The Dow at 36,000 and the end of history

March 12, 2009


Bernd Debusmann - Great Debate — Bernd Debusmann is a Reuters columnist. The opinions expressed are his own. —

It’s no longer in print but you can get it over the Internet and $1.99 (plus shipping and handling) buys you a well-preserved copy of Dow 36,000, a book that has become an emblem for really, really wrong forecasts.

With the Dow Jones Industrial Average below 7,000 and the U.S. in its worst financial crisis in 80 years, re-reading the book is a bizarre experience, as well as a lesson that being wrong does not necessarily harm the prognosticator’s career.

On the contrary. Many have flourished, from the perpetually upbeat hosts of financial cable television shows to authors of “how to become a millionaire” advice.

Take James Glassman and Kevin Hassett, authors of “Dow 36,000, The New Strategy For Profiting From the Coming Rise in the Stock Market”. It was published ten years ago, made bestseller lists and catapulted Glassman, a financial columnist, to celebrity status and a series of high-profile jobs, including undersecretary of state for public diplomacy in the last 11 months of George W. Bush’s presidency.

Hassett, a scholar at the conservative American Enterprise Institute, a Washington think-tank, largely stayed out of the limelight but John McCain valued his expertise so highly that he made him senior economic advisor for his unsuccessful 2008 presidential campaign.

“A sensible target date for Dow 36,000 is early 2005,” the two said in their book, “but it could be reached much earlier.

After that, stocks will continue to rise, but at a slower pace.” If the history of earnings growth repeated itself, they ventured, “Dow 36,000 itself will be a distant memory – of happier times when stocks were still cheap.”

This week, in an interview with the Washington Post, for which he used to write a column, Glassman described as sound the history and logic (stocks perform well in the long run) on which the book were based and wondered “Are we in a period so different that we can no longer take our view from history?”

Tricky question. Despite routine comparisons between the Great Depression of the 1930s, there’s no precedent for today’s crisis. And identifying turning points in history has defied eminent historians.

Remember “The End of History”, the famous essay Francis Fukuyama wrote after the fall of the Berlin Wall in 1989? Mankind’s ideological evolution had ended, he argued, to be replaced by the “universalization of Western liberal democracy as the final form of human government.”


That has yet to happen, if ever it will, in places as far apart as Congo and Darfur, Egypt and Saudi Arabia, Russia and China.

The most memorably wrong financial predictions have tended to be on the exuberantly optimistic side. Irving Fisher, an economics professor at Yale, earned a place in the history books with a speech, on October 14, 1929, in which he said “stocks have reached a permanently high plateau.” The worst stock market crash in history came two weeks later.

Now, after years during which prophets of financial nirvana commanded most attention, dominating TV ratings and bestseller charts, it is the turn of the doomsayers, a development reflected by the titles displayed at popular bookstores.

Meltdown, says one. The Return of Depression Economics, says another. It sits next to The Great Depression Ahead.

One of the most dire predictions has come from Niall Ferguson, the prolific author and Harvard economic historian who thinks that the contagion that spread from the United States to the rest of the world will have an impact that goes far beyond finance and the economy.

“There will be blood,” he told a Canadian interviewer in February, “in the sense that a crisis of this magnitude is bound to increase political as well as economic (conflict). It is bound to destabilize some countries. It will cause civil wars to break out that have been dormant. It will topple governments that were moderate and bring in governments that are extreme.”

Out on an apocalyptic limb? Ferguson has heavy-weight company. Dennis Blair, the Director of U.S. National Intelligence told a Senate intelligence committee that the global economic crisis presented a greater threat to American national security than anything else (terrorism included).

“The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests.”

A bleak view on the speed of the recovery came this week from the head of the International Monetary Fund (IMF), Dominique Strauss-Kahn. He told Reuters correspondent Lesley Wroughton in Dar Es Salaam that the advanced economies of the world were moving too slowly to rid banks of problem assets, one of the many interlocked elements of the current crisis.

