Has the Dow Left You Dazed and Confused?

Let’s set aside the fact that the Dow Jones Industrial Average is a flawed measure of the overall stock market.  The media, your parents, and their parents have all accepted the Dow as the standard.  Besides, over time the Dow does move in line with the overall market.  So instead of arguing semantics, let’s talk about the headline: a 4-digit drop in the Dow today along with a 600+ point drop on Friday. While the average person associates the Dow with the overall market, we should also recognize that the media loves the Dow because of the potential for attention grabbing headlines.  To paraphrase Wooderson in Dazed and Confused: That’s what I like about the Dow, the points get bigger, but the size of the returns stays the same. On average, the S&P 500 experiences a drawdown of 14% every year.  If we apply that average to the Dow, it would…

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This Weekend’s Fiduciary Test

The first phase of the Department of Labor’s fiduciary rule went into effect on Friday.  This is the rule that mandates that your financial advisor must act in your best interest.  The whole thing doesn’t go live until 2018, but it will be interesting to see who makes what kinds of changes in the meantime.  Some have rushed to comply.  Others are banking on the Trump administration to overturn it. The Test I was particularly interested to hear whether the local AM station’s annuity salesman would change up his schtick this weekend.  He has an hour on Sundays to make his pitch in his non-threatening monotone.  The focus is on potential returns of the annuity (really the change in income the annuity would pay – very different from change in total value).  There’s always some sort of bonus and guarantee that you can’t lose money.  What’s not in focus is…