/ [tomdispatch.com]

"To get closer to a real figure, it’s necessary to start peeking at other parts of the federal budget where so many other pots of security spending are squirreled away."

Re:The Stock Market is a Joke (1)

Wyatt Earp (1029) | more than 3 years ago | (#37474466)

If you were to read the link, somehow he pulls over $150 billion in pension and health plans in as "defense", and a huge chunk of Intelligence, which doesn't report to the Department of Defense and thus are not defense spending.

I am surprised he didn't lump Department of Education in there (the soldiers learned to read somewhere!) and Department of Agriculture (the soldiers eat food grown in the United States!). Or Department of Transportation (the soldiers often drive to work on highways funded by the United States Government!)

Re:The Stock Market is a Joke (1)

blue trane (110704) | more than 3 years ago | (#37474528)

The pensions and health plans are for soldiers. The purpose of intelligence is defense.

In conclusion, the parent post is using hyperbolic exaggeration to try to discredit the article I linked to, shamelessly misapplying "reductio ad absurdum" by extending the items which have a direct relation to defense to those that don't.

What is a direct relation? (1)

tepples (727027) | more than 3 years ago | (#37474758)

shamelessly misapplying "reductio ad absurdum" by extending the items which have a direct relation to defense to those that don't.

I think Wyatt Earp's point was that he'd like to see a precise definition of such "a direct relation".

Re:The Stock Market is a Joke (0)

Anonymous Coward | more than 3 years ago | (#37474820)

You.. are fucking dumb. the dept of education goes towards students that might be soldiers,and is not defense spending. Food costs are accounted for out of DoD budgets, either by payroll that soldiers then buy food with, or by food provided by the DoD for its employees out of its budget. To count it again separately is double counting.

Whereas not counting the soldiers pensions Earned this year as present value defense spending is financial sleight of hand to hide how much this year's operation actually cost the DoD. Trying to make out intelligence gathering as not defense spending because the agency spending it is "civillian" is.. odd. Well.. it's the same sort of bureaucratic bullshit that the government loves because that reduces its "defense" (DoD) spending without reducing the cash outlays of defense spending.

Re:The Stock Market is a Joke (1)

hedwards (940851) | more than 3 years ago | (#37474890)

I'm sorry, but that's bullshit semantics. It doesn't matter whether spending is to the DoD if the purpose is clearly defense it's still defense spending. The Intelligence services wouldn't exist if not as a means of supplying the information necessary for the DoD to conduct its affairs. Consequently, I have a really hard time buying the notion that it isn't defense spending.

Unless of course you're implying that the intelligence they get isn't any good or isn't being provided for use in defending the country.

Re:The Stock Market is a Joke (1)

Wyatt Earp (1029) | more than 3 years ago | (#37474978)

CIA, NSA, NRO don't report to the Secretary of Defense or DoD, they report to the President of the United States.

Intelligence for the Department of Defense is from the branch intelligence services. For example, INSCOM
http://www.inscom.army.mil/Default.aspx?text=off&size=12pt [army.mil]
http://en.wikipedia.org/wiki/United_States_Army_Military_Intelligence [wikipedia.org]

Re:The Stock Market is a Joke (1)

Jeff DeMaagd (2015) | more than 3 years ago | (#37474892)

Actually, one of Ike's original rationalizations for the "National Interstate and Defense Highways Act" is... defense. It's not so much anymore.

Any pension and health care for armed service members deserves to be in the defense spending. Splitting it off is one of the ways used to make the defense budget seem smaller.

Intelligence is used for national security to i.e. defense.

Re:The Stock Market is a Joke (5, Insightful)

FooAtWFU (699187) | more than 3 years ago | (#37474512)

You're a FUD-spewing pinko-commie - which is not to say you're completely wrong, but you're missing the point.

