Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

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Yishen Kuik

10/22/04
Dow History:

A striking presentation of the components of the DJIA over 120 years of history at http://quasimodos.prinews.com/info/dowhistory.html

In 1900 the Dow was copper, sugar, steel, smelting, leather, rubber.
In 1950 the Dow was chemicals, cars, steel, retailers, oil, tobacco, telco, farm equipment, consumer products.
In 2000, the Dow was financials, consumer products, cars, tech, retailer, media.

Sectors rotated from dominance to insignificance (copper, smelting) and from non-existance to dominance (oil, tech, media).

Dow component companies vanish from memory. (Laclede Gas, Pacific Mail Steamship, National Lead)

Does this argue that all stock picking is about market timing since the return of the vast majority of portfolios bought in 1900 and held for 100 years of compounding would be -100%?

It is also striking how the longevity of Dow components appears to be lengthening - there are fewer short stints in the Dow after the 1940s.

Is this a testament to modern finance reducing wastage in the economy? With armies of M&A bankers looking for a fee is it now easier for established companies who are growing tired to find fresh blood to utilize their fixed investment in distribution and brand recognition, not to mention blue chip cost of capital? (Or the reverse - for young blood to takeover these husks from within)