The Van Trump Report

How a Farmer From Connecticut Became the Most Well-Known Name in Finance

The Dow Jones futures index traded to an all-time record high of 30,000 yesterday, this first modern American stock index was created by a not well-educated farm boy with little money named Charles Henry Dow. Mr. When the young Charles Dow left the family farm for the big city, there was exactly no one predicting he would go on to become one of the most famous names in American financial history.    

Born into a family of farmers early-November 1851, in Stirling, Connecticut, Dow’s brothers and father all tragically died while he was still a young boy. His chances at an education lost out to his responsibilities running the farm with his mother. Despite his lack of education, Dow’s boyhood dream was to be a journalist. At age 21, he moved to Massachusetts and managed to land a job with the Springfield Republican where he apprenticed under its owner, the well-respected Samuel Bowles. Dow eventually earned his own byline and gained further experience reporting for a couple of other publications.

It was at the prominent Providence Journal in Rhode Island where Dow discovered his passion for business and investing, though. Interestingly enough, the editor was not keen on hiring Dow, who was still very green at only 26. Dow wouldn’t take no for an answer, however. When the editor learned he had worked for Bowles, he relented and gave Dow the business beat. After a couple of years of highly impressive reporting, Dow was assigned the story that changed the course of his career, accompanying a group of bankers, investors, and politicians on a trip to Colorado. He was to report on mining operations and the boom towns that were popping up all over the state Colorado. What he learned was how the world of high finance worked and what sort of information investors were really looking for.

Dow’s new passion for finance and investing had him heading to New York soon after, where he worked at the Kiernan Wall Street Financial News Bureau, which delivered by messenger handwritten financial news to banks and brokerages. Dow invited Edward Davis Jones, a former co-worker from the Providence Journal, to join him. A Brown University dropout, Jones was a gifted statistician that could skillfully analyze financial reports. The two men were also like-minded in their commitment to delivering unbiased financial news and had become disillusioned with the corruption they saw around them. Objective information was in short supply with reporters and publications easily bribed.

In 1882, the two men, along with silent partner Charles Bergstresser, formed Dow Jones & Company. Headquartered in the basement of a candy store their daily “Customers’ Afternoon Letter” published stock tables, quarterly and annual reports. It also provided a detailed analysis from Dow and Jones, which, most importantly, was easy to understand. This is also where the precursors to the Dow Jones Industrial Average were first printed. Dow wanted to provide readers an easy way to determine whether the overall market was going up or down, giving them a view of the bigger picture. By 1896, the first DJIA was calculated using the top 12 stocks in the market. The initial calculation was a simple sum and divide that yielded 40.94 as the first published average.

Dow also developed the Dow theory, which stated that a relationship existed between stock market trends and other business activities. Dow felt that if the industrial average and the railroad average both moved in the same direction, it meant that a meaningful economic shift was occurring. He also concluded that if both indexes reached a new high, it signaled a bull market was underway. 

The hugely popular Letter became “The Wall Street Journal” with its first issue on July 8, 1889. It cost two cents per issue or five dollars for a one-year subscription. The paper had a private wire to Boston and telegraph connections to Washington, Philadelphia, and Chicago. It also had correspondents in several cities, including London. It also had a strict policy against exchanging slanted stories for stock tips or free stock. Crusading for honesty in financial reporting, Dow would publish the names of companies that hesitated to give information about profit and loss. It was not long before it became the most read financial paper in the U.S., and the DJIA became the go-to average for determining the direction of the market.

On December 24, 1884, the farmer from Connecticut officially joined the New York Stock Exchange, a fully recognized pillar of American finance. After experiencing health problems, Dow retired from the business in 1902 and died eight months later at the age of just 51. The foundations he laid for the modern financial world remain fundamental to Wall Street and its institutions to this day. Not bad for a farm boy with very little formal educations! (Sources: Investopedia, TodayIncHistory, biography)

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