How will it all end? One can only hope that things turn out better than they did for Irving Fisher, the pre-1929 crash optimist. At the time he made his “permanently high plateau” forecast, his assets totalled around $100 million in today’s dollars. When he died, in 1947, he owned around $60,000.

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Band wagons are so easy to jump on. When times are good the optimists have the bandwagon, when times suck the doomsayers get the spotlight. I think we have the old Chinese curse going on “may you live in interesting times”. I only hope things get bad enough that maybe people will start to realize that the old failed system of capitalism needs some major overhaul going forward. Maybe just maybe we can bring some conscience and humanity to capitalism. That’s me being optimistic in these dire times, betcha 5 bucks it isn’t a view your going to see in the news.

Posted by Chris | Report as abusive

Fun as it is to laugh at all the predictions gone awry, it’s also interesting to read up on the predictions that have come true. I’m sure there had to be more than one forecast that this housing bubble was going to burst and in a big way. I think 60 Min did a special on a guy who sold insurance to mortgage securities in the form of a hedgefun and he made a killing predicting this housing crash. I’d like to see a follow-up to this article with a tribute to some who got it right.

Posted by Ari | Report as abusive

Most of the “experts and authors” are simply proving ole Barnum had it right about suckers and how they respond to a “Carnie pitch”, but it from Wall St, media-experts or political s and their numerous hacks wanting votes.
We have so hit the bottom of the barrel the guy running Fed Bank is supposed “expert on Great Depression” and he long ago ran Fed Bank on to the financial rocks. We can find story after story of “Forecasters-analysistes-economists etc-ists” no “hit-missed-wonder-etc” as to what they predicted.. all of them without names or do we ask for historical records of these “experts” as to hits, miss, maybe, should have or even “Why are you wrong again”?
Our media, the NWN’s (Nit Wit Networks) being the worse closely followed by “24 hour news” on cable, will drag in anyone not yet unconscious, for “advise” with little or no score presented for previous “warning, advise ideas, etc. We have “experts on Health care” that NEVER state what their “care costs, who pays etc” at about same level as the ‘Financial experts”. We could discuss the “Hallowed halls of Congress and what is said there, but I just ate and want to keep it down.
This current mess did not “just happen” and “Oh gee, look a recession”. This thing is so bad MANY had to KNOW it was inevitable..many had to know it was no doubt criminal as billions seems to have “Vanished”.. and same James Gang riding along the rails in Wall St and their banks waiting for next train to rob, while those they bought in DC fund them for new horses..
The folks that wrote as “Experts” of good and bad, are not the real issue. The real issue is a dumbed down USA where we stopped really teaching even at HS and it appears at most college levels, Finance, money, government, basic financial math like “compound interest” etc, as better to know sports stats the stats on every day life. BA in basket weaving better then the tough courses, a GED better then HS grad, and none upset the fully 1/3 drop out of HS. {“Hi tech” for most a cell phone or Ipod, and we are falling behind the world in every measurement, other then debt and war. Sorry but do not blame the “good or bad” of the authors as the nation buys into anyone as they comprehend and understand no one. the net now posts more “Steaming video” then printed as most do not want to bother to tax brain by reading and envisioning for self. Let’s not knock the snake oil authors to much. They are dealing with an increasingly dumbed down, self absorbed population that has become so weak and meek of heart, brains, backbone they only want to be told, not challenged. Mr P.T Barnum was so right, he should have had his advise entered as a Constitutional Amendment, Nr 28.. A sucker every 30 seconds and they shall have the right to be as dumb as needed!”. and leave it open to be amended to “one every second”, we do it to selves, like the good Doc’s dogs we slobber when someone hits the hot buttons.. as the “Experts” now “think” for us. They must, as we are to busy with the stats of big games on the big screens and watching out 2000’s version of Rome’s gladiators in the arena to bother with reality. But it seems China and India and others are not, they are so far behind us they do not even have a super bowel and other gladiatorial games, or even “Sports stars” paid $100 Mil contracts. Got to wonder how under such conditions many think they can over take us? Probably a book out there on it?