It's true that to day-trade, it's all about the high-frequency crazy-fiber stuff. But you know what? You don't need a fiber link to go out and buy a share of McDonald's (today's prices: $87.48-$89.72) and pick up their ~61-cent quarterly dividend. You don't need a billion-dollar real-time system to pick up a piece of Apple ($412.00 - $421.59) and own a fraction of their still-growing revenue stream and cash hoard. You can go out there and place your order for just about as many shares as you care for, for any stock (or your selection of exchange-traded funds which hold hundreds of stocks for a minimal expense ratio), pay about $10, then come back three to thirty years and ask yourself "who fucking cares how fast the HFT traders were trading on 21 June 2011?"

HFT is all about things like spotting a tiny market inefficiency of a fraction of a cent across a half-billion shares on two different exchanges and exploiting it for whatever it's worth. You were never going to play that game; don't kid yourself.

Which is not to say that there aren't people rigging the game to their advantage all over the economy - but "high-frequency trading" isn't really the tool they're using. When you're in the really big leagues, your most powerful tool is The Government. (Bailouts, subsidies, implicit government guarantees, sketchy Solyndra loans, what have you.) Then, the next few rungs down on the latter are all about exploiting the shareholders of your publicly-traded company. That's the sort of thing we should worry about, not the HFT crap.

Re:The Stock Market is a Joke (1)

anarkhos (209172) | more than 3 years ago | (#37474844)

Most people aren't in it to make money so much as to try avoid losing it from inflation.

But if we had sound money...

Re:The Stock Market is a Joke (1)

trout007 (975317) | more than 3 years ago | (#37475372)

Interesting how that works.

Governments inflate to buy votes. The banks are the first that get to use that money so they get very rich producing nothing. Meanwhile the people are forced to invest with those same banks to attempt to keep pace with inflation plus they have to work much more than they used to even though there has been a big increase in productivity.

Re:The Stock Market is a Joke (1)

aliquis (678370) | more than 3 years ago | (#37475326)

No.

Trading is a losing game for most.

You shouldn't be competing with whatever you complain on.

Buy low and hold for multiple years and you will get dividends. Eventually reinvest the dividends in the stocks to gain yields on yields / compound interest/yields.

If you're in it to try to gain 20% in two months, then yes, you need to be lucky or have inside information. (Being smart probably doesn't help much since what's already known may already be in the price, have a fast internet connection I doubt helps at all (with one exception), keeping cool and trade according to your plan may help if you actually do trade instead of going into panic and doing the totally wrong moves, but that doesn't have much to do with being smart or knowing more than the market.)

Stupid algorithm (1)

russsell (185151) | more than 3 years ago | (#37473980)

FTFA: "Dow companies are ranked by stock price, not market value"

This seems to me to be a stupid way of calculating a stock market index.

Re:Stupid algorithm (1)

tysonedwards (969693) | more than 3 years ago | (#37474078)

Market Cap seems just as arbitrary a figure as anything.
What surprises me is that a fund like the DJI which prides itself on being a "stable" fund would elect to not include someone because the share price is "too high". It is a fund... it's not like investors get a 1:1 share purchase of any company within the DJI. If they are afraid of "what if it goes down", than only buy a smaller percentage of Apple and more in Company-XYZ to help to mitigate risk.

Re:Stupid algorithm (1)

FooAtWFU (699187) | more than 3 years ago | (#37474204)

The Dow Jones Industrial Average is not a fund of any sort. It's a market index. It doesn't follow a reasonable investment strategy because it's not an investment - and anyone basing their investment structure solely on its components is doing it wrong.

The Dow is only relevant because it's the oldest general-purpose stock index in the US, and everyone is used to it. (The oldest index was the Down Jones Transportation Index, but that's a little sector-specific.) It's handy for headlines, but not much else. If you want to get a better idea of what the stock market as a whole is doing, use the S&P 500. If you want a better investment strategy, use the S&P 500. If you want to day-trade, maybe a DJIA ETF would be good for you. Otherwise, use the S&P 500.

S&P isn't that great for funds either. (1)

Estanislao Martnez (203477) | more than 3 years ago | (#37474546)

If you want a better investment strategy, use the S&P 500.

Actually, not this either, because the S&P was designed before index funds too, and isn't ideally suited to them. The S&P has a committee that unpredictably handpicks which stocks go into it, and when a new one enters the index, a lot of people buy them up because the S&P index funds are forced to buy it.

