DJIA: Do New Highs Matter?On the 19th anniversary of Black Monday, the Dow Jones Industrial Average (DJIA) closed above 12,000 for the very first time. With the Dow Jones Industrial Average at near record levels all things must be well with the economy … mustn't they?
What About Inflation?
Below is a graph of the Istanbul Stock Exchange (ISE) from 1998 to present. Please note the logarithmic y-axis that starts at 2000 and goes all the way up to 47,000.
In a period of less than nine years, the ISE has increased 13-fold!
![](https://photos1.blogger.com/blogger/2422/3008/400/ise2.0.jpg)
What's missing here of course is consideration for the double digit inflation rates for the Turkish lira. At the end of 1994 before its million to one revaluation the exchange rate with the USD was 1,350,000:1! That gave the Turkish lira the dubious honour of being ranked as the world's least valuable currency by the Guinness Book of World Records.
Ever Changing Components
Another factor to consider is that the companies that comprise the DJIA change. This makes year-to-year comparisons somewhat misleading as well. Poorly performing companies are taken out and replaced with ones that are performing well.
Of the original twelve in 1896 that constituted the DJIA only General Electric remains.
On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Roebuck, Sears and Union Carbide were removed from the DJIA and replaced by Home Depot, Intel, Microsoft, and SBC Communications.
On April 8, 2004, another change occurred as AT&T, Eastman Kodak, and International Paper were replaced with AIG, Pfizer, and Verizon.
On December 1, 2005 AT&T's returned to the DJIA as a result of the SBC Communications and AT&T merger.