Posted by Chuck | Report as abusive

I think it is only fair to ask Niall Ferguson to predict _which_ civil wars and where. Simply predicting that a civil war will happen somewhere in the world sometime during the decade or so in which it will take growth to return to trend is, well, a mug’s game! We’ve had at least five civil wars, plus at least three coups, and a few failed coups, since 1990.

Posted by Ian Kemmish | Report as abusive

Ian Kemmish 2:39 GMT

I think Nial was definitely thinking about the folks back home. As depredation hits the UK, the workers there will look for someone to blame. Since they can’t punish Brown directly, they will lash out at those who they perceive as “grit in their oyster shell”. The mood there is VERY UGLY if one is to believe all that I’ve read on the comment pages of many blogs.

Hope I’m totally wrong. As I believe Debussman’s predictions to be.

Posted by Hammish | Report as abusive

“there will be blood” from there on:

Ofcourse there will be blood, remember alabama (close to california) yesterday as a start pls.

There will be blood when “U.S. strategic interests” has been based for the past eight years on 9/11 politics and wars on so called (“self inflicted”) terorrism by GWB and family.

U.S. “strategic interests” is only a facade for “total control” globally, which includes also mister Debusmann, me, and you too.

Ms. H. Clinton asks China to continue buying US bonds, PLS.! Nice! is this also part of “U.S. strategic interests”?

It’s time for a new age, maybe China, or Asia as a whole are going to be the dominant player globaly, or maybe Russia, or maybe even Europe (“the old world”), and U.S. strategic interests will soon be marginalized to trying to survive.

There will be blood.

Posted by Me | Report as abusive

The chatter of gloom and doom tends to peak at Stock Market bottoms — as history proves again and again. The market climbs a wall of worry as cash that has accumulated on the sidelines during bear markets eventually goes back to work. History will show that Madoff’s “send-off” to prison and Warren Buffet’s “The economy fell of a cliff” will be events that surfaced near the bottom of this most brutal bear market. Where was Mr. Buffet 17 months ago? He certainly is one of the great investors of the bull market and I respect him. But it’s far too easy to play hindsight AFTER the big crash. I certainly don’t know if this is “the” bottom. I do know that this level of gloom, doom, and fear rarely precedes a major downturn. As the Oracle of Omaha has said at every perceived bottom (with the exception of his recent 3/9/09 CNBC interview): “Buy when others are fearful and sell when they are greedy”. Yes, our economy will prevail, possibly sooner than many think.

Dan Stevens
New York, NY

Posted by Dan Stevens | Report as abusive

“the old failed system of capitalism needs some major overhaul going forward”

Capitalism hasn’t failed. It is still going full bore. The only time captialism has issues is when too many outside forces interfere with the natural market progressions. The recent swings and volatility in the stock markets are the easiest proof to see…If you choose not to see it than you choose not to see it. Simply closing your eyes doens’t mean it isn’t there…

Posted by Jon | Report as abusive

It is becoming increasingly obvious that the “experts” aren’t. Our fearless leader isn’t a leader and in fact has never run anything, not even a popcorn stand. The blind are being led by the blind, our treasury and commerce guys have little experience… and that includes Leon Panetta, who has zero Intel exposure but is now running the CIA. I say “duck” because what is coming cannot be controlled, altered or avoided by inexperience. Learning on the job can sometimes have disastrous side effects.

Posted by Barry Forbes | Report as abusive

As a general rule no one should ever express forecasts referring to money markets, but should keep them for himself.
The fact that editors publish such opinions is thought-provoking on how much damage can be generated.

