Stupid stock market question

[silverpig]

The DOW is at 12300 today.

12300 what?

 

[E equals MC2]

Originally posted by: silverpig
The DOW is at 12300 today.

12300 what?

Also what do they mean by DOW is up or down / S&P500 is up (or down)? If down, I assume it means the whole market collectively down, amongst are some companies that may have went up, but in a bigger picture, everyone is down?

 

[txrandom]

$

 

[LegendKiller]

Originally posted by: silverpig
The DOW is at 12300 today.

12300 what?

http://en.wikipedia.org/wiki/D...nes_Industrial_Average

 

[KeithTalent]

There is a basket of widely held securities that make up the Dow Jones Induistrial Index. So they measure the collective gains and losses (scaled average) of these securities and use them as a general representation of the market as a whole.

KT

 

[silverpig]

Originally posted by: LegendKiller

Originally posted by: silverpig
The DOW is at 12300 today.

12300 what?

http://en.wikipedia.org/wiki/D...nes_Industrial_Average

Ahh okay, so it seems like there exists a list of companies which make up the DJIA. The number comes from summing the stock prices of those companies, then dividing by some number.

 

[Modelworks]

Down over 300 points now.
AIG lost $5.5 billion in just 3 months.
I love how they say "we're not in a recession ".

Uhm , maybe your not, but the rest of us are !

 

[Martin]

Originally posted by: silverpig

Originally posted by: LegendKiller

Originally posted by: silverpig
The DOW is at 12300 today.

12300 what?

http://en.wikipedia.org/wiki/D...nes_Industrial_Average

Ahh okay, so it seems like there exists a list of companies which make up the DJIA. The number comes from summing the stock prices of those companies, then dividing by some number.

(I'm not a finance guy)

Its just an index that cannot be compared to other indecies. The index is a weighted average of the market cap of the companies. If the average goes up, the index goes up, if the average goes down, the index goes down.

Say, I make "Martin's Index" which will be structured like this: On March 3rd, the index will start at 1000 points and will be made up of 50% Google, 25% MS and 25% RIM. Then every day I track how much the market cap changes and that gets reflected in my points. So on March 3rd at 9am it will be 1000, but during trading day, GOOG goes up 5%, MSFT goes down 10% and RIMM goes up 10%. When you sum that up and apply the weights, Martin's index will be up 2.5%, which means that it'll be at 1025 (25% of the index (MSFT) went down 10%, 25% of the index (RIMM) went up 10% and 50% of the index (GOOG) went up 5%).

Each index (SP500, DOW, TSX) has different weights and is composed of different companies. For example, the DOW are picked to be a representative sample of the economy, while the SP500 is simply the 500 largest companies. The composition of the indecies also changes every now and then. The points themselves are meaningless - anybody can make their own index and can make it start at any number of points. They only make sense when compared to themselves (DOW being 300 points means it lost ~2.5%)

Anyway, that's generally how it works (AFAIK). I recommend you pick up this book. Its an excellent (and very readable) intro to how markets work.

 

[Epic Fail]

Originally posted by: Martin
Each index (SP500, DOW, TSX) has different weights and is composed of different companies. For example, the DOW are picked to be a representative sample of the economy, while the SP500 is simply the 500 largest companies. The composition of the indecies also changes every now and then.

More like the other way around, DJIA is only 30 companies, 500 is more representative of the economy.

 

[Martin]

Originally posted by: yamadakun

Originally posted by: Martin
Each index (SP500, DOW, TSX) has different weights and is composed of different companies. For example, the DOW are picked to be a representative sample of the economy, while the SP500 is simply the 500 largest companies. The composition of the indecies also changes every now and then.

More like the other way around, DJIA is only 30 companies, 500 is more representative of the economy.

Sure, but what I meant is the people that pick the companies that go on the DOW will tell you they do it so that it represents a cross section of the economy.

 

[LuckyTaxi]

Originally posted by: Modelworks
Down over 300 points now.
AIG lost $5.5 billion in just 3 months.
I love how they say "we're not in a recession ".

Uhm , maybe your not, but the rest of us are !

Yep, our wonderful leader doesnt think we're in a recession.
He's just that smart

 

[WHAMPOM]

Originally posted by: silverpig
The DOW is at 12300 today.

12300 what?

What stocks are selling for, compared to what they are worth?
Hay! , it's the only way it makes sense to me.

 

[LegendKiller]

Originally posted by: LuckyTaxi

Originally posted by: Modelworks
Down over 300 points now.
AIG lost $5.5 billion in just 3 months.
I love how they say "we're not in a recession ".

Uhm , maybe your not, but the rest of us are !

Yep, our wonderful leader doesnt think we're in a recession.
He's just that smart

1. It's impossible that we are in a recession, in 4 months we can be, but not now.

2. Just because people who invested in CDOs or RMBS lost money on their investments doesn't mean we are in a recession.

People just love tossing round the R word for hyperbole.

 

[CPA]

Originally posted by: Modelworks
Down over 300 points now.
AIG lost $5.5 billion in just 3 months.
I love how they say "we're not in a recession ".

Uhm , maybe your not, but the rest of us are !

Who is this "rest of us" you speak of?

AIG lost $5.5B because they did a lot of crap sub-prime business. What do you expect when risky folks don't make their mortgage payments?