Economic concerns of today mimic 1865

David Helscher

Measurements can be used as a comparative tool; 150 years as a bank, a milestone that Clinton National Bank reaches this year, is a long time by any measure. If this was broken down into days, hours or minutes, it would generate a much larger number, but years can be a more convenient measure of the passage of time. 

Financial markets also use measurement tools to provide a short-hand means of describing movements. The U.S. stock markets use several means to provide a general overview of the direction of markets, namely the Dow Jones Industrial Average, Standard & Poor’s 500 (S&P500) or the Nasdaq Composite Index.

The DJIA is the second oldest of stock measures. The Dow Jones & Company, started in 1882, first published the Wall Street Journal in 1889. It first began publishing an afternoon news sheet that included a Transportation Average in 1884. In 1896 it first began to list an industrial average of 12 member stocks. Of these 12 stocks, only one continues to hold a spot in the DJIA. These original 12 were: American Cotton Oil; now a part of Unilever but dropped from the average in 1901: American Sugar Company; acquired by American Sugar Refining and dropped in 1930: American Tobacco Co.; renamed Fortune Brands but dropped in 1985; Chicago Gas Co.; now a subsidiary of Integrys Energy Group but dropped in 1915: Distilling & Cattle Feeding Co.; dropped in 1899: Laclede Gas Co.; still around but dropped in 1899: National Lead Co.; now NL Industries but dropped in 1916: North American Co.; dropped in 1930 and broken up by the SEC in 1946: Tennessee Coal, Iron and Railroad Co.; merged into US Steel and dropped at that time in 1907: US Leather Co.; dropped in 1928 and liquidated in 1952: United States Rubber Co.; dropped in 1928, changed its name to Uniroyal and acquired by Michelin in 1990: and, the sole survivor, General Electric. This average has evolved over time, expanding to 30 companies. Most recently, AT&T was removed from the DJIA and replaced by Apple in March 2015.

The industrial part of the DJIA is mostly historical as many of the 30 companies included in the average have little to do with traditional heavy industry. Its current components range from American Express to Walt Disney Company. It is a scaled price weighted average. The value is not the actual average of the prices but rather the sum of the component prices divided by a divisor. This divisor is adjusted when any included company has a stock split or declares a stock dividend.

The S&P 500 is a weighted index based on market capitalizations of the 500 largest companies listed on the New York Stock Exchange or Nasdaq Exchange. Standard & Poor’s introduced its first stock index in 1923. The S&P 500 in its present form began in 1957. As an index weighted by capitalization, price movements in stocks with higher market capitalizations would have a larger influence on the index than those with smaller capitalizations. The Nasdaq Composite Index started in 1971 and is weighted toward information technology companies, but less so than prior to the dot-com episode at the turn of this century.

Foreign markets also have the snapshot indicators. Stocks traded on the Tokyo Stock Exchange make up the Nikkei 225, which was first calculated in 1950. The Hang Sang Index began in 1969 for stocks that traded in Hong Kong. Frankfurt Germany has the DAX index, Paris, the CAC-40 and London, the FTSE-100. There are quite a few other indices that measure a variety of markets, industries or combinations of these.

In case you want additional methods of measurements, 150 years is approximately 54,750 days, 1,314,000 hours, or 78,840,000 minutes. This was 28 U.S. Presidents ago and 75 Congresses. For me, it was one year before the last of my direct ancestors came to the U.S. By any measure, a long time ago.

David Helscher is a senior vice president with Clinton National Bank.


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