The Washington PostDemocracy Dies in Darkness

Dow 15,000: Here’s why caring about it is not as silly as it might seem

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The champagne corks are surely ready to pop on Wall Street, and the nation's business editors are surely trying to decide whether their headlines should be in 36-point or 42-point type, as the Dow Jones Industrial Average has closed above 15,000 for the first time.

What the headlines don't say, but could, is this: Arbitrary index hits arbitrary number.

The Dow has long enjoyed a prominence in the financial discourse that outstrips its usefulness (surely due in no small part to its shared corporate parentage of the nation's leading business newspaper). It is an index of a mere 30 stocks chosen because they are thought to be representative of American industry broadly; they are weighted not based on how valuable the company is, but buy the per-share stock price, which is itself an arbitrary function of a given board of directors' proclivity for splitting the stock when its value reaches high levels.

That made sense when Charles Dow created the index in 1896. In the era before computers, adding up something as complex as the Standard & Poor's 500, with 500 companies weighted by their market capitalization, would have required a roomful of green-eyeshade types to calculate.

So, the fact that some people pay more attention to the Dow than the S&P today is more out of habit than out of a need to glean truly useful information. And the 15,000 level is a milestone only in the sense that humans like round numbers.

Still . . . there is a defense of the inevitable cheering and news coverage that accompanies these milestones: Financial market moves are important to lots of people; if the market rises 20 percent, it makes millions of people wealthier and may (emphasis on may) presage better economic times ahead. If it drops 20 percent, the reverse is true.

But on any given day, the motion in the market is too small to be worth noting. The bump that drove the Dow over 15,000 on Tuesday amounted to an 0.5 percent increase in the S&P. If anything, news coverage of arbitrary milestones is an occasion to make sure people know, "Hey, this is the trend in the markets in the last few months."

So, don't care that the Dow is at 15,000. Do care that the S&P is up 14 percent so far in 2013, and 19 percent over the last year, and that this has a range of consequences starting with the value of your 401(k). The Dow's milestone is just an opportunity for noting it.