Posted by riccardo scaglia | Report as abusive


You say “capitalism hasn’t failed”. What do you mean? What do you consider “success” or “failure” for that matter? We used to have “socialism” and “communism” to compare capitalism to to get some kind of guage or bogie for those sorts of things. When people thought capitalism was superior, it was because of personal freedoms (no secret police, gulags, etc.) plus a higher standard of living.

You know, the “average worker” had a better dwelling, more appliances, better health care and longer life expectancy, worked fewer hours to afford a washing machine etc. etc. etc.

So, is [US style] “capitalism” better than EU-style socialism or old school Communism? How do you guage? If Warren Buffett and Bill Gates and the other top 1% which owns half the wealth are doing all right, even with their diminished portfolios, is “capitalism” OK? Was capitalism “OK” during the New Deal, or [similar to what Obama may have to do] did it need to be regulated and its propensity towards abuses need to be cured to save the system? [I’d argue “yes”]

Clearly, our dumbed down populace doesn’t have the economic tools or understanding to figure out what ails capitalism and how to fix it. We continue lauding our discredited CEOs and have no problem with their vast take out from the trough, we don’t even think they should be taxed more than Joe Six Pack. And we have people like you, Jon, still offering up this circular and simplistic Adam Smith reasoning that “capitalism” must work because of the invisible hand, surely everything that the untrammeled “free market” does must be good by definition.

I’d assume you are against the stimulus programs and efforts to reform the banking system by re-regulating it, because the “free market” is always right. I bet if we just do nothing, the “free market” will magically restore jobs, income and prosperity in time, because in your view probably the wonderful “capitalist” system is self-regulating and self-healing, through the wonders of the “free market” and “invisible hand”.

Me, I do not worship greed and laissez faire government, never did. I’m waiting to see how far this country has to fall into the abyss before the rest of you ostriches take your heads out of the sand and stop drinking the Ronald Reagan kool-aid. Newsflash: the 80s and 90s are over.

Posted by jackl | Report as abusive

The economic crisis will end when people believe it is ending, and start buying things as if they’re going to have money tomorrow as well as today. That’s the only actual way to fix such a thing.

Obama is a genius. He’s building this up to be the most awful thing that’s happened since the Great Depression. And so it is. When he says things are improving, and a dramatic turnaround is taking place…it will, and he’ll look like a hero for fixing the problem. He just has to get public expectations low enough that when things start to pick up a little there’s room to gain momentum.

It’s all about what the majority of people believe–that influences how they act, and that is the true basis of the economy. The rest is a lot of mumbo jumbo.

Posted by Donna | Report as abusive

Fisher may have got it wrong, but he had lots of company from equally prominent economists, not to mention the Wall Street Journal and President Hoover. History tells us that economists are as likely as anyone else to accurately predict the short term future. Oddly enough Buffet will probably join Fisher in history, remembered more for what he did wrong than what he did right. And $60,000 in 1947 is worth half a million today. He didn’t die poor.

Posted by ChrisB | Report as abusive

Wow, Chris….’the failed system of capitalism’??? Capitalism is what has made the United States of America the richest and most powerful country on the planet. Capitalism will have its ups and downs, but you have to let it run its course. The danger in an economic downturn is that people like you get scared and run to the government for help, gladly giving up our freedoms for a temporary security. If you want total security from risk, check into a maximum security prison. An isolation cell would even be better. The government will give you free shelter, food, protection, and medical care… of course you will have no freedom at all, but you will have your socialist utopia. Capitalism has made this country great, my friend, and just because we have a scary time ahead of us doesn’t mean that we should abolish the system. It is comical, however, reading just how wrong the ‘experts’ can be.

Posted by Travis | Report as abusive

I don’t think economy or democracy need an overhaul. It is only a matter of confidence and human nature. By mid-2010, people in America, europe and Asia will begin to hope again and the wheel will restart. People and governments will have learn from failures but will soon forget again and the history will be repeated.