A better simple idea is just to buy an index fund that invests on the whole US stock market—e.g., Vanguard's Total Stock Marked Index funds. It's also more diversified—3,500+ stocks instead of just 500.

Re:Stupid algorithm (1)

Estanislao Martnez (203477) | more than 3 years ago | (#37474482)

Market Cap seems just as arbitrary a figure as anything.

No, a market-cap weighed portfolio has the advantage that it doesn't need to be rebalanced when the prices of the stocks change.

What surprises me is that a fund like the DJI which prides itself on being a "stable" fund would elect to not include someone because the share price is "too high". It is a fund... it's not like investors get a 1:1 share purchase of any company within the DJI. If they are afraid of "what if it goes down", than only buy a smaller percentage of Apple and more in Company-XYZ to help to mitigate risk.

The Dow isn't a fund. It's an index—and it's over a hundred years old, which is the reason why it's so antiquated.

Re:Stupid algorithm (3, Informative)

FooAtWFU (699187) | more than 3 years ago | (#37474106)

Congratulations. You've just discovered why there are dozens of S&P 500-based mutual funds, but there aren't really any DJIA mutual funds.

Dow's whatever a SPDR can (2)

tepples (727027) | more than 3 years ago | (#37474808)

there aren't really any DJIA mutual funds.

There is DIAMONDS (DIA) [amex.com] , a SPDR exchange traded fund [spdrs.com] that tries to track the DJIA.

Re:Stupid algorithm (1)

DriedClexler (814907) | more than 3 years ago | (#37474846)

Bingo. This is quite possibly the stupidest way to run a stock index and the stupidest reason for leaving a business off the top 30.

Anyone in software or engineering who heard that excuse would smack the manager who said it, and say, "Um ... so change the weighting of Apple? So that the value of Apple's component is continuous with that of whatever company it replaced at the time? You do realize that the share price is just a meaningless number determined by the arbitrary choice of how many shares are in existence, right?"

Jesus fuck. To think that the big financial sector players are still tripped up by what is effectively a choice of labels. Everyone in finance seems to be either really evil or really stupid.

It's not the stock price. (0)

Anonymous Coward | more than 3 years ago | (#37473994)

It's the market cap.

Re:It's not the stock price. (1)

PPH (736903) | more than 3 years ago | (#37474102)

More likely the volatility.

The DJIA is supposed to be made up of 30 companies that are 'representative' of the health of the market as a whole. Put one stock in with too much volatility and all the indexes derived from the DJIA will go berserk.

You could put a $5/share stock in there that would grow 100% per year and do just as much damage. OTOH, put Berkshire-Hathaway A in (about $101K/share today) and things would be much more stable.

Average (1)

GrahamCox (741991) | more than 3 years ago | (#37474044)

Do they know what an "average' is? That's the problem with averages, one outlying value can skew the result. Maybe they should stop using something as dumb and simplistic as an average to indicate the collective state of stock prices?

Re:Average (2)

Daniel Dvorkin (106857) | more than 3 years ago | (#37474530)

Do they know what an "average' is?

Do you?

The (arithmetic) mean, which is probably what you're thinking of, is only one type of average: mean, median, harmonic mean, etc. The Dow Jones is a weighted mean; weights can be calculated in such a way as to minimize the effects of outliers. If there's a problem, it's with the way they calculate the weights, not with the concept of an "average" in general.

DJIA has a weight problem (1)

tepples (727027) | more than 3 years ago | (#37474876)

In that case, DJIA has a weight problem. DJIA assumes the same weight for each stock, as if someone were to buy 7.57 shares of each. S&P 500, on the other hand, weighs by the number of shares outstanding, such that each stock's influence is proportional to its float, or the publicly traded portion of its market capitalization.

DJIA is (5, Informative)

Z8 (1602647) | more than 3 years ago | (#37474054)

The Dow Jones is an older index in which each company's weight in the index is determined by its stock price. In more recent indicies like the S&P500, stocks are weighted by market capitalization. Assigning weights by stock price is silly because it makes no intuitive sense and means extra work is needed to prevent events like stock splits from moving the index around.

