Super Boom

Why the Dow Will Hit 38,820 And How You Can Profit From It, Jeffrey A. Hirsch, Wiley.

In 1999, James K. Glassman and Kevin A. Hassett published “Dow 36,000,” in which they famously predicted that the Dow Jones Industrial Average would reach 36,000 by early 2005. Of course, their prediction was was off base (ten years later the Dow was still around 10,000), a mistake Jeffrey Hirsch attributes to their “failure to remember and respect the lessons of history.”

Yet Glassman and Hassett's spectacular prediction fail didn't stopp Hirsch—editor in chief of the “Stock Trader's Almanac”—from predicting Dow 38,820 by 2025, courtesy of a “super boom” cycle similar to the one his father Yