Sunday, April 5, 2009

Latest Casualty in an Old Scam

As Dow Jones readies to take my advice (way too late) and kick out broke GM before they declare bankruptcy (and soon F, C, and BAC in addition to already gone AIG), it is a good time to reflect upon the greatest rip off mankind has ever created: paper stocks.

Anyone throwing their money away in the stock market should seriously consider giving all of their money away to charity, instead, before our current government eliminates the tax deduction. Over time, giving your money away vastly outperforms the stock market.


Bought the Dow 30 in 1929, cost: $385.
Gave $385 to charity. Kept 25% marginal tax rebate in a jar.

Only GE remains from the Dow 30, after-split value: $70.
385 - 1932 Quarters, typical auction value: $3,850.


  1. FDR, I was thinking this morning about how the newest bailout program, the private/public partnership theft, and it strikes me as odd that the program will be back stopped by the FDIC.

    Why wouldn't this be back-stopped by the Treasury or Fed, and it occurred to me that since the FDIC has been identified as a sinking ship, and they've decided to try and stuff it with as much crap as possible so as to segregate the responsibility for these assets away from the Treas/Fed.

    Seems plausible anyway.

  2. Does the vehicle really matter as long as it gets you there?

    The fdic is the most convenient and it's trusted by most.

    Just one of the many wealth transfer programs going.

  3. FDR wrote: "Today: Only GE remains from the Dow 30, after-split value: $70."

    Then John Mauldin must be gravely mistaken when he says: "The Dow Industrials was expanded to 30 names from 20 on October 1 of 1928. Today, only nine names of the original 30 remain in the Dow. The committee at Dow Jones has replaced the other names as the companies grew out of favor, were merged into other stocks, were considered too small, or the committee felt that other companies better represented the industrial prowess of the US economy."

    Both of you can't be right, can you? Are eight of the "nine names" he refers to mostly meaningless because the stock value was not retained during some sort of transition for each of the eight, or something of that sort?

    He cites as a source of additions and deletions, and probably used it (but it's not entirely clear from his article).

    His entire article can be viewed here:

    I disagree on a number of things John has said in his articles (especially his stance on the desirability of "solving the housing crisis") but would be surprised to find that he's downright wrong about this. Not that I rule out that possibility entirely ... it's tough to believe that you (FDR) would be wrong about this as well! Hence my confusion...

  4. A few have gone broke and then regenerated in some form. Texas Company became Texaco which declared bankruptcy in 1987 but kept operating in bankruptcy and was later merged as a part of Chevron. Standard Oil of NJis still partly operating in Europe as ESSO and part went broke in NJ as ARCO, the current XOM is a merger with other pieces and parts of the many Standard Oil Co's mostly of NY which was not a piece of the original. AT&T is SBC that repurchased the AT&T name after they were broken up and kicked out.

    Whatever part they want to dump and pump is the public part.

    I am a little premature in kicking out GM as they've been operating in bankruptcy with a value of -55/share.

  5. FDR: Thanks for the clarification. It sounds like the names don't necessarily mean very much.

    So GE is the only firm in the original Dow 30 that didn't at the very least go through a bankruptcy of some kind?

    Mauldin's article claims that you'd have a better return starting in 1928 by holding onto the original Dow 30 than you would if you had put your money into the index. But I'm skeptical of his claim.

    I'm curious what your thoughts are on that part of his article (which I gave the link to previously)...


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