So anyway, this isn't really about Apple, it's just a technical detail about a legacy index. Apple's share price is high ($412 as I type this), but so are plenty of other companies like Google ($539) and Berkshire Hathaway ($101250!).

Re:DJIA is (3, Funny)

Anonymous Coward | more than 3 years ago | (#37474108)

Berkshire Hathaway ($101250!).

101250! = 6.7994476169830511727851464589251787226197877510690... × 10^462826

Re:DJIA is (2)

Z8 (1602647) | more than 3 years ago | (#37474206)

Berkshire Hathaway ($101250!).

101250! = 6.7994476169830511727851464589251787226197877510690... Ã-- 10^462826

Wow no wonder Warren Buffett is so rich

Re:DJIA is (0)

Anonymous Coward | more than 3 years ago | (#37474608)

Berkshire Hathaway shares have never had a stock split, there just aren't that many A shares out there (the 101K priced shares), there are more B shares (they are 1/10th the A price) out there though.

sage (0)

Anonymous Coward | more than 3 years ago | (#37474472)

×

That's unicode! How the hell did you get that to show up correctly?

Re:DJIA is (0)

Anonymous Coward | more than 3 years ago | (#37474678)

It seems like an incredible commentary on our culture that the media religiously reports the Dow countless times a day, attributing all manner of ephemeral agenticity to the tiniest move up and down, yet the value of this index is nearly zero by virtue of it's simplistic definition. Since the Dow is just based on stock prices, if the Dow companies did reverse stock splits it could cause a perceptual shift that might rescue the economy. Oh wait, that might give Obama an edge. Never mind.

Doja is marijuana, DJIA is the Dow 30 (1, Funny)

syntap (242090) | more than 3 years ago | (#37474060)

As in Dow Jones Indus--oh never mind.

The writer and the reasons for Apple now being in the Dow 30 are both high.

Re:Doja is marijuana, DJIA is the Dow 30 (1)

catmistake (814204) | more than 3 years ago | (#37474620)

As in Dow Jones Indus--oh never mind.

The writer and the reasons for Apple now being in the Dow 30 are both high.

Just... wow. Hate Apple, don't hate Apple, whatever. But to hate them so much to deny that they successfully move product and make lots of money... its self-deluding. You know, it really can't be luck, you know that, right? Its just not possible for Apple to have "lucked" their way into financial global boondoggle, you get that right? Either you realize this, or you are quite stoned my hippie friend.

Re:Doja is marijuana, DJIA is the Dow 30 (1)

mattack2 (1165421) | more than 3 years ago | (#37474922)

I don't see why you think that statement was anti-Apple. He complained about the "reasons for Apple now being in the Dow 30", not about the company.

Re:Doja is marijuana, DJIA is the Dow 30 (2)

syntap (242090) | more than 3 years ago | (#37474946)

Actually I typo'd now, meant to type not. Slashdot is my doja, I guess I get a high from being here and it messes with the typing.

Apple has been trading below-value for a long time now. People see the high per-share price and aren't sophisticated enough to know that the share price is simply the result of a division problem involving market cap and shares outstanding, and thus believe stocks that have a high share price are automatically "expensive" stocks when they may be cheap (as with Apple based on earnings and earnings growth), versus a low per-share price that is very expensive (as with Sirius/XM with a $2 share price but not enough earnings to justify that price).

Re:Doja is marijuana, DJIA is the Dow 30 (1)

mattack2 (1165421) | more than 3 years ago | (#37475100)

Which is why stock splits are good -- take advantage of the math-challenged, and buy before the split goes into effect. It makes you *look* to an outside observer like one of the math-challenged, but if you sell right after the usual post-split bump.. you aren't one of them.

Re:Doja is marijuana, DJIA is the Dow 30 (0)

Anonymous Coward | more than 3 years ago | (#37474982)

What the fuck are you blabbering about. He said that the writer of this article and the reason the writer gave for not including APPL in the DJIA are dumb. The stock price of APPL would be accounted for by a factor going into the average so there is no such thing as priced to high for the average. Go pleasure yourself while thinking of Apple somewhere else.

