Tracking futures Ah, October. Leaves turning, football crowds cheering, developing economies tanking, stock markets crashing. The memories return every autumn, with Proustian clarity. At any time of the year, it would take a certain chutzpah to claim that the wild bull market of the 1990s is going to keep charging higher and higher. But to do so in October is to exhibit either reckless disregard for history or brilliantly prescient foresight. Or both.
Yet here they are, just in time to make perfect anniversary gifts for those commemorating the stock market disasters of October 1929, October 1987, or October 1998: Four brave books that claim the best is yet to come for investors and the general economy.
Believe it or not, the least audacious of these titles may be Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market (Times Books, $25, 0812931459), by James K. Glassman and Kevin A. Hassett. I confess I'm always skeptical about books of prognostication, whether they are optimistic or full of gloom and doom. (Remember Ravi Batra's The Great Depression of 1990? It's out of print now, but Batra soldiers on: his latest work is Crash of the Millennium: Surviving the Coming Inflationary Depression from Harmony Books.) And yet Dow 36,000, with its intricate but lucidly argued analyses, has just about won me over.
Every prospectus churned out by a publicly traded company or mutual fund includes a mantra that's about as meaningful as cigarette-pack labels or instructions on how to use one's seat cushion as a floatation device: Previous performance is no guarantee of future results. Washington Post columnist Glassman and think-tank scholar Hassett take these words at face value. Evaluating stocks by historical measures, they claim, ignores their true, latent strength.
The authors offer a new yardstick for measuring the markets: Perfectly Reasonable Price. The PRP is the price a long-term investor would be willing to pay for an investment. Traditionalists in the investment world use price-to-earnings ratios (how much the buyer must pay per dollar of the company's profits) as a standard for judging the valuation of stocks. By that historical standard, the market is wildly overvalued and due for a painful correction. Problem is, the traditionalists have been saying so for years now, and they are starting to sound like Chicken Little. Glassman and Hassett posit that the market indices have only begun to climb, and that it's perfectly reasonable to buy stocks at today's nosebleed-altitude earnings multiples.
In well-crafted layman's prose, they calculate the PRP of a few individual stocks, analyzing recent trends in earnings growth, dividend growth, and other factors that point to long-term success for the companies. By this reckoning, home mortgage giant Fannie Mae (to take one example) is worth nothing like its May 1999 price of $67 a share: its PRP could be as high as $872. The authors don't claim that the markets as a whole will do this well, but it's easy enough for the Dow to reach the 36,000 target if, as they assert, many stocks are currently trading well below their PRPs.
Dow 36,000 makes a cogent and convincing argument that the good times are going to roll on and on. If that's true, readers who follow this book's suggestions in navigating the markets will triple their money and then some. Whether it's true or not, this intriguing book is going to be a very interesting read in five, 15, or 20 years, with its authors enshrined as either the butt of jokes or visionary geniuses.
While Glassman and Hassett don't predict at what magic moment the Dow Jones Industrial Average will crack 36,000, Charles W. Kadlec goes further out on a limb. In Dow 100,000: Fact or Fiction (Prentice Hall, $25, 0735201374), Kadlec offers a date certain for the completion of a tenfold rise in the Dow: the year 2020.
An investment strategist for a mutual fund firm, Kadlec cites some of the same optimistic reasoning as the other authors for the huge boost in stocks such as gains in productivity, improvements in management and more free global trade but his dramatic scenario of future prosperity relies more on a long view of historical economic developments than on technical analysis of equity markets. He puts the internet into context, for instance, by discussing the impact of the railroads and the telegraph in the last half of the 19th century.
Taking the long view, Kadlec is not shy about drawing a parallel between the 1990s and the 1920s the decade that ended in a cataclysmic market crash. He notes that if the Dow grows in years to come at the same rate it did in the '20s, it will reach 100,000 by 2016. He sees no reason to consider a crash inevitable after such an explosion. Kadlec's command of historical detail, and his talent for drawing incisive parallels between past, present, and predicted future, make this book particularly thought-provoking.
