“This book will convince you of the single most important fact about stocks at the dawn of the twenty-first century: They are cheap….If you are worried about missing the market’s big move upward, you will discover that it is not too late. 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.”

-Glassman and Hassett, introduction, Dow 36,000


Call it the audacity of cluelessness: Let us congratulate James K. Glassman and Kevin Hassett, the authors of the incredibly money losing advice in their book Dow 36,000, on their 10 year anniversary. The book forecast that lofty number would be obtained in 3 to 5 years; it was  published precisely 10 years ago today.

In the ensuing decade since this book (and I use the term lightly) was published, the Dow is still below where it was 10 years ago, rather than tripling in price. The Nasdaq remains more than 60% below its highs of one decade ago.

dow 36000I tried to read the book as a history lesson, but it was, to be blunt, unreadable. I got through enough to learn the basic argument they made: Stocks have been undervalued for decades, and over the ensuing years, we should expect a dramatic one-time upward adjustment in stock prices. Why? People were about to figure out what only these two geniuses already knew (hubris anyone?).

The book contain numerous implications that were questionable back then and today, look utterly ridiculous:

• Buy & Hold is the best strategy;

• Value is relative;

• Risk is wildly overstated by naysayers;

• The economic cycle has been defeated!

Perhaps the greatest sin in this foolishness is extrapolation — during the peak boom years, stock prices tripled every 7 years. The forecast of Dow 36,000 simply tacked on another 7 year run at a record breaking pace on top of an 18 year bill market. Smart!

But rather than merely engage in schadenfreude, let’s see what lessons we can learn from their errors. Here is what I can deduce as valuable lessons from the foolishness in their book:

1. Every Bull market is followed by a Bear market.

2. Buy & Hold is fine during a secular bull market; it is ruinous during a secular bear market;

3. Returns are a function of Risk: The greater return you seek, the more risk you must be willing to accept;

4. Valuation matters a great deal;

5. “Risk” as it is defined means that sometimes, you lose. Big.

6. The business cycle still exists, and recessions will occur regularly;

7. Markets are subject to bouts of emotional extremes. They are after all, just crowds of humans, where at times logic does not prevail.

8. Capital preservation is just as important as performance. Returns become irrelevant if during the inevitable downturn you lose all your money.

9. Extrapolating the current trend to infinity (or zero) is foolhardy;

10. Politics and investing make for terrible bedfellows.

There are always lessons to be learned from each turn of the wheel in the market. I find its much less expensive to learn them from other people’s mistakes, rather than my own . . .


Dow 36,000 (excerpt)
by James K. Glassman and Kevin A. Hassett
The Atlantic, September 1999

Waiting for ‘Dow 36,000′
Interview by Carlos Lozada
Washington Post, March 8, 2009; Page B02

Dow 36,000: Booknotes Interview
October 3, 1999

Kevin Hassett, Bloomberg columns

Kevin Hassett, Wikipedia

Category: Investing, Markets, Really, really bad calls, Rules

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

27 Responses to “Lessons to Be Learned From Dow 36,000

  1. Perhaps even more astonishing is that these two authors continue to work in fields that rely on their judgment and analytical abilities:

    Glassman served in the Bush administration as undersecretary of state for public diplomacy, “leading U.S. efforts against terrorist ideologies.” (That ought to help you sleep at night).

    And Hassett still dispenses money-losing advice at Bloomberg.com, where his political views tinge everything he writes with a sublime absurdity. Hassett is currently director of economic policy studies at AEI, so you can pretty much toss out anything those guys say about the economy.

    Hassett was also John McCain’s chief economic adviser in the 2000 presidential primaries, and subsequently served as an economic adviser to the 2004 Bush campaign, and to the 2008 McCain campaign. (Perhaps this helps to explain Bush’s economic performance).

  2. Wes Schott says:

    …clearly part of the rah, rah crowd

  3. Bruce in Tn says:

    11. Investing depends on liquidity. When liquidity starts to dry up globally, it is time to head for the exits. Likewise, when infusions of liquidity are forthcoming, it is time to reconsider equities. The business cycle and the investment cycle are merely the opera, and the audience viewing the unfolding drama.

