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Quote of the Day

“Indexing in the long run is sensible…In the short run it can be lethal, particularly now”

-Jeremy Grantham, 1999.

When an index is driven by high-fliers, an investor who buys an index is, by definition, buying high. This day in 1999 represents one of the largest shakeups of the Dow Jones Industrial Average in its history. As tech markets boomed the makers of the Dow Jones Industrial Average Index had no choice but to add tech shares into the index. For new investors, this meant over-weighting a sector that was just about to burst…

 

November 1st – This Day in Stock Market History

November 1st. 1999 – As another sign of the tech bubble inflating, the Dow Jones Industrial Average adds significant technology exposure and drops many industrial companies.

On this day, Microsoft, Intel, SBC Communications, and Home Depot are added to the index, while dropping Chevron, Goodyear Tire and Rubber, Sears Roebuck, and Union Carbide. Prior to the move Sears Roebuck had been a part of the Dow for 75 consecutive years, Union Carbide for 71 years, Chevron and Goodyear for 69 years.

At the time, the technology sector made up about 23% of the Dow Jones Industrial Average:

Today that stands at about 19%

Within the next 3 months the Dow Jones Industrial Average would reach its tech bubble peak. On January 14th, 2000 the Dow would be at 11,722.98, a level it would not again see for 6 and a half years.

Source: CNN Money coverage and The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average

Best November 1st in Dow Jones Industrial Average History

1978 – Up 4.46%, 35.34 points.

Worst November 1st in Dow Jones Industrial Average History

1917 – Down 4.15%, 3.09 points.

Read of the Day

One of the best books I have read on the tech bubble, and the source for our quote of the day above, is Bull! by Maggie Mahar. The book provides excellent detail of the buildup of the bubble, the euphoria and its decline.
You can read our review of Mahar’s book here: Bull! A History of the Boom and Bust

<– Go To Previous Day: October 31st, 1932 – Nevada closes down all banks in the state, the first state to close banks during the Great Depression.