Posted by Jacquelin | Report as abusive

How will end? The economy will get saturated with borrowered money from Central Asia. We will most likely incorporate a form of “socialized” medicine . We will increase our regulation. We will start building a new mass transit infrastructure – which will enable most commuters, college kids and the elderly not need to rely on a life-time lease (reduced emissions will be the bonus). We will grudgingly let GM, Chrysler and some large suppliers like Delphi die (because there business practices require the reckoning)and we will let the banks die (same reckoning). We may start building a society that accomondated keeping the youth in university longer and out of the workforce. Teachers will have a harder time qualifying for the priviledge of teaching and the high salary that comes with the job. However; the inevitable will happen. During this process, such pain across the world will be felt. The less educated dogmas that teach blame and hate will start diving people and new evil will develop. You see we took too long. We wanted too much. We simply have too many people, not enough resources and no love to go around. Nature has a way of correcting this unbalance and it will be realized with generation X and Y.

Posted by Deacon | Report as abusive

The way I see it, there are idiots on the way up and idiots on the way down.

I never believed the “We are going to 50000!” people anymore than I believe the “We are going to be living in caves!” people.

Posted by Mithan | Report as abusive

The pro-neo-con bias of financial news services has been another reliable tool of selfish anti-Americans. All wealth to the rich: no problem. Raise the minimum wage: the end of the world. The unrelenting attacks on the Obama administration before it even gets off the ground is proof that these discredited social philosophers and their failed political slogans not only survive, but have the gold to still rule over us all.

Posted by Jack Oak | Report as abusive

When the market is going up, it is of course because people are feeling optimistic and putting their money into it. When the market is going down, it is because the majority is pessimistic and not putting their money into it. Any author writes for the majority because it is what sells. It is cold comfort to be right as a publisher who carries the titles buyers don’t want to buy. Their real job is to sell books – and right now books of doom and gloom are doing better than DOW 36,000. You may remember the authors who were right (or wrong), but do you remember their publishers?

Posted by David Lawrence | Report as abusive

The economy has been through a decade of boom. The shareholders were waiting for the crest of the wave, so they could cash up their shares and head home.

Meanwhile the banks were overextended with bad credit debt. This means they were treading on thin ice. That isn’t economics, just plain business sense.

The sub-par loans defaulted. A couple of overextended banks collapsed. The shareholders got their signal and sold everything. The slow-witted or unlucky shareholders showed up a day later to watch their shares plummet.

All is right with the world. Everything has happened according to the rules of economics. Capitalism still follows the rules. Dog bites man.

Now lets deal with the recession and get on with our lives.

Posted by John Smith | Report as abusive

Not to worry – so the forecast was off by a few years.
We’ll see Dow 36,000 after all. Maybe by 2015.
Around the time we see $24 for a tall regular coffee at
Starbucks, and $35 for a gallon of gasoline.

Posted by Mike Ward | Report as abusive

It is havoc happening. Why did we have to create value on whatever asset we create? This creation of value (mostly virtual) and realised by greed of man in anticipation of creating even higher value ( a never ending story). When it comes to realise all the created values at only one point in time, for which no one has been prepared for, then we see everything crumbling down.

We should find a new way of formulating capitalism in an endeavour to refrain creation of the intangible and keep us focussed on what can be created and valued for what it has been spent for.

Posted by JUGDISH | Report as abusive

This was as much a collapse of the model of our world being run by institutionalized and rampant sociopathy as it was a collapse of an economic model, although it most definitely was just that. The collapse of an economic and social model propagated by the Full Bull Sociopath of them all, the economic Attila The Hun, Uncle Miltie Friedman. May hell enjoy his presence. His legacy of institutionalized sociopathy has lived on in places and people like Dickie “I can sure take a punch” Fuld and AIG, as well as too many to list here.

Between that nut and the other nut, Ayn Rand, everywhere we look, the economic landscape grows more sere by the day, the blatherings of the cheerleaders notwithstanding.

