THE Dow Jones Industrial Average (DJIA) came tantalising close to 20,000 on Jan 6, a record level that is being closely watched (and hyped) by the financial media. At one point during the trading session, it was within 0.37 points, or 0.0002%.
Most agree that it is just a matter of time before this milestone is attained. The longer-term significance, however, is subject to more debate. Let’s start by acknowledging that the DJIA is far from comprehensive when it comes to analytical content. The index covers a very narrow set of stocks and therefore is lacking in representation. Its calculation methodology also is problematic, placing way too much emphasis on the absolute share price, as opposed to market capitalization. As a result, a few names can move the index significantly -- as has occurred recently with Goldman Sachs and JPMorgan Chase, which account for a substantial part of the upward surge since early November.
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