    12. As it pertains to your (2) and (11), there are frequent times when it makes sense to leave the equity markets, at least as an investor. If one has a trader’s mentality and nerves, then betting against the long market may make sense, but at any rate there are times one would not wish to bet on increasing equity values.

    4. Valuation matters a great deal. However, in times of interest rate manipulation, valuation extremes may occur. In these times, market timing makes sense. However, since market timing has been drilled into us to be more evil than pornography, let us now say that it is good to be “nimble” in all markets…

    I agree wholeheartedly with your post, Barry. And thanks for the site.

  4. super_trooper says:

    I hope they’ll remember their reply to critics in the January 2000 issue of The Atlantic Monthly: “if the Dow is closer to 10,000 than to 36,000 ten years from now [i.e. if the Dow is below 23,000 in January 2010], we will each give $1,000 to the charity of your choice.”

    On the other hand, G&H laughed all the way to the bank after writing the book. The book was probably their best investment in the market.

  5. investorinpa says:

    Barry, the irony of this is when I was a teenager in the 90′s, I used to read James Glassman’s column in the Washington Post all the time. He got me into wanting to be an investor in the stock market when I was 19 and had no clue. I used to think his WaPo stuff was pretty good but in hindsight, it was more a cheerleading drill than anything else. I guess I derived SOME benefit out of it. Luckily, this book came out after I had wised up!

  6. Ah yes, I remember when that book came out.

    For those that weren’t there, every stock message board sounded exactly like that book at the time. Back then stock message boards are what financial blogs are today. It was ten to one arguing that case on message boards. Probably 100 to 1 on tech boards and about 75 to 25 on the gold boards. If you go to the yahoo message boards you can still read the madness to this day

  7. not that I disagree with the 10 points, but, I like:
    “8. Capital preservation is just as important as performance. Returns become irrelevant if during the inevitable downturn you lose all your money.”

    beyond the ol’ adage: “You gotta be around to be around..”, I think it fine-tune one’s ‘critical thinking’ skills.

    by realizing, as in 5. “Risk” as it is defined means that sometimes, you lose. Big., first, one should be, more, able to find the ‘missed stitches’ and ‘wrinkles in the cloth’..

    when we focus, instead, on ‘how great it’s going to look’, we, often set up ourselves up for, just, ‘paying the piper’..

  8. VennData says:

    I’ll bet “Dow 9820″ wouldn’t have sold as many copies.

  9. [...] lessons can be gleaned from the mistake that was Dow 36,000?  (Big Picture, [...]

  10. Moss says:

    Harry Dent had a good one as well which came out in 2004.

    The Next Great Bubble Boom: How to Profit from the Greatest Boom in History, 2005-2009 (Hardcover)

    Now he is the ultimate depressionist.

  11. investorinpa says:

    Dent’s research in his books are always really worthwhile to read. His DOW predictions are usually terrible to go by. I’ve read his most recent book and can tell everyone on here that Chapters 4-6 may be the best demographics read I’ve ever laid my eyes on, talking about trends in real estate & migration as well as international growth. It is fantastic to read. His investment advice and predictions about where the DOW is headed are likely to be wrong. But I’d advise people not to throw away the value of what’s in his latest offering just because he’s bad at guessing the DOW.

  12. Cursive says:

    Actaully, this headline doesn’t sound so off-base at the moment. If you had told me that equities would stage a 60% rally in the midst of some of the worst economic news EVER, I’d have voted to have you committed. However, given the current dollar carry trade, it seems that we may see Dow 36,000 soon enough. At least, that is my feeling in regards to what the “green shoots” crowd is trying to propagate.


    BR: Yes, and all it took to generate that rally was the worst market year in 8 decades.

    Somehow, I doubt that was what Glassman & Hassett were referring to . . .

  13. Marcus Aurelius says:

    “Perhaps the greatest sin in this foolishness is extrapolation — during the peak boom years, stock prices tripled every 7 years. The forecast of Dow 36,000 simply tacked on another 7 year run at a record breaking pace on top of an 18 year bill market.”

    Trying to drive down the highway while looking only through the rear-view mirror is bound to end in a bad way.

