In January 2000, at the height of the bull market there was widespread attention given "Dow 36,000. Discussion of the premise however was surprisingly uncritical and uncontentious. After an 18 year bull market that had brought market valuations to heights at least double their historical levels, analysts affirmed the market could continue to rise at historical rates. Simply asking how Abby Cohen and the rest could be as bullishish in January 2000 as in January 1995 or 1989 or 1982 should have been in order. To entertain Dow 36,000 without the toughest criticism shows how poor economic understanding was in the press.

Krugman has pointed out that even the authors own absurd numbers were wrong by 50%.

My sense was that Glassman in particular was hoping the book would undermine our traditional social security program.

Shameful.

I remember that article well. Made me cancel my subscription. (And now, if I sold all my stocks, I might be able to afford to renew it.)

Quote from the WSJ article today:

Another way to say this is that investors have been bidding down the equity risk premium -- the extra return that they demanded in the past because they believed (irrationally) that stocks were riskier than Treasuries.

How do you talk to a 'scholar' who maintains that stocks are no riskier in the long term than Treasuries?

How do you even begin to debate Risk with those who completely blank out the variability of returns from their minds?

Like I said before: IDIOTS!

Even if the stock market as a whole was no more riskier than treasuries over 15 to 25 years, individual companies are surely riskier, thus a premium should be built into equity prices.

The authors are not idiots, they are hucksters.

Did the stock market decline contribute significantly to the recession? Will it contribute to further economic weakness?

I am amazed that the Washington Post hired Glassman to write a personal finance column. That like hiring Trofim Lysenko to write a science column.

Paul Goldman wrote: "I am amazed that the Washington Post hired Glassman to write a personal finance column. That like hiring Trofim Lysenko to write a science column."

Can I .sig that?

Krug argued convincingly that the 36K number initially came from mistaking earnings for dividends; after the catchy title was locked in they threw in a bunch of other assumptions to cover their tracks:

http://web.mit.edu/krugman/www/dow36K.html

You're right...

A rather obvious point I haven't seen brought up, that's probably already handled somewhere else: a significant portion of investment in the stock market is not long-run, and that component of investment will be too averse to the short-run risk to justify P/Es on the order of a 22,000 Dow.

Maybe 16,000 instead?

I too am amazed that the general public accepts books like Glassman's and David Elias' (DOW 40000) that for the most part take a short period of time and just project indefinitely into the future. There is little discussion of cycles or behavioural finance. Being in the investment advisory business, I know that clients rarely have the patience to idly watch the gyrations of investment markets and let time and basic portfolio management practices smooth their returns. Glassman throws around thirty year periods of time without much attention to the human element of investing.

That being said, has there been any follow-up by the authors since this historic bear market has unfolded?