Kadlec warns that continued progress is not a sure thing. Taking a broad view of economic and social policy issues that will influence financial markets, Kadlec draws surprising conclusions about the threats that the American economy faces for instance, that Medicare is in much worse shape than Social Security and is headed for a stark choice between full coverage of those in need and fiscal solvency, and that global terrorism lurks as a risk not adequately appreciated by investors. Readers intoxicated by the vision of a six-digit Dow will find these warnings sobering.
Still, Kadlec presents an exhilarating vision of what really might be. Dow 100,000 is no fantasy: Kadlec argues persuasively that the number is attainable.
Knight Kiplinger, representing the third generation of a family that has made its living by economic forecasting in personal finance publications, weighs in with further cheerful tidings in World Boom Ahead: Why Business and Consumers Will Prosper (Kiplinger Books, $14.95, 0938721704). The first edition of this book came out just as the Asian financial crisis was spooking markets last year, but this updated paperback version is even more optimistic. Kiplinger's focus is on the long term, and he has an authoritative command of the trends reshaping our lives.
Kiplinger is somewhat at odds with the Dow boosters, predicting a less boomy stock market in the decade to come. In fact, he wouldn't be surprised if stocks head south for a year or two in the near future, but he finds the long-term trends bright. Though he sees the U.S. economy continuing to perform very well, he says the greatest growth in the new millennium will come in the rest of the world. The author foresees a planet teeming with 1.5 billion new humans by 2020, most born in less-developed countries but that prospect doesn't trouble him. Living standards will rise for these less-fortunate earthlings, he predicts. The real problems will come to countries with too few residents of working age. A relatively open immigration policy has already given the U.S. a competitive advantage in that department.
World Boom Ahead includes an engrossing survey of future developments in industry and society, picking the relative winners and losers of the new economy. A few samples: Traditional retailers will see the downside of chasing super-shoppers, as boomers burn out on the mall . . . In a low-inflation climate, home prices will grow less steeply than in the past . . . Four-hour supersonic trips across the Pacific, day-trading 80-year-olds and microchip-imbedded cattle all await us in Kiplinger's 21st century.
Buck Rogers lives. If Kiplinger's work is not enough to convince you, maybe another new release will: The Long Boom: A History of the World's Future, 1980-2020 (Perseus Books, $26, 0738200743), by Peter Schwartz, Peter Leyden, and Joel Hyatt a consultant, technology journalist, and Stanford business professor, respectively.
Imagine this world as the authors imagine it, viewed in hindsight from 2050: We humans have fixed the damage we had done to the environment, without denting anyone's standard of living. Cars now run on hydrogen fuel cells refilled twice a year. Machines the size of molecules and 120-year life spans are realities for today's George and Jane Jetsons, and nothing is out of the realm of possibility not cold fusion energy, not anti-gravity devices, not cooperation with alien life forms.
This is a mind-boggling book.
These authors see the present moment as a watershed in human history. Emerging technologies and new modes of deploying human capital, they argue, are in the process of bringing about an unprecedented leap in the progress of civilization. If we can all get it right, the result will be good times throughout the planet we currently inhabit and beyond.
There will be bumps in the road the overthrow of Saudi Arabia's government by Islamic fundamentalists will cause another oil shock in the economy, for instance. But an evolving civilization, in which all peoples are bound together by common interests and increasingly shared prosperity, will be able to work through such rough patches, in the view of Schwartz, Leyden, and Hyatt.
Like all the authors mentioned here, though perhaps to a far greater degree, The Long Boom's visionaries have taken on the risk of being ridiculed, now or in the future. But their well-reasoned speculations, and the acrobatic dexterity with which they have stretched their minds, will not be ignored.
Briefly noted: Tom Peters, the personal trainer of American business writing, wants to pump you up. Brash visions of the new millennium are obviously in vogue this month, and Peters offers his own in a new series of books. Just out are The Brand You 50 (Alfred A. Knopf, $16.95, 0375407723), The Projects 50 ($16.95, 0375407731), and The Professional Service Firm 50 ($16.95, 0375407715). In his trademark style of breathless exhortation, Peters inspires readers to embrace the new realities of the evolving workplace and to turn themselves into sought-after brand names on the job.