The Dow Jones Industrial Average just became a little more hip.

It did not become more relevant.

In ditching the old flip phone (AT&T Inc.) for the iPhone (Apple Inc.), the index both modernizes its components and shows off why it is an outmoded, anachronistic measure of the stock market all at once.

www.marketwatch.com/story/will-2015-be-apples-blue-chip-debut-2014-12-15)

In fact, you could argue that the news proves the point, as many investors would have assumed that a company as important as Apple (AAPL) must already have been in such an important measure of the market, while others will now be shocked to learn that a stock as venerable as AT&T (T) is now on the outs.

I have ripped on the Dow (DJI) before, but this latest move pretty much confirms that the Dow is like People Magazine’s list of the most beautiful people compared to the front page of The Wall Street Journal.

www.marketwatch.com/story/atts-stock-could-beat-apples-now-that-its-out-of-the-dow-2015-03-06)

The Dow is filled with current and classic beauties, but the real news that represents what is happening in the market is in a much broader cross-section of what’s happening now.

Adding Apple doesn’t change that.

The Dow is the celebrity number of the financial world, not the meaningful one.

As I noted in October and December, the hype right now — and yes, I know I am contributing to it, but like the rest of the media I have a job to do — simply shows why it’s time to stop discussing the Dow as if the index actually matters.

The Dow is important to people because it’s what they know, the staple of every market-oriented website, every radio station market update, every newspaper’s daily business section, and the centerpiece of the 20 seconds of coverage that every national newscast guarantees the investing world each day.

But that’s precisely what makes it a celebrity index. A celebrity is someone who is famous, mostly, for being known. It’s the Kardashian sisters, who you may have heard of and be curious about, but who don’t appear to have any particular talent.

The Dow, as an index, is not particularly talented either. That’s why it hasn’t been particularly important or meaningful in the investing world for a long time, probably for the many years since Dow Jones, the company — which owns MarketWatch, my employer — stopped having much of a relationship to the index itself.

For more than a decade, investors talking about the market have been referring to the Standard & Poor’s 500 (SPX) or the Wilshire 5000 Total Market Index.

The Dow is too thin and poorly constructed for anyone in the know.

As an industrial average, you’d expect it to be a sector index for industrial companies (as an investor, that would make it more like the Industrial Select Sector SPDR (XLI) ).

Instead, the Dow is a price-weighted average of 30 actively traded blue-chip stocks.

The 30 companies aren’t all industrial, and there aren’t enough securities in the index to make it a broad reflection of anything, even the sector it is named for.

Price-weighting an index is old-fashioned and anachronistic. It means that each stock influences the index in proportion to its price per share, so that a stock trading for $1,200 per share has 10 times the pull of a stock trading at $10 per share.

By comparison, a cap-weighted index like the S&P uses the market value of the listed stocks as the basis for how much weight they carry in the benchmark. There are also equal-weight indexes — each stock pulls the same weight — and any number of other constructions, virtually all of them now considered superior by experts to the price-weighted methods of the Dow.

And as for blue-chip stocks, that term is outdated; it no longer has any unique meaning on Wall Street, where the few mutual funds that still have it in their name benchmark to the S&P, not the Dow.

All of which brings us back to the need to de-emphasize the Dow.

The media also need to stop reporting ordinary mile-marker numbers as if they are meaningful, the same as it needs to cut down on the coverage of triple-digit days as if 100 points — a move of roughly 0.55% — is some kind of big deal.

The 100-plus point moves that were a big deal back in the late 1980s — when Black Monday really imprinted the Dow’s movements on the psyche of the public — are a waste of emotion today.

Moreover, the media is intellectually dishonest when it puts much more vigor into reporting down days of these magnitudes with much more vigor than gains of the same percentage size. (The percentage move is the same, the emotions about that move should be the same.)

The media need to help the public accept a new, more appropriate and meaningful index, and use that benchmark to re-set the scale of public expectations.

Of course, if and when that ever happens, people will then get excited when that market measure drops or adds big names too. And, just as it is with the Dow today, most of those changes will be a much smaller deal than they are made out to be.

-Chuck Jaffe; 415-439-6400; AskNewswires@dowjones.com

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(END) Dow Jones Newswires

03-08-15 0844ET