Ah. I had forgotten that the Atlantic Monthly--failing to consult with anybody knowledgeable... or half knowledgeable... or quarter knowledgeable...--gave James Glassman and Kevin Hassett their first platform for "Dow 36000."
Although he seems to regret it now, Glassman got fairly specific with a stock market prediction back in 2000. He pledged to donate $1000 to charity if the Dow was less than 23,000 in January 2010, and said that his coauthor Hassett would do the same.
From the “Letters” section of the Atlantic Monthly, January 2000 issue:
[A reader wrote in as follows:] The core of Glassman and Hassett's theory of stock value consists of a giant fallacy. In the past, they remind us, stocks have almost always returned more to the investor, over long periods of time, than bonds have, so owning them entails less risk than holding bonds. Consequently, they assert, the market should bid up stock prices to the point where the expected return from stocks is no greater than the interest rate on Treasury bonds.... No one is going to expose himself to the vastly greater short-term volatility of stocks if he cannot count on the near certainty of a superior return further down the road. For the same reason, the market demands nearly two percent more return from long-term bonds than it does from three-month bills, though both securities are equally "safe" in the sense that both interest and principal will ultimately be paid.
Stocks are amply priced now. Using the authors' dividend-yield-plus-growth-rate formula, the universe of American stocks should return seven percent to eight percent [nominal] over the next generation-only one percent or so more than Treasury bonds, and no more than corporate bonds. I would be willing to bet Glassman and Hassett that even ten years from now, when earnings and dividends should have nearly doubled, the Dow Jones Industrial Average will still be closer to its current level of 11,000 than to their hyperbolic projection of 36,000.
J. Douglas Van Sant, Stockton, Calif.
James K. Glassman and Kevin A. Hassett reply:
To J. Douglas Van Sant we say, 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.