Alphabet joins the Dow Jones Industrial Average. Verizon gets kicked out. Thirty companies become thirty slightly different companies. The index that tracks exactly nothing useful just got more useless.
The Dow is price-weighted. Google's stock costs more per share than Verizon's stock. This means Google now moves the index more when it goes up or down. Retail traders will spend the next six months pretending this matters. They'll buy shares of something called DIA and tell their wives they're "rotating into big tech." Their wives will rotate into someone else's bed.
The index committee met in a conference room. They discussed which thirty American companies best represent the American economy. They looked at Verizon, a telecom company everyone already owns through their monthly bill whether they want to or not. They looked at Alphabet, a company that knows what porn you watched last Tuesday. They made the hard choice. The brave choice. They picked the one that's up more.
This changes nothing about how either company operates. Alphabet will still print money from search ads. Verizon will still charge you forty-seven dollars for data overages. But fund managers who track the Dow must now sell Verizon and buy Alphabet. They have no choice. The rules say so. Passive investing means doing what you're told and calling it strategy.
Some day trader in Michigan just saw this headline. He's now convinced he needs to front-run the index rebalancing. He's buying Google calls at open. He doesn't know the index funds already rebalanced after hours. He doesn't know his Robinhood order goes to Citadel first. He definitely doesn't know the committee announced this weeks ago. But he knows he's early to something big. He can feel it. That feeling is called bag-holding, and it's genetic.
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