January 27, 2022

DOW 36,000

Max Martin

22 years ago, James Glassman and Kevin Hassett published their famous book DOW 36,000. In it they argued that the stock market as a whole was drastically undervalued, and that the 1999 Dow Jones Industrial Average of 11,000 would rise exponentially to 36,000 by 2004 at the latest. In a nutshell, their view was that:

"The single most important fact about stocks at the dawn of the twenty-first century: They are cheap. Stocks are now in the midst of a one-time-only rise to much higher ground–to the neighborhood of 36,000 on the Dow Jones industrial average."

For a few months it looked like they might be right. By January 2000, the average had jumped to 11,750 and Glassman, Hassett, and fellow enthusiasts were ready to take a victory lap.

Glassman & Hassett’s best seller DOW 36,000

What they failed to consider, however, is that the world is a fundamentally unpredictable place. The bursting of the dot-com bubble in the early 2000s combined with the September 11 attacks in 2001 to push the Dow below 8,000 and while it would slowly recover, the average remained below 12,000 until 2006. Amid the crash, Glassman and Hassett did what many financial experts do when their predictions fail and moved the goalposts. In a 2000 interview, the authors told a reporter that, “if the Dow is closer to 10,000 than to 36,000 ten years from now, we will each give $1,000 to the charity of your choice.” Going forward 10 years, the average was 10,725.

Luckily for Glassman and Hassett, they are in great company. In a world flooded with financial predictions, correct ones are few and far between even from the most educated sources. All the way back in 1929, economist Irving Fisher released a statement explaining that “stock prices have reached what looks like a permanently high plateau. I expect to see the stock market a good deal higher within a few months.” Within months the country had fallen into the Great Depression. More recently, in 2007 former Fed Chairman Alan Greenspan released a memoir in which he warned that the economy was heading towards double-digit interest rates. Looking forward a year, rates were hovering right above zero.

One thing that all these individuals had in common is that they were considered economic or financial “experts”. They had academic and experiential knowledge that made them appear to be the right people to answer questions about the future, but they also had books to sell and audiences to captivate. All the experience in the world couldn’t have predicted the exact timing of the Great Depression, the dot-com bubble, the housing collapse, or the COVID-19 pandemic. It’s now 2021, and with the Dow just now crossing 36,000 it’s worth considering what experts you’re listening to about the unpredictable future.