Dow Jones nearing an all-time high. So what?

The Dow is a silly index for silly people. Pay no heed.

Today could be the day the Dow Jones Industrial Average hits its highest ever mark. And it won't mean a thing.

The DJIA—commonly referred to as just the "Dow"—is one of the most important stock market indexes in America. With the S&P 500 and Nasdaq, it's a useful proxy for the health of American business. When the Dow's up, times are good; when it's down, hold on to your hats.

Later today, it's expected that the Dow will break 14,164.53, the all-time high reached on Oct 9, 2007. It closed at 14,127.82 yesterday, and a slew of "good" reports from Europe—where French, German and UK PMIs came in higher than expected, albeit still signalling contraction for the former—as well as futures contracts due to vest today indicate that nows the time it will break that barrier.

But even if it does, it's a meaningless milestone. Due to the way the Dow is put together, the two marks aren't comparable. So while you will read stories about how "the American market has recovered", they may or may not be true—and this says nothing either way.

Adam Nash describes the problem:

Just thirty stocks, hand picked by committee by Dow Jones, with no rigorous requirements. Worse, it’s a “price-weighted” index, which is mathematically nonsensical. When calculating the Dow Jones Industrial Average, they take the actual stock prices of each stock, add them together, and divide them by a “Dow Divisor“. They don’t take into account how many shares outstanding; they don’t assess the market capitalization of each company. When a stock splits, they actually change the divisor for the whole index. It’s completely unclear what this index is designed to measure, other than financial illiteracy.

In fact, there is only one justification for the Dow Jones Industrial Average being calculated this way. Dow Jones explains it in this post on why Apple & Google are not included in the index. To save you some time, I’ll summarize: they have always done it this way, and if they change it, then they won’t be able to compare today’s nonsensical index to the nonsensical index from the last 100+ years.

The end result is that, as Nash points out, the Dow is only "off its highs" of 2007 because of it made one arbitrary decision rather than another. If Apple had been introduced to the index in 2009 rather than Cisco, the Dow would have broken its high well over a year ago. It would have been nonsensical to report that then; and it's still nonsensical to care now.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

The deafening killer - why noise will be the next great pollution scandal

A growing body of evidence shows that noise can have serious health impacts too. 

Our cities are being poisoned by a toxin that surrounds us day and night. It eats away at our brains, hurts our hearts, clutches at our sleep, and gnaws at the quality of our daily lives.

Hardly a silent killer, it gets short shrift compared to the well-publicised terrors of air pollution and sugars food. It is the dull, thumping, stultifying drum-beat of perpetual noise.

The score that accompanies city life is brutal and constant. It disrupts the everyday: The coffee break ruined by the screech of a line of double decker buses braking at the lights. The lawyer’s conference call broken by drilling as she makes her way to the office. The writer’s struggle to find a quiet corner to pen his latest article.

For city-dwellers, it’s all-consuming and impossible to avoid. Construction, traffic, the whirring of machinery, the neighbour’s stereo. Even at home, the beeps and buzzes made by washing machines, fridges, and phones all serve to distract and unsettle.

But the never-ending noisiness of city life is far more than a problem of aesthetics. A growing body of evidence shows that noise can have serious health impacts too. Recent studies have linked noise pollution to hearing loss, sleep deprivation, hypertension, heart disease, brain development, and even increased risk of dementia.

One research team compared families living on different stories of the same building in Manhattan to isolate the impact of noise on health and education. They found children in lower, noisier floors were worse at reading than their higher-up peers, an effect that was most pronounced for children who had lived in the building for longest.

Those studies have been replicated for the impact of aircraft noise with similar results. Not only does noise cause higher blood pressure and worsens quality of sleep, it also stymies pupils trying to concentrate in class.

As with many forms of pollution, the poorest are typically the hardest hit. The worst-off in any city often live by busy roads in poorly-insulated houses or flats, cheek by jowl with packed-in neighbours.

The US Department of Transport recently mapped road and aircraft noise across the United States. Predictably, the loudest areas overlapped with some of the country’s most deprived. Those included the south side of Atlanta and the lowest-income areas of LA and Seattle.

Yet as noise pollution grows in line with road and air traffic and rising urban density, public policy has turned a blind eye.

Council noise response services, formally a 24-hour defence against neighbourly disputes, have fallen victim to local government cuts. Decisions on airport expansion and road development pay scant regard to their audible impact. Political platforms remain silent on the loudest poison.

This is odd at a time when we have never had more tools at our disposal to deal with the issue. Electric Vehicles are practically noise-less, yet noise rarely features in the arguments for their adoption. Just replacing today’s bus fleet would transform city centres; doing the same for taxis and trucks would amount to a revolution.

Vehicles are just the start. Millions were spent on a programme of “Warm Homes”; what about “Quiet Homes”? How did we value the noise impact in the decision to build a third runway at Heathrow, and how do we compensate people now that it’s going ahead?

Construction is a major driver of decibels. Should builders compensate “noise victims” for over-drilling? Or could regulation push equipment manufacturers to find new ways to dampen the sound of their kit?

Of course, none of this addresses the noise pollution we impose on ourselves. The bars and clubs we choose to visit or the music we stick in our ears. Whether pumping dance tracks in spin classes or indie rock in trendy coffee shops, people’s desire to compensate for bad noise out there by playing louder noise in here is hard to control for.

The Clean Air Act of 1956 heralded a new era of city life, one where smog and grime gave way to clear skies and clearer lungs. That fight still goes on today.

But some day, we will turn our attention to our clogged-up airwaves. The decibels will fall. #Twitter will give way to twitter. And every now and again, as we step from our homes into city life, we may just hear the sweetest sound of all. Silence.

Adam Swersky is a councillor in Harrow and is cabinet member for finance. He writes in a personal capacity.