Dow 20,000

Today the Dow Jones Industrial average pushed passed 20,000 points, a new milestone.  What does this mean and should you care? 

The Dow is a stock market index collection of 30 large American companies.  The Dow was founded in 1896 by the Wall Street Journal editor Charles Dow.  The Dow’s market value is created by adding up the share price of those 30 companies and dividing them by a random number called the Dow Divisor.  These are 30 random companies that the Dow has put together, and these companies aren’t necessarily the largest companies either.  Google, for instance, isn’t a part of the Dow.

Interestingly, the 30 companies that make up the Dow are not always the same and regularly get replaced.  As this article by the Conservative Income Investor explains, the stocks the Dow Jones committee chooses to make up the index can have a huge effect on the returns calculated by the index.  In March 1939, the Dow committee decided to remove IBM from the index and replace it with AT&T.  Later in 1979, IBM re-entered the Dow Jones Index, replacing Chrysler.  From 1939 to 1979, IBM ended up being the best performing stock in the US stock exchange.  Amazingly, $1000 of IBM stock in 1939 would end up becoming $41 million in 1979!  If the Dow had kept IBM in the index, it would have pushed pas 20,000 in 1975, and not 2017!

While the Dow IS an economic indicator, it’s a pretty crappy one.  It only tracks 30 companies, and these 30 companies don’t represent the entire US stock market properly.  If you really want to get an idea of how the stock market is doing, a better metric to follow would be the S&P 500, which is made up of 500 American companies.  The Wilshire 5000 index tracks 5,000 of the largest American companies and is another good metric to follow.  This being said, financial pundits still can’t stop hyping the Dow as a market index.   

The only thing going for the Dow as an index is that it has a very long 120-year history.  I personally think that pundits refer to it because it is attached to a nice BIG number.  When you hear that the S&P 500 closed at 2,298 today, it just doesn’t sound as exciting as hearing that the Dow closed at 20,068 today.  Bigger numbers make bigger financial headlines.  Financial news makes a 100-point drop in the Dow sound scary, but it is really just a 0.5% change. 

Planet Money podcast did a great episode on why the Dow is a terrible measure of the US economy.  You can hear the short and entertaining 17-minute podcast here. 

While the Dow hit new highs today, so did the S&P 500.  And this suggests that investors see the economy improving.  New jobs are being added, unemployment is low, and consumers are confident.  Many investors believe that this could be a start of even greater stock market returns.  Other investors believe that these market highs won’t last long and that a crash is coming. 

What should you do?  Ignore the hype and stay the course.  Keep saving, keep investing, and keep pushing closer towards your own financial freedom. 

Redeeming Barclaycard Arrival+ miles towards an Airbnb stay

Earlier this month, I signed up for my second Barclaycard Arrival Plus credit card.  I explained how the sign up bonus for the same card could be churned as long as you don’t have an existing Arrival Plus or regular Arrival card.  Two weeks later, I’ve already received my sign up bonus and redeemed my miles towards $550 worth of travel!

The best thing going for the Arrival+ credit card is the big 50,000 mile sign up bonus after spending $3,000 within the first 3 months.  This card earns 2x miles on every single purchase.  The way these miles can be redeemed is only towards travel expenses of $100 or more made within the last 120 days.  Once a mileage redemption is made, you get a 5% rebate on miles redeemed.  This essentially makes the Arrival+ a 2.1% cash back travel card.  Barclaycard makes it quite a hassle to use this card long term, since minimum redemption of miles is 10,000 miles.  Doctor of Credit does a great write up here on using math to optimize redemption of these miles.  He basically concludes by saying that a normal 2% cash back credit card (such as the Citibank Double Cash card) is better to use long term than the Arrival+ card.

While the Arrival+ card’s annual fee of $89 (charged the second year) makes this a poor card to keep long term, the 50,000 mile sign up bonus is definitely worth a look.  To quickly reach minimum spending, we put a lot of big charges like car insurance ($597 for 6 months of car insurance coverage for 2 vehicles) on the credit card.  For our upcoming Japan trip, we booked an Airbnb stay in Tokyo for 4 nights for $901.  For our big group of 5 adults and 2 children, Airbnb options include excellent location, free portable wifi, clothing washer and other amenities that hotels don’t offer.  Since Airbnb stays count as travel expenses, we used our big 50,000 mile sign up bonus to save money on our Airbnb stay.  If you’ve never stayed at an Airbnb, consider signing up through my referral link here (thank you for your support!).

One of the best things about the Arrival+ card is that points earned show up immediately in your account.  Most credit card rewards points only post when the statement closes.  For the Arrival+, as soon as your credit card charge clears, points show up.  The same happens with the 50,000 sign up miles bonus.  As soon as I received it, I logged into my Arrival+ account and clicked on the “Rewards & Benefits Center.”

Then I went to “Start using my miles”

It was extremely easy to redeem my miles and I used 55,000 miles towards a $550 statement credit.  

Since Barclaycard rebates 5% of miles redeemed, I received a credit of 2,750 miles to add to my balance. 

Barclaycard makes it very easy to redeem miles towards any travel related expense, like our Airbnb booking!  Would I keep this card and pay the $89 annual fee?  Definitely not.  

Another year, another AMEX airline fee credit

One great benefit of having an American Express Platinum card or Premier Rewards Gold card is that you get an airline fee credit every calendar year.  With the Platinum card, you get $200 airline fee credit and with the Premier Rewards Gold card, you get $100 airline fee credit.

According to AMEX, eligible incidental fees include:

·                Checked baggage fees

·                Itinerary change fees

·                Phone reservation fees

·                Pet flight fees

·                Seat assignment fees

·                In-flight amenity fees (beverages, food, pillows/blankets, headphones)

·                In-flight entertainment fees (excluding wifi fees)

·                Airport lounge day passes & annual memberships 

Different airlines you can choose include: Alaska, American, US Airways, Delta, Frontier, Hawaiian, Jet Blue, Spirit, United, Southwest and AirTran.  You select an airline here; you can select a different airline every calendar year.  

In the past, I’ve used this airline credit to get a $200 Amazon gift card from my previous Platinum card ($200 Amazon gift card loophole has now been closed) and multiple Southwest Airlines gift cards from my Premier Rewards Gold card.  Since you can no longer get an Amazon gift card with the airline fee credit, I decided to get another $100 Southwest Airlines gift card with my Premier Rewards Gold card.  I closed my Platinum card last year; if I still had it, I would have used it to buy $200 worth of Southwest Airlines gift cards.

I first made sure that I had Southwest Airlines gift card purchases were still being credited by American Express.  I went to this Flyertalk thread to confirm that Southwest gift card purchases were still being credited.  Then I made sure that Southwest Airlines was selected as my airline of choice here.  Finally, I went to purchase a Southwest Airlines gift card here.

2 days after my $100 Southwest Airlines gift card purchase was charged, I received a $100 statement credit.  Woohoo!