Fiscal Measurements
Fiscal Measurements
A former colleague at a major stock brokerage firm always
confused "fiscal" with "physical". On June 30th, he would talk
about the close of the "physical year". Just a mental block for
an intelligent man. Fiscal year-end differs for corporations
with most ending June 30th while others use December 31st.
Fiscal is fancy jargon for "show me the money". Measurements
connotes appearances men notice. Year-end fiscal measurements
get the attention of both genders. A friend reminds me, "You
cannot track what you do not measure". Many market watchers
measure the stock markets performance by tracking the Dow Jones
Industrial Average. So, just what is the Dow Jones Industrial
Average?
The Dow Jones Industrial Average
When Charles Dow, a journalist, devised his index for
securities, most investors were bond buyers. Bonds provided
predictable ownership with specific interest payment (coupon)
and a promised return of your money (principle) on a specific
date (maturity). Only a few investors wanted stocks; for most,
stocks were too risky.
Think you have trouble following stock prices? In 1884,
investors read charts with prices up 1/4 point, down 1/8th
point. All seemed rather perplexing (frankly, it is not much
different today with newspapers printing decimal stock-closing
prices.
On July 3 1884, Charles Dow published an average of leading
American stocks to make it easier for investors. Railroad stocks
and Western Union (for obvious reasons) were on the list.
Railroads were the backbone of emerging economic forces tracked
in the U.S. economy.
* Some recognized names: New York Central * Union Pacific *
Chicago & North Western
As time progressed, the list changed, and still changes.
Theoretically, the Dow Jones Industrial Average represents a
wide range of industry in the United States. The Dow no longer
includes railroads or utilities; they are separate averages. The
Transportation and Utility Averages are proxies or "leading
indicators" for the economy. One tells us about the movement of
product; the other the energy used to produce it.
Today, the Dow Jones Industrial Average is a list of 30 stocks.
When an index has a few stocks, the price of a few impacts the
average. This often skews index pricing. For example during
2005, General Motors stock (GM) stalled and sputtered.
* GM 2005 performance Stock price January 3, 2005: $40.30 *
Stock price December 30, 2005: $19.42 * Stock price loss
percentage: 48% * Current Dividend: $2.00 * Year-end Yield:
10.30% (this is called a "yield rally")
The Wilshire 5000 Average
The Dow Jones Industrial Average gets the recognition, but the
Wilshire 5000 tells you more. For some reason, news stations
will not give the Wilshire 5000 averages. It is reported
here:.