All because we, in our greed and stupidity, handed over the keys to our economies to sociopaths, sniffed our armpits and screamed “Ambrosia!”.

My lord, we are a thick and dull people, at our core.

Posted by T. Scheisskopf | Report as abusive

Do we have a problem? Seems like all in Tulsa is the same as before—houses and business construction are being made–resturants are full at night and people come and go as usual–lots of people at the mall too–is the sky falling?

Posted by travguy | Report as abusive

When government restricts or attempts to remove the core of a nation, which is the individual, that nation will slowly regress and disolve into a dark age. Read back in history and you will find that the freedom of the individual in all aspects of his life is wear greatness and innovations are born.

Posted by carl | Report as abusive

What is needed for running water, schools, hospitals, and food enough for all humanity is a sum that corresponds to the amount spent by us on perfume in a year.

Posted by gunnar | Report as abusive

Jon said, “The only time captialism [sic] has issues is when too many outside forces interfere with the natural market progressions.” Oh really? So the natural market progression of monopolies and cartels is not an “issue”? The fact that corporations will lie, cheat, steal, and bribe their ways to the top if unchecked by government is of no concern to you?

Wake up! Capitalism needs government intervention to work properly! There has to be a balance achieved between letting capitalism have its necessary freedoms while ensuring that competition and treatment of the consumer stay fair. Right now, I think the government is destroying capitalism on one side and letting it run wild on the other.

I blame stupid or apathetic voters, and corrupt or stupid politicians.

Posted by Steve | Report as abusive

Jon, you are one of a dying breed. Reality is too real for sane people to deny. Capitalism does this. This IS capitalism. It is not socialism, Obama or some weird Democrat housing plan. Over the past 30 years we have had Thatcher, Regan, Blair, Clinton and Bushes. ALL have tried to “free” the free market, but that just encourages corruption. Face it, either just accept that capitalism is not particularly efficient, effective or just and tell us to like it, or accept that it should go. PLEASE don’t try to blame some inappropriate tinkering. Capitalism never had it so good, and capitalism has never had it so much its own way. It failed.

Posted by Lee Salter | Report as abusive

What we need is a good old fashioned military dictator in the USA. A round or 2 of Fascism to rid this great country of all the greedy, corrupt people who have it on the brink of collapse. Capitalism is not to blame, any more than Communism was in the old Soviet Union. Basic human nature is to blame. How long till Hale Bopp returns? I am getting my purple velvet ready!!!

Posted by Attila | Report as abusive

Jon and everyone who agrees with him are defeatist. Yes I make that bold claim and I will explain why. What is capatalism? Yes it is the most optimal form of social order we know of, but it is a human construct. As such it can be improved, it can be honed. Because there is a huge crash in the global economy does not have to be the natural order, but rather we make it such. I believe capatalism does not need to change much, but like a corporation a nation too must be selfish about protecting its long term interests rather than letting corporations do whatever they want to suit a set in stone ideology.

A Roman emperor could tell his subjects that there is only an emperor and that is the natural state of things, but today we know that there is a smarter way to be for all people.

Posted by Jason P. | Report as abusive

Why do people keep saying that capitalism has failed, just because we had a recession?

Its just like saying meteorology has failed, just because you don’t like rain. And just as smart.

This wouldn’t be a problem if more people learned economics in high school…

Posted by John Smith | Report as abusive

The countries that fulfill the promises of socialism are the Scandinavian capitalist welfare states, which invest the surpluses created by the market in education and social services that eliminate absolute poverty and create a highly skilled population. There’s capitalism and there’s capitalism. The boom-and-bust capitalism of corporate high-flyers triggered the current crisis. Will its reverberations trigger instability around the world? The largest economies in the most affluent countries will probably chug back to life, fueled by government bailouts–or what conservatives termed “handouts” when given to the poor. Perhaps we will all learn a little something from this socialism-for-the-rich-capitalism-for-th e-poor object lesson.

Posted by Anne Marie | Report as abusive