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The Dow: Then & Now

There's so much talk of the markets crashing, the Dow dropping, then rising, then dropping again. Under 9,000 today, over 9,000 tomorrow. But what do these numbers even mean? What is this "˜Dow' on which investors and the media fixate themselves? And is it really comprised of only 30 stocks?

The Dow is a market index, which is a listing of stocks that share some similar characteristic; they could belong to the same industry or they could all have similar market cap (how much a company is worth).

The Dow, the NASDAQ, and the S&P500 are the three main market indexes, providing the basic signal of how markets perform. The Dow is the most widely publicized and discussed, thus I'll follow suit.

First, some history.

The Dow Jones Industrial Average was started in 1896 by Charles Dow, the editor of the Wall Street Journal's precursor, the Customer's Afternoon Letter. Dow had a vision to create a benchmark that would project the general market conditions. Interesting to note that of the original 12 stocks of the DJIA, General Electric remains a part of the average (though it was taken out and reinstated twice). Today it is made up of 30 of the largest blue chip companies in the US that are traded on the NYSE, as selected by the editors of the Journal. The composition of the Dow changes fairly often. In fact, here's a list of the deletions and additions over the past 30 years.

936 points. So what? Even though it's called the Dow Jones Industrial AVERAGE, they don't simply add up the stock prices of the 30 companies and divide by 30. No, the average is price-weighted, meaning each stock influences the Dow in proportion to its share price. In order to account for stock splits (when a company's existing shares are divided into multiple shares making, for instance, a $100 share worth two $50 shares, which is typically done to make shares seem more affordable when a company's stock gets too high, or higher than that of other companies in the same industry) and stock dividends, they create a Dow divisor by which the sum of the 30 companies' prices is divided. That divisor is constantly changing depending on the stocks in the average, the splits and extra shares issued.

Can I buy the DJIA as if it were a stock? Well, not really. You can't buy the DJIA as if it were a security, but you can buy a Diamonds ETF, which basically gives you a small ownership of the 30 stocks in the Dow. An ETF is an Exchange-Traded Fund that puts a bunch of pieces of stock into one overarching stock. You may be more familiar with the SPDR—Standard & Poor's Depository Receipt, or Spider—which is an ETF for stocks in the S&P500. ETF's hedge your risk - if one stock does poorly, you have others to back you up. 

The Dow: Now and Then

Last week, the Dow almost crashed. Almost, but not quite - because by common definition a market crash is a 20% decline in a single day or several days. Last week, the Dow fell 18.2% or 1,874.19 points, making it the worst week in market history (prior to last week, the largest weekly percentage drop was the week ending July 22, 1933, when it fell 17%).

We saw a brief rebound, when history was made again. Monday, the Dow rose 936 points, the largest single day gain in market history. Then down again. Then back up. Then...

After the market crashed in 1929, it took twenty-five years to return to the pre-crash peak of 381.17 (late 1954). But this is not 1929. We have stronger governmental agencies to help fix the mess (The Fed has more power, and the FDIC provides deposit insurance.) We are coming down from an all-time high (14,164.53 a year ago). We acted fast and have allocated over $1 trillion (of our tax dollars) to fix this up. Despite these differences, however, history may not bode well for us.

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Big Questions
Why Does Turkey Make You Tired?
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iStock

Why do people have such a hard time staying awake after Thanksgiving dinner? Most people blame tryptophan, but that's not really the main culprit. And what is tryptophan, anyway?

Tryptophan is an amino acid that the body uses in the processes of making vitamin B3 and serotonin, a neurotransmitter that helps regulate sleep. It can't be produced by our bodies, so we need to get it through our diet. From which foods, exactly? Turkey, of course, but also other meats, chocolate, bananas, mangoes, dairy products, eggs, chickpeas, peanuts, and a slew of other foods. Some of these foods, like cheddar cheese, have more tryptophan per gram than turkey. Tryptophan doesn't have much of an impact unless it's taken on an empty stomach and in an amount larger than what we're getting from our drumstick. So why does turkey get the rap as a one-way ticket to a nap?

The urge to snooze is more the fault of the average Thanksgiving meal and all the food and booze that go with it. Here are a few things that play into the nap factor:

Fats: That turkey skin is delicious, but fats take a lot of energy to digest, so the body redirects blood to the digestive system. Reduced blood flow in the rest of the body means reduced energy.

