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Rigging the Dow




Don't forget when looking at the Dow at year-end that it is really far worse than they could ever let it be.

In recent years, the proprietors rip precipitiously declining stocks out of the Dow so often that not only is the Dow a joke, but the WSJ is too.

They used to take the turkeys out long before their heads get cut off: remember Westinghouse? But in the past year, as wikipedia confirms, it's like they've simply been speculating with the Index itself. "Altria Group and Honeywell were replaced by Chevron and Bank of America on February 19, 2008. On September 22, 2008, Kraft Foods replaced American International Group in the index."

Above, a chart for Kraft, AIG, and the Dow 30 since the week Kraft replaced AIG. Note how much further AIG would have dragged the Dow down had it been allowed to stay in longer. You could do the same kind of chart for Altira and Honeywell.

This is why those rosy "six-straight-decades-of-returns!" claims your broker makes are so phoney as to be criminal. We'll see if Obama's SEC cuts your Series 7 and the indices themselves a little less slack than previous administrations have; I hope so.