In 1999, James K Glassman and Kevin Hassett published the book Dow 36,000, predicting major growth in the value of stocks. Glassman argues that the recent recovery of stock prices indicates that target is within site.
The Dow Jones Industrial Average set a record this week, but it’s still far from the mark that economist Kevin Hassett and I forecast in our 1999 book, “Dow 36,000.”
We wrote in the introduction that “it is impossible to predict how long it will take” to get to 36,000. Then, in the same paragraph, we rashly made a guess anyway: “between three and five years.”
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.
Of course, all this begs the real question – do the stock prices truly reflect the underlying value of the companies? Or would DJIA of 36,000 represent a bubble that was bound to burst because the value of the stocks was artificially inflated? Indeed, do the prices of stock today truly represent what the companies in question are really worth, or are we riding the next Wall Street bubble that is preparing to burst?