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Comment by bamdadd | Hacker News Reader

Listen to this episode of Planet money in 2013: Despite all the celebration, the Dow Jones industrial average has not hit record highs recently. If you adjust for inflation, the highs just aren't as high as they seem.

And even if it does hit a real, inflation-adjusted high in the next few weeks, it won't mean much. The Dow is a seriously flawed stock index, and it's certainly not a good way to measure what's going on in the overall economy.

On today's show, we rain on the Dow's parade and explain why a lot of very smart people say we should ignore the Dow.

http://www.npr.org/sections/money/2013/03/12/174139347/episo...

The Dow Isn't Really At A Record High (And It Wouldn't Matter If It Were) http://www.npr.org/sections/money/2013/03/05/173515767/the-d...

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Yes, the dow is a flawed index.

That said, the S&P 500 & Russell 1000 are also at all time highs.

https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7K...

https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIW...

None of these data points mean anything on their own. People that look at a chart a conclude anything at all are not doing enough analysis.

It makes no sense to inflation adjust the DJIA price index. Because the index discards cash dividends, by adjusting for inflation but not dividends you're ending up even further from the real returns of a DJIA portfolio then you were before.

The same goes for S&P 500.

I listened to that podcast when it got rebroadcasted. Even the people who are in charge of the Dow admit it's not a great tool for measuring the economy. They don't change it because the only thing it has going for it is the fact that the algorithm has been around for over a century. If they changed it, they wouldn't gain much and they would lose the only thing it has going for it, which is its standing as the oldest economic measurement used today.

Also, the stock market isn't the economy.

THANK YOU for pointing this out.

The stock market is not the economy. Stocks going up is not objectively good, and stocks going down is not objectively bad. Same for housing prices and cost of living.

When the pie grows, often the result is I have a shrinking portion of it.

Yes, true, but unfortunately for all of us who don't have our billions yet, many of those making policy decisions have a thumb or three in that pie and much of their wealth tied to it. What I've learned is that you can either be part of the "tide which lifts all ships" or be drowned by it. TL;DR get some index funds :)

Don't forget too that 401(k)s force your hand to care about the stock market to get any sort of retirement in the modern era.

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