So, 10 years ago you predicted the Dow would reach 36,000. This week, the Dow fell to its lowest level since 1997, and 6000 seems more likely than 36,000. On behalf of investors and readers everywhere: What happened?
I think that people who read my columns would consider me a level-headed person who doesn't get upset, either way, doesn't have tremendous enthusiasms. But it's true that in 1999 Kevin Hassett and I wrote "Dow 36,000," which really made two points: The more important was that for investors who could put their money away for the long term, stocks were a much better investment than bonds. A lot of other people have said that, but we really made the case for stocks.
The second point was that based on our calculations, we believed that stocks would rise to roughly 36,000. We said in the book that it is impossible to predict how long it will take for the market to recognize that Dow 36,000 is perfectly reasonable, but then, of course, we did take a guess.
You said three to five years.
Obviously that hasn't happened. I think the question investors are facing now is, "Is history a guide?" In "Dow 36,000" we looked at history in, I think, a completely reasonable way and said a) you ought to be in the stock market b) stocks are very much undervalued.
So, does history still prevail? My conclusion is that it does and that the basis of "Dow 36,000" is a good one and people should be in stocks for the long term. But I think reasonable people can differ about that today. We face a really scary time.
Would you be willing to hazard a guess on where the market will be three to five years from now?
No, and I think if there was a mistake in "Dow 36,000," it was that we in that one sentence did hazard a guess. We sort of said two different things: It's impossible to predict when this is going to happen, and then we said, well, we'll predict it anyway.
Do you still think it will hit 36,000?
I have no doubt about that. I think that is absolutely true. But I'm not going to tell you what date.
Do you ever regret having written the book, or regret the title? Do people come up to you at cocktail parties and say "Oh, yeah, Dow 36,000 -- how's that working out for you?"
Yeah, people do say that. There is no doubt that people -- especially people who haven't read the book -- think this is some sort of wild-eyed book that was part of the high-tech boom and so forth. Kevin and I usually joke that we really wish we'd called the book "A Treatise on the Declining Equity Risk Premium." I have to say, I don't really regret it. I think if people read the book, its examination of the nature of investing is right on. I think it's exactly right. . . .
But you don't feel the need to apologize to someone that read your book, went in and got creamed?