he Dow Jones Industrial Average this week reached a record high of 14,329.49. And like moonlight activating a gang of dancing Thriller zombies, the new height has heralded the reappearance of rabid market cheerleaders who have laid low during the financial crisis and its aftermath. James Glassman, co-author with Kevin Hassett of the 1999 book Dow 36,000, is back with a new column for Bloomberg arguing that the market is once again on the cusp of that mythic threshold.
"We wrote in the introduction that 'it is impossible to predict how long it will take' to get to 36,000," Glassman writes. "Then, in the same paragraph, we rashly made a guess anyway: 'Between three and five years.'"
Glassman, wisely avoiding any rash guesses this time around, continues, "Today, the far edge of that time frame is clearly in reach. From its low of 6,547 on March 9, 2009, the Dow has risen 117 percent. Another 117 percent in four years would put it at 31,022, just 16 percentage points shy of the magic number."
In the annals of stock market history, Dow 36,000 has come to epitomize the irrational exuberance that fueled the Dow's boom-and-bust cycle of recent years. Not only did the market tank shortly after the book's publication with the collapse of the dot-com bubble, but did so again several years later, causing enormous financial carnage and resulting in a general withdrawal from the market by mom-and-pop investors.
It's no surprise, then, that Glassman's reappearance has been accompanied by steaming piles of scorn. "Fourteen years later, we're still just over one third of the way toward the level Glassman insisted we were already at in 1999," says Jonathan Chait at New York. "That's not called 'being right.'"
Ryan Chittum at The Columbia Journalism Review notes that three of Glassman's 2000 stock picks — ADP, GE, and Cisco — would have resulted in ruin for investors. "Only ADP is up, slightly, since then (and it took 14 years to get into positive territory). If you bought GE and Cisco after reading [Glassman's work], you've lost about two thirds of your money."
The upside of Glassman's prediction is that though the Dow may have its ups and downs, and wipe out billions of dollars of personal wealth in the process, and cause widespread financial panic across the globe, it could, one day, far into the future, plausibly reach 36,000 — at which point we can expect Glassman to step out of his grave and proclaim victory.
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