Author Topic: Hardware/OS Geek Thread  (Read 37237 times)

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Offline NatsAddict

  • Posts: 4095
Re: Hardware/OS Geek Thread
« Reply #175: September 17, 2009, 10:54:06 AM »
Hey NA, here's a gadget just for you :thumbs:

Thanks, Chief.  Below is the financial part of my Vista sidebar.

[ot for the curious]
I don't watch DJIA other than to see what the talking head idiots may be using to mis-inform the public that has no idea how it works.  You know, the morons that psyched the gullible into the DJIA hitting its all time high on October 9, 2007 - 52 days before the recession officially started.  I swear, Maria Bartiromo, perhaps the biggest bimbo to ever disgrace a TV screen, had an on-air orgasm.

The DJIA has two fatal flaws.  Foremost, it is a price index.  The other foremost is that is it only 30 companies.  The other other foremost is that it now has little to do with manufacturing/industry.  In a price index, everything is valued on the price of a share of stock, not market cap (price per share times the number of shares outstanding).  At present, Microsoft has a market cap of about $224 billion, and a share price of $25.  IBM has a market cap of about $160 billion, and a share price of $122.  So, MSFT has a market cap of 40% greater than IBM.  However, since IBMs share price is roughly five times that of MSFT, each change of $1 per share in IBM equates to about a $5 per change in MSFT in the DJIA index.

While most people can understand that 30 companies is not a fair representation, and understand that American Express, Bank of America and such are not industrials, and that Wal-Mart and Home Depot are retailers and not manufactureres, they don't know understand a price index. 

This is slightly, but only very slightly over-simplified:  Assume all other 28 stocks in the DJIA stay unchanged, and MSFT has a huge day, gaining 10%, jumping to $27.50/share.  Also, assume IBM has a weak day, well with its trading range, and drops a little over 2% to 119.4.  What has happened is that at the beginning of the day, the total market cap of MSFT and IBM was $384 (224 + 160).  At the end of the day, the total market cap of the two is $403 (MSFT now at 246.4 and IBM at 156.6) - huge gain of $19 billion, or 4.9% for the day.  But, the DJIA ignores market cap.  Since the total of the prices of individual shares at the beginning of the day was $147 (25+122), and is $146.9 at the end (MSFT at $27.5 and IBM at $119.4), the DJIA would fall.

No economist ever bothers with the DJIA.  It's BS.  It's just a random number that can cause elation and hysteria that creates volatility, making it possible for huge gains by those who understand the workings of the index (and often manipulate them), at the cost the life savings and retirements of those who do not.