The Dow

Remember Victor Talking Machines, Postum Incorporated, and Nash Kelvinator? Probably not, unless you love business and finance history. These companies were once part of the Dow Jones industrial average. Here is the list of the original Dow 30 in 1928.

Allied Chemical, American Can, American Smelting, American Sugar, American Tobacco B, Atlantic Refining, Bethlehem Steel, Chrysler, General Electric Company, General Motors Corporation, General Railway Signal, Goodrich, International Harvester, International Nickel, Mack Truck, Nash Motors, North American, Paramount Publix, Postum Incorporated, Radio Corporation of America, Sears Roebuck & Company , Standard Oil (N.J.), Texas Company, Texas Gulf Sulphur, Union Carbide, U.S. Steel, Victor Talking Machine, Westinghouse Electric, Woolworth, and Wright Aeronautical.

Today, only 8 names of the original 30 remain in the Dow now that GM has been dropped. The financial author John Maudlin has a good article on thinking about the Original Dow and long-term returns here It was published last April. he quantatative strategist Rob Arnott notes in an email to Maudlin:

"If Dow Jones hadn't tinkered with the index, the 30 companies would have merged or failed their way down to just 9 survivors. Of the 21 companies in the original 30 that are now gone, 20 disappeared through M&A, some were replaced by successor firms and others not, and only one (Bethlehem Steel) failed outright. But this no-fiddling index would have topped out at just over 30,000 in October 2007 and would have finished 2008 at 14,600. Ugly decline, but not as ugly as a level of 8776 [now down to 7300 as I type this]. This compounds out to a 0.7% per year greater return than the actual Dow 30 results. The difference comes from dropping companies when they're out of favor, and trading at deep discounts, only to replace them with popular large-cap, high-multiple newcomers."

Here was my takeaway:

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