Good afternoon,
The DJIA is being changed. Again. This construction of the Dow Jones Industrial Average changes every few years. The 30 components of the index are chosen by the Dow Jones Company basically whenever they deem is necessary, or more accurately, whenever they feel like it.
I feel like I need to explain this every time there is a change in the DJIA, so here we go again. The DJIA was formed in 1896 by Charles Dow as a method to measure the movement of the stock market. He took the largest 12 publicly traded companies at that time, computed their average share price and published it. Viola, the Dow Jones Industrial Average was born. It remained 12 companies until the 1930’s when it was expanded to 30 companies. It has been 30 companies, chosen by Dow Jones, ever since. It really isn’t a very good representation of the of the market, which contains in excess of 13,000 publicly traded companies, https://fred.stlouisfed.org/series/DDOM01USA644NWDB
We continue to use the DJIA as a proxy for market activity simply because that’s the way we’ve always done it. The S&P 500 is a better barometer of the market because it represents nearly 80% of the value of all public companies, https://en.wikipedia.org/wiki/List_of_S%26P_500_companies#:~:text=The%20S%26P%20500%20stock%20market,the%20American%20equity%20market%20by
But even that isn’t perfect because it is skewed by a few dozen very large companies. So bottom line is that whether the Dow is up or down today may or may not have any relation to your own investments. Some may argue the S&P is better, but not perfect.
September is finally here! He says with a bit of sarcasm….which means that summer is winding down in what feels like the strangest year we’ve ever had. Kinda seems like we missed most of it so far, which I guess we have. One glowing bright spot however, is that September is Life Insurance Awareness Month. Bet you didn’t know that, did you?
Did you also know that Brooke Shields is the spokesperson for Life Insurance Awareness Month? Neither did I, but hey, at least someone is doing the talking. I remember Brooke from back in the day, wonder what she’s up to these days, besides talking life insurance, but I digress…
If 2020 has shown us anything, and I believe it’s shown us a lot, one of the things is that the world is unpredictable. You never really know what’s around the corner. There is that old saying along the lines of “if you want to make God laugh, just tell him your plans.” Or something to that effect. Well life insurance is there to remove some of the uncertainty. If something bad happened to you, or someone close to you, whom have other people relying on them, then life insurance can cushion the financial blow. If you’d like to discuss your life insurance needs, give me a call. Or if you have an old policy (or annuity) you purchased many years ago, let’s do an analysis and make sure it’s still suitable for you. Long term care insurance is another topic that might need your attention as well. “Money won’t solve all your problems, but it will solve all your money problems.” – Naval Ravikant.
File this under the WMR has had about enough. We need to get the economy open and we need to get it open soon. Call your state and/or federal congress person. This extended lockdown/shutdown is causing extensive damage to people’s lives and livelihoods which in turn will impact public health as much or more than the virus will.
More companies have announced more layoffs,
United Airlines, https://www.cnbc.com/2020/09/02/united-airlines-cuts-jobs-as-coronavirus-hurts-air-travel-demand.html
And many others, https://www.businessinsider.com/coronavirus-layoffs-furloughs-hospitality-service-travel-unemployment-2020
What started as temporary layoffs or furloughs have become permanent. Sidenote, I’ve helped clients with hundreds of retirement plan rollovers over the years, so if you’re one of the unlucky workers who finds yourself unemployed, or know one, call me to help.
And there are company bankruptcies, https://www.nbcnews.com/business/consumer/which-major-retail-companies-have-filed-bankruptcy-coronavirus-pandemic-hit-n1207866
Maybe they were in trouble before covid, but the shutdown has pushed them over the edge. And I’m not even including the hundreds of thousands of small businesses that were forced to close and will never reopen.
Enough is enough. Let businesses open and let people get back to work. Now.
Even the iconic Boston tavern that inspired the 80’s sitcom “Cheers” is closing permanently. https://www.cbsnews.com/news/cheers-faneuil-hall-marketplace-boston-closing/#:~:text=The%20%22Cheers%22%20bar%20at%20Boston's,aired%20from%201982%20to%201993.
I’ve linked to hedge fund manager Peter Schiff in the past and he agrees. He also thinks the markets are overvalued. He may or not be right, but he’s made a fortune placing correct bets in the past. If you are interested in hearing what he has to say, Google his name.
Not to be entirely negative this week, I fully believe that the US economy will recover and eventually be stronger than ever. That’s how we respond after every crisis and we’ll do it again this time. The sooner they let us get back to work, the sooner we’ll get back on that path.
Both of my daughters have birthdays in early September and are now fully immersed in their teen years. How did that happen? It seems like I was in college yesterday and now I have one kid in college and two more on their way soon. Life is moving fast. And BTW, we did a Zoom call for one of my daughters with her dance team the other night and it was difficult and challenging to say the least. And the participants were all teenage girls and their parents. There is no way, in my opinion, that kids will be able to sustain an all Zoom class schedule every day for the school year. And I imagine it has to be even worse for younger students and the parents charged with keeping them engaged each day.
This week’s chuckle is courtesy of the TV show Cheers. Here are the best Norm entrances, enjoy, https://www.youtube.com/watch?v=VXED2AVlbR0
Happy Labor Day.
Have a great week and stay healthy.
The opinions expressed are those of Michael Acho and not necessarily those of Lincoln Financial Advisors Corp. CRN-3229275-090320
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Michael J. Acho, MBA, CFP®
Private Wealth Advisor
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