Dear Friend and Reader,
I WAS LUCKY enough to catch a few minutes with my friend John Curran who works in the financial sector (his primary experience is in hedge funds) and is still secure in his job in Manhattan. In between his train ride home (he’s just like Joe Biden!) and some time with his family, I asked him some questions about the Dow Jones and the recent market changes.
While researching for an earlier article, I realized that for all we’ve been reading and writing about the Dow, I wasn’t sure exactly what it was, where it comes from and what the difference is between, say, the Dow Jones Industrial, Transportation, Utility and Composite Averages.
First of all, the concept of trading is very old. In Prehistoric times, when humans first had the ability to speak, they traded goods and services for survival. During the Stone Age, the period when we started using stone tools, we introduced our first currencies: obsidian and flint. Obsidian flakes off to make very sharp points and blade edges, and flint is a fire starter. It’s the historical equivalent of trading Swiss Army knives and matches. (My mom is so proud I studied anthropology in college.)
As we evolved, and civilization became more advanced, our currency became less practical and more symbolic: turning to beads, silver and gold. By the 11th Century, “Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of credit and payment.”
To yank us up to present day, Wikipedia tells me the Dow Jones was launched in 1896 by Wall Street Journal editor and “Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.”