Alcohol: What Homer Simpson called the cause of—and solution to—all of life's problems is also a central nervous system depressant.

Overeating: Same deal as fats. It takes a lot of energy to digest a big feast (the average Thanksgiving meal contains 3000 calories and 229 grams of fat), so blood is sent to the digestive process system, leaving the brain a little tired.

Have you got a Big Question you'd like us to answer? If so, let us know by emailing us at bigquestions@mentalfloss.com.

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Space
More Details Emerge About 'Oumuamua, Earth's First-Recorded Interstellar Visitor
 NASA/JPL-Caltech
NASA/JPL-Caltech

In October, scientists using the University of Hawaii's Pan-STARRS 1 telescope sighted something extraordinary: Earth's first confirmed interstellar visitor. Originally called A/2017 U1, the once-mysterious object has a new name—'Oumuamua, according to Scientific American—and researchers continue to learn more about its physical properties. Now, a team from the University of Hawaii's Institute of Astronomy has published a detailed report of what they know so far in Nature.

Fittingly, "'Oumuamua" is Hawaiian for "a messenger from afar arriving first." 'Oumuamua's astronomical designation is 1I/2017 U1. The "I" in 1I/2017 stands for "interstellar." Until now, objects similar to 'Oumuamua were always given "C" and "A" names, which stand for either comet or asteroid. New observations have researchers concluding that 'Oumuamua is unusual for more than its far-flung origins.

It's a cigar-shaped object 10 times longer than it is wide, stretching to a half-mile long. It's also reddish in color, and is similar in some ways to some asteroids in own solar system, the BBC reports. But it's much faster, zipping through our system, and has a totally different orbit from any of those objects.

After initial indecision about whether the object was a comet or an asteroid, the researchers now believe it's an asteroid. Long ago, it might have hurtled from an unknown star system into our own.

'Oumuamua may provide astronomers with new insights into how stars and planets form. The 750,000 asteroids we know of are leftovers from the formation of our solar system, trapped by the Sun's gravity. But what if, billions of years ago, other objects escaped? 'Oumuamua shows us that it's possible; perhaps there are bits and pieces from the early years of our solar system currently visiting other stars.

The researchers say it's surprising that 'Oumuamua is an asteroid instead of a comet, given that in the Oort Cloud—an icy bubble of debris thought to surround our solar system—comets are predicted to outnumber asteroids 200 to 1 and perhaps even as high as 10,000 to 1. If our own solar system is any indication, it's more likely that a comet would take off before an asteroid would.

So where did 'Oumuamua come from? That's still unknown. It's possible it could've been bumped into our realm by a close encounter with a planet—either a smaller, nearby one, or a larger, farther one. If that's the case, the planet remains to be discovered. They believe it's more likely that 'Oumuamua was ejected from a young stellar system, location unknown. And yet, they write, "the possibility that 'Oumuamua has been orbiting the galaxy for billions of years cannot be ruled out."

As for where it's headed, The Atlantic's Marina Koren notes, "It will pass the orbit of Jupiter next May, then Neptune in 2022, and Pluto in 2024. By 2025, it will coast beyond the outer edge of the Kuiper Belt, a field of icy and rocky objects."

Last week, University of Wisconsin–Madison astronomer Ralf Kotulla and scientists from UCLA and the National Optical Astronomy Observatory (NOAO) used the WIYN Telescope on Kitt Peak, Arizona, to take some of the first pictures of 'Oumuamua. You can check them out below.

Images of an interloper from beyond the solar system — an asteroid or a comet — were captured on Oct. 27 by the 3.5-meter WIYN Telescope on Kitt Peak, Ariz.
Images of 'Oumuamua—an asteroid or a comet—were captured on October 27.
WIYN OBSERVATORY/RALF KOTULLA

U1 spotted whizzing through the Solar System in images taken with the WIYN telescope. The faint streaks are background stars. The green circles highlight the position of U1 in each image. In these images U1 is about 10 million times fainter than the faint
The green circles highlight the position of U1 in each image against faint streaks of background stars. In these images, U1 is about 10 million times fainter than the faintest visible stars.
R. Kotulla (University of Wisconsin) & WIYN/NOAO/AURA/NSF

Color image of U1, compiled from observations taken through filters centered at 4750A, 6250A, and 7500A.
Color image of U1.
R. Kotulla (University of Wisconsin) & WIYN/NOAO/AURA/NSF

Editor's note: This story has been updated.

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