  14. going broke says:

    DOW 36,000
    The book… 18 used from $0.32

    James and Kevin were bears compared to this dude…
    Dow 100,000!

  15. impermanence says:

    All systems are designed to bilk the majority. Just imagine the unlimited ways there are to cheat outsiders when it comes to equity markets. The illusion of functioning markets is right up there with the representative democracy mirage.

    These are simply ideas we have been spoon fed since our kindergarten days of reciting the “pledge of allegiance” followed by the “duck and cover” drill.

    People need to break away from the massive temptations of selling out and re-discover the American spirit of taking chances, and standing up for something other than your bank account.

  16. DOW 36,000
    The book… 18 used from $0.32

    So here is some irrational rationalizing:

    When the book was first sold it was probably going for 30 bucks. So the price tag relative to the 36,000 prediction looked pretty steep. Now, the book is 32 cents and the Dow is at 9820. So relatively speaking that book is a DEAL!

  17. flipspiceland says:

    I remember reading that prediction by Glassman, cut it out of the WSJ and put it in on my mirror back then. Not as an inspiration.

    And didn’t buy the book, the title was so far over the top that I never believed another syllable from Glassman to this day.

  18. Cursive says:


    Yes, I’m chuckling because the permabulls, e.g. Ken “the Charger” Fisher, will take credit if that is the route. For doctrinaire permabulls, we are all supposed to be fully invested, all the time. You wouldn’t want to miss the ride from 6,440 to 36,000, would you (wink, wink)? What’s a little volatility among friends?

  19. going broke says:

    “So here is some irrational rationalizing:

    When the book was first sold it was probably going for 30 bucks. So the price tag relative to the 36,000 prediction looked pretty steep. Now, the book is 32 cents and the Dow is at 9820. So relatively speaking that book is a DEAL!”

    That is, IF, the book has any useful information…

    Let’s say the DOW did get to 36K, what would the price be of some of the components?
    WMT is at $50 now, @ DOW 36K, WMT would be ?

    I’m not smart enough to figure this out.

  20. Onlooker from Troy says:

    It’s quite ironic that’s there’s a James Glassman at JP Morgan who’s a raging bull right now and thinks we’re going to have a vigorous recovery and a great new bull market. What a hoot.

  21. Onlooker from Troy says:

    Actually not ironic, but coincidental. Fell into that common error.

  22. ndonahoe says:

    I re-read the book in 2006-2007. I still have a copy on my bookshelf. In hindsight they had a lousy title. Yet, one of the main points was that stocks pay dividends and bonds pay interest on a regular basis. Many companies have long term records of paying out increasing dividends, much the same as interest is paid on bonds. The conclusion was that stocks were cheap, given the record of dividends being paid…sort of a Dividend Discount model. In reality dividend paying stocks proved to be quite cheap in 2000. From the top in March of 2000 JP Morgan had shown that by June 2007 the stocks in the S&P 500 that paid dividends as a group were up 148% – think of it as Dow 30,000…In June 2007 the Value managers were king having typically more than doubled in 7 years after the peak in the tech market…….however, as we know, many of these value managers were heavy into banks ! In conclusion, there are plenty of stocks (in a diversified portfolio) you can tuck away (buy and hold) and enjoy years of increasing dividends. I remind folks that what we see in the paper is simply the last trade. It is not an indication of the future value of a quality dividend paying company. Hold them to maturity and ignore the “market noise”.

  23. Gatsby says:

    The bitch-slap of history once again delivered via Ritholtz.

  24. Unsympathetic says:

    Look at the cover art on the book, behind the words “Dow 36,000.”

    It clearly shows a stock that does NOT plateau – rather, it shows something that looks suspiciously like the Dow.. today, if 9/07 was the second peak.

  25. cjcjc says:

    The Economist magazine (amongst many others) destroyed their argument at the time.

    As I recall, even if you accepted their lower (I think they argued for *zero*) risk premium case, they managed to confuse dividend yield with earnings yield, effectively doubling the Dow target from what might have been a “reasonable” 18,000 to 36,000.

    When this simple error was pointed out needless to say they tried to bluff…and failed dismally.

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