Where Dow Has Led, Indices Will Follow

Skeptics about the effects of the average's new high need to realize how truly representative it is.
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Scanning the articles on the


new high, I notice a common thread: skepticism. Whether it be the "Cold Water Club" article in

The Wall Street Journal

this morning or the myriad articles I have read about how the

S&P 500

is well off the pace or more articles about whether the


will ever reclaim its old highs, the takeaway is the unimportance of the high and how little it indicates.

Far be it from me to not be skeptical -- you can't make any money if you aren't -- but as someone who used to be a longstanding critic of the Dow and its components, I find that the changes made to the index in the last decade have done much to capture the real economy and make it very representative.

In the Dow Jones Industrial Average, you have the most important barometers of retail, pharma, financial, industrial and technology. The only sector that's underrepresented is oil, but that's just because we've had a big run in petroleum.

So, this ramp in the Dow could, if anything, be the leader that allows the other indices to follow. To me, that's what will happen. I think the critics should look at the components, look at more than the index.

It's a perfect snapshot of this American economy in 2006.

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