First, an announcement from Jim Hassett:
Being proud of my Irish Hassett ancestors (not to mention my descendants), I'd like to take this occasion to say that I have no known family connection (or any other connection, for that matter) to Kevin Hassett (or his economic and political views).
Making Light: Everything You Know is Wrong: And here I thought I wrote science fiction.
“Every stock owner should read this book.” — Allan H. Meltzer, professor of political economy, Carnegie Mellon University
- A radically new way to determine what stocks are really worth
- Why the Dow is still poised to zoom
- Why the financial establishment is wrong
- Why stocks are actually less risky than bonds
- How to build a maximizing portfolio and invest without fear
“One of the hottest business books around… . It has wonderfully clear explanations of financial theory [and] excellent advice on general investing approaches.” — Allan Sloan, Newsweek
“It may sound like headline-grabbing sensationalism, but the scholarly and punctilious authors make a persuasive case … the book is highly readable and witty.” — Arthur M. Louis, San Francisco Chronicle
“Dow 36,000 is a provocative and well-written treatise that cannot be dismissed… .” — Burton G. Malkiel, Wall Street Journal
“Dow 36,000: Everything you know about stocks is wrong.” — Jim Jubak, Worth magazine
The book, as you may have gathered, was Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market. It was published on 01 October 1999, reissued in paperback on 14 November 2000. In proving beyond the shadow of a doubt that the stock market would only rise, and rise more sharply than ever before, authors James K. Glassman and Kevin A. Hassett confidently predicted that the Dow would hit 36,000 by 2005.
1999 was the very height of the dot.com stock market bubble. Dow 36,000’s basic message was that stock prices would keep going up forever. As to how this would happen, it was because every economist who had written since “economist” became a profession was wrong.
You know the cartoon where the business plan has a block labeled “Then a miracle happens” just before the block labeled “Profit!”? That’s what was being presented in three hundred pages of witty and provocative prose, and what engendered such wonderful pull quotes from reviews. The authors were … vague … about the exact process by which the wonderful results would come to pass.
“They laughed at Galileo. But they also laughed at Bozo the Clown.” —attributed to Carl Sagan
Glassman and Hassett’s particular discovery relied on people suddenly (and for no discernible reason) acting differently than they had since the invention of the stock market. This falls squarely under Sign #7 of the Seven Warning Signs of Bogus Science: 7. The discoverer must propose new laws of nature to explain an observation.
Blackadder: Look, there’s no need to panic. Someone in the crew will know how to steer this thing.
Captain Rum: The crew, milord?
Blackadder: Yes, the crew.
Captain Rum: What crew?
Blackadder: I was under the impression that it was common maritime practice for a ship to have a crew.
Captain Rum: Opinion is divided on the subject.
Blackadder: Oh, really?
Captain Rum: Yar. All the other captains say ‘tis; I say ‘tisn’t.
Blackadder: Oh, Ghod; Mad as a brush.
As we now know, the Dow-Jones high of 11,700 on 14 January 2000 has yet to be exceeded (once one adjusts for inflation). Far from hitting 36,000 by 2005, the market collapsed (as will happen with bubbles) to a closing low of 7,286.27 on 09 October, 2002, less than two years after the paperback edtion of this book hit the streets. Worse was to come: the Dow closed at 6,547 on 09 March 2009, a 12½ year low. As it turned out, everything that anyone who wasn’t Glassman and Hassett knew about stocks was right.
Nothing that you will learn in the course of your studies will be of the slightest possible use to you in after life, save only this, that if you work hard and intelligently you should be able to detect when a man is talking rot, and that, in my view, is the main, if not the sole, purpose of education. —John Alexander Smith, professor of moral philosophy at Oxford, 1914,
Dow 36,000 was serialized in the Atlantic Monthly; it was a Money Book Club main selection and a Book Of The Month Club alternate selection; the authors got a five-city tour. Glassman went on to found the George W. Bush Institute, “an action-oriented organization focused on independent, non-partisan solutions to America’s most pressing public policy problems.” Hassett remains an economist at the American Enterprise Institute.