The Most Revolutionary Act

Wall Street Volume at 10 Year Low

Another worrying article on Zero Hedge raises concerns about the declining health of the US economy. An 8/16/12 post by Tyler Durden points out that Wall Street has lost hundreds of billions of dollars of wealth over the past two years. Durden cites data showing that Wall Street markets have experienced 17 weeks of “inflows” in the last 106 weeks, amounting to $31 billion. During the same period, they have experienced outflows of $300 billion. In other words, America’s publicly traded companies have experienced a net loss of wealth of $270 million. This loss has been accompanied by a steep decline in volume (numbers of shares traded). I guess it’s no surprise the mainstream media chooses not to tell us about this.

The mainstream media does report on the Dow Jones Average every night. The $270 billion loss isn’t reflected in the DJA, which only measures the performance of 30 carefully selected stocks. During the 2008 economic collapse, the DJA dropped from an all time high of ($)14,164.53 to ($)6,547. Since 2008, it has continued a steady upward trend that has failed to reflect the massive loss of wealth which has occurred over the past two years. On Aug 29th, it closed at ($)13,014.06.

Although the DJA is the most common index quoted in the mainstream media, it is calculated using a price weighted average that causes it to trend higher than other indices. Because high value stocks like IBM and Chevron have a greater influence than lower priced stocks like Alcoa and Bank of America, the DJA rises faster than other indices – giving potential investors the impression that Wall Street is performing better than it really is.

It may also be significant that poorly performing stocks are removed from the DJA and replaced with better ones. AIG (which required a massive government bailout to stave off bankruptcy) was one of the 30 Dow Jones stocks in September 2008. It alone was responsible for ($)3,000 of the ($)7,600 DJA loss. It was subsequently removed from the Dow Jones Average.

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