Econ 210a: Fall 2006: Memo Question for November 8
Chris Matthews and Dick Army Are Shrill!

James Glassman and Kevin Hassett Rear Their Ugly Heads Yet Again `Dow 36,000' optimists unbowed | Chicago Tribune

Ezra Klein directs us to a Bloomberg column in which James Glassman and Kevin Hassett of the American Enterprise Institute continue to defend their claim back in 1999 that the DJIA would reach 36000 "very quickly," "perhaps in "three to five years":

'Dow 36,000' optimists unbowed | Chicago Tribune: James Glassman says his seven-year- old prediction that the Dow Jones Industrial Average will rise to 36,000 wasn't wrong, just early. Two years after Glassman and co-author Kevin Hassett published their theory, the Dow average had sunk 29 percent. Their "Dow 36,000... became metaphors for the investing excesses of the late 1990s.... "Anyone who followed their advice in 2000 got their butts handed to them," said Barry Ritholtz, chief investment officer of Ritholtz Capital Partners in New York, which manages about $100 million. "These guys come out of the woodwork when society is foaming at the mouth and receptive to these things."...

The Dow has since recovered.... The surge has improved some portfolios and may eventually do the same for the reputations of the authors, who stand by their forecasts.... Glassman, 59, defends "Dow 36,000's" original premise as well. The prediction -- that the Dow would triple by 2005 -- is still valid, he says, although he's pushed the deadline out to 2021.... "There's nothing that's occurred over the past few years that's changed our minds about the original thesis," said Glassman, who writes a syndicated investing column and is a resident fellow at the American Enterprise Institute, a Washington-based think tank...

Bloomberg can surely find better people to report this than Demian McLean. You cannot validate Glassman and Hassett's original thesis by pointing to its likely value in 2021 or 2121. The original thesis was not that the Dow would rise to 36000 "someday" but that "the rise will take some time, perhaps three to five years..." (p. 18).

A better reporter than Demian McLean would have had a follow-up question, like:

Mr. Glassman: In your book, on pages 18 and 19, you sneer at one of your American Enterprise Institute colleagues who you say gave a cynical laugh at your title Dow 36000 and said, "As long as you don't say when [the Dow will reach 36000], I suppose it is all right." Your claim in your book was: "we aren't laughing. The case is compelling.... 36000 is a fair value for the Dow today... stocks should rise to such heights very quickly.... [Our readers will] learn to invest in ways that take advantage of [this] remarkable time in financial history..." Don't you owe everybody who bought your book in 1999 and 2000 at least ten times their money back?

But Demian McLean doesn't.