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History of the Dow
Charles Dow, Revolutionary

By Randy Befumo (TMF Templr) and Alex Schay (TMF Nexus6)

Charles Dow transformed the world of investing more than any high-powered money manager or investment banker, yet he wasn't born in the center of cosmopolitan New York and he wasn't a financial child prodigy found scanning the stock tables for price/earnings ratios at a tender age. Dow was born in 1851 on a farm and worked odd, menial labor jobs from the age of six to help support his family after the death of his father. He never finished high school. In spite of this, he managed to get a job at the age of 18 as a reporter for the Springfield Daily Republican. The Republican was a newspaper of national repute edited by newspaper giant Samuel Bowles, reknowned for establishing the credentials of aspiring journalists.

Dow also worked at another prominent newspaper, The Providence Journal. Through a series of articles Dow established himself as an historian of the local scene with a keen interest in financial affairs. From tracing the corporate transactions of steamship companies to discussing investments in Newport real estate, Dow found that financial reporting not only matched his interests but also suited his temperament.

After a move to New York and a stint with the Kiernan News Agency in 1882, he started Dow Jones & Co. with two partners, Edward Jones and Charles Bergstresser. Their first publication was a two-page daily called the Customer's Afternoon Letter started in early 1883. By 1889, the Customer's Afternoon Letter had evolved into the Wall Street Journal.

The Customer's Afternoon Letter was nothing short of revolutionary. In Dow's time, consolidated stock tables published every day did not exist. Information about a company's balance sheet was rarely published, with management attempting to hide and obscure the full value of their company for fear of a takeover. The Letter not only reported consolidated stock tables, but also made public quarterly and annual information regarding company financials -- something that only insiders had available to them before this. Dow's publication leveled the playing field between the Wall Street elite and the individual investor. It would not be until the Securities Act of 1934 that companies would be required to file quarterly and annual reports that all investors could look at. So, for more than fifty years, the only place for the individual investor to get the straight poop on company financials was the Wall Street Journal.

In line with founding the first daily publication dedicated to the financial world, Dow Jones & Co. were the first to see the need for an index that could be used to gauge the activity of the New York Stock Exchange as a whole. The first Dow Jones Index, the precursor of the Dow Jones Industrial Average, included nine railroad stocks, a steamship line and Western Union from the handful of companies traded on the New York Stock Exchange. At that time, railroad stocks represented a key growth industry and, as such, were the only shares traded in large volume on the NYSE. That is why they were chosen. The initial Average was simply the price of all eleven stocks added up and divided by the number of companies.

Although Charles Dow never wrote anything that claimed he invented the Average and, in fact, never really wrote anything at all about his thoughts on investing, the record left by his contemporaries clearly shows that he was the idea man behind all of Dow Jones & Co.'s endeavors, while his partners managed the employees and kept the books. Dow, continued to tweak the the list of companies making up his Average until his death in 1902.

Charles Dow left behind the first average, a barometer for the general pressure of the "market." The investment world would be a very different place without the kind of reporting and financial disclosure pioneered in the Wall Street Journal or the notion of an average used to measure where the broader market was at any given point.

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 History of the Dow

  • The Dow 1884-1886
  • The Dow Today
  • Charles Dow, Revolutionary
  • Dow's Theory
  • Dow Jones Averages
  • Dow Mechanics