Re:Doja is marijuana, DJIA is the Dow 30 (0)

Anonymous Coward | more than 3 years ago | (#37475016)

Steve Jobs used to be a hippy.

Till he sold out to the corporations, man.

Re:Doja is marijuana, DJIA is the Dow 30 (0)

Anonymous Coward | more than 3 years ago | (#37475336)

What the hell are you rambling about? The OP was poking fun at the author of the article for using the wrong abbreviation. The Dow Jones Industrial Average is abbreviated "DJIA," where as Doja is apparently slang for cannabis. The only thing he mentions about Apple is that their share price is too 'high' for the DJIA (which is true, and what the article is about). Did you respond to the wrong comment, or are you just a crazy, hyper-sensitive Apple fanboy that assumes everyone is out to persecute your sacred Apple.

DJIA is irrelevant anyway (2)

alexmin (938677) | more than 3 years ago | (#37474140)

The index is too narrow. S&P 500 and Russel 2000 have much better coverage of broad economy. Not coincidentally S&P500 and Russel2K ETFs, futures, and options are among most traded on capital markets.
The publisher of the index, Dow Jones agency also owns Wall Street Journal and that maybe why DJIA is not forgotten just yet.

Re:DJIA is irrelevant anyway (1)

Wyatt Earp (1029) | more than 3 years ago | (#37474502)

The Wall Street Journal is published by Dow Jones & Company, a division of News Corporation.

On February 10, 2010, CME purchased of 90% of Dow Jones Indexes including the Dow Jones Industrial Average, News Corp owns the other 10% through ownership of Dow Jones & Company.

And this is how I know that I know nothing. (1)

icannotthinkofaname (1480543) | more than 3 years ago | (#37474500)

Wait, wait, wait, wait, wait. The media has been using the DJIA practically religiously to tell us whether or not our country has an economy. But if they can selectively ban companies that do well, are we really in a state of near financial emergency?

Are we only in a recession because companies who are going to say we're in a recession are allowed to be counted in the DJIA?

Re:And this is how I know that I know nothing. (2)

brusk (135896) | more than 3 years ago | (#37474762)

Are we only in a recession because companies who are going to say we're in a recession are allowed to be counted in the DJIA?

No. The DJIA and S&P 500 track each other pretty well over the long term. Look [yahoo.com] .

Re:And this is how I know that I know nothing. (0)

Anonymous Coward | more than 3 years ago | (#37475194)

> Are we only in a recession because companies who are going to say we're in a recession are allowed to be counted in the DJIA?

No, it's because people with your degree of analytical skills still manage to vote.

Apple-Turf? (0, Flamebait)

rueger (210566) | more than 3 years ago | (#37474798)

Wow, am I alone in thinking the story submission is just fan-boy astro-turf? [wikipedia.org]

"vanguard of technological innovation"

Re:Apple-Turf? (0)

Anonymous Coward | more than 3 years ago | (#37474866)

I only clicked into this story to comment on Apple being on the vanguard of tech innovation, what a joke.. fanboyism at its finest.

total BS (1, Flamebait)

Charliemopps (1157495) | more than 3 years ago | (#37474964)

Walmarts listed on the Dow... and they are WAY bigger than apple. There are a lot of other companies on the DOJA that are as big, if not larger than apple. Apple keeps their stock price high for PR reasons.

Financial illiteracy (2)

qxcv (2422318) | more than 3 years ago | (#37475188)

Title:

Apple Too Big For the Dow Jones Industrial Average

TFA:

Apple, trading at about $420, would have the largest weighting in the 30-company measure because Dow companies are ranked by stock price, not market value.

Apple is not too big for the DJIA, it just has a ridiculously high stock price. On its own this is meaningless. The basic formula for stock price is market capitalisation (company size in dollars) divided by number of shares in circulation, which means that a company can increase their stock price without increasing company size simply by reducing the number of shares in circulation. Don't you love financial illiteracy?

Two Words (1)

actionbastard (1206160) | more than 3 years ago | (#37475322)

Stock Split
Load More Comments
Slashdot Login

Need an Account?

Forgot your password?