Right around 5th grade, most kids start to hear about "the Dow Jones Industrial Average." And passing newsstands, it's hard to ignore the "Barron's" name dominating the cover of one of the most prominently featured publications. But while most of us know the names, we probably don't know the story behind them.
In the end, few men had a greater impact on America's financial landscape than those mentioned below. Read on to learn more about these investing visionaries.
Charles Dow. Born into very humble roots, Dow cut his teeth as a reporter, eventually covering the silver mines in Colorado. He found the raw capitalism associated with the mining boom to be fascinating, and started analyzing and documenting the investment gains and losses.
In 1880, the 29-year-old Dow moved to New York City and began working at the Kiernan Wall Street Financial News Bureau. He soon hired an old colleague, Edward D. Jones (who is not related to brokerage firm Edward Jones Investments). Just two years later, they bolted to start their own company, Dow, Jones & Co., along with a daily investment-focused newsletter. Readership of the newsletter quickly grew, becoming especially popular for its newly-created index of 11 stocks: nine railroads, one steamship line, and Western Union (NYSE: WU).
In 1896, Dow officially created the Dow Jones Industrial Average (DJIA), right at a time when a number of conglomerates were being created through the purchase of competing companies in similar industries. (A trend that would be broken up a decade later as President Teddy Roosevelt grew concerned about too much corporate power in too few hands).
[InvestingAnswers Feature: Dow Know-How: What Moves the World's Most-Watched Average?]
Business was so good, that by 1889, it was time to upgrade the newsletter into a real newspaper -- the Wall Street Journal. To set it apart from the other financial papers of the era, Dow made transparency a hallmark, pressing reporters to never take bribes, and pressuring companies to provide an increasing level of financial disclosure. That helped cement the paper's reputation among readers, and eventually led circulation to dwarf that of any competitors.
Dow also created an index of railroad stocks, which in turn led to the "Dow Theory." He believed that when both the DJIA and these railroads stocks (eventually known as "transports") were both trending in the same direction, it was a clear confirmation of the direction of the economy. Both indices hitting new highs signaled a bull market.
With his health fading, Dow sold his stake in the company to Clarence Barron in 1901, who had been an employee in the firm's Boston office. Barron may actually deserve greater credit for turning the WSJ into the premier source of financial journalism, developing reporting standards that would eventually be mimicked by the business sections of many leading newspapers around the country.
In the early 1920s Barron launched the eponymously-named newspaper that continues to this day. Barron's quickly became a must-read as the investment frenzy of the Roaring '20s got underway. Major corporate executives came to consult Barron before making major moves, hoping to glean a sense how he thought their actions may play out with investing public. No journalist, either before or since, played such an important role in shaping the public discourse about investing. Barron died in October, 1928, just one year before the investing world would be upended by a devastating crash.
Clarence Barron's heirs ran the Dow Jones company for the next 80 years, ultimately selling out to publisher Rupert Murdoch's News Corp. (NYSE: NWS).
Three other icons of 19th century investing:
Jay Gould. Perhaps best known for his attempts to create a panic in gold markets in the 1870s, Gould's wealth was not built on the panic. He instead amassed his fortune by gaining control of 11% of the nation's railroad tracks and then parlaying his riches into meaningful stakes in Western Union and New York City's emerging subway system.
"Diamond Jim" Fisk. Fisk partnered with Jay Gould on a series of efforts to manipulate markets. He was also a key patron of the Boss Tweed's Tammany Hall, which enabled him to influence legislation from which he could quickly profit.
J.P. Morgan. The son of a well-known banker, he really started on his wealth-building by wresting control of a pair of railroads from Gould and Fisk in 1869. Twenty years later, his railroad wealth started to spread to other industries such as electricity generation, steel and banking. He focused on business and industries that were inefficient, aiming to boost their productivity through a process known as "Morganization." In 1901, his U.S. Steel (NYSE: X), was the first company to ever exceed $1 billion in market value.
If you want to read about some of the famous investors that followed Dow, Jones, Barron, Gould, Fisk & Morgan, click here to check out the following articles: What Investors Can Learn from Legendary Investor Sir John Templeton, The Man Warren Buffett Dubbed a Superinvestor, and 50 Warren Buffett Quotes to Inspire Your Investing.
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