Dow Jones has removed General Electric from the Dow Jones Industrial Average (DJIA) and replaced it with Walgreens Boots Alliance. GE was an original Dow stock and was part of the index for over 100 years. The Dow is how your parents consume the stock market which is why newscasts tend to report that information in Dow points. This is a huge deal, right? Not from an investing standpoint.
The DJIA is price-weighted, meaning that stocks with higher prices make up a larger portion of the index than stocks with a lower price. This is different than an index like the S&P 500 which is market cap-weighted (the size of the actual company). It’s interesting to note that GE is getting replaced by a company about half its size by market cap so it’s not like GE is getting the boot (pun intended) because of its size, it’s because the committee that determines Dow components said so. So is it a huge deal? From DJIA’s perspective, no. At around $12.72 per share, GE represented lass than half of a percent of the index. That’s in an index made up of 30 stocks! The Dow committee was looking for a stock that would make an impact to the left of the decimal. Eddy Elfenbein wrote up a great summary here.
Left of the Decimal
So GE no longer moves the needle over at the DJIA. Here are some posts about things that do move the needle (Surprise! Kid blog posts!) –
Brian Lund is a no nonsense kind of guy which is why I always appreciate when he writes about family. It’s funny how kids can change our perspective on what’s important.
Josh Brown reflects on suddenly having a middle schooler.
I love reading posts about the kids of the finance guys I follow and how family makes a left of the decimal difference to them. Kids can really make you take a fresh look at what you’re doing with your life. It’s so easy to get caught up in the daily noise of work, tv, social media, politics, but at 4am when I’m holding my 4 month old son all of that falls away. Between 2 and 4 am he likes to babble. It sounds like an authority on whatever it is he’s talking about, but will occasionally stop to smile at me with every fiber of his little being. And in that moment I realize that being up at 4 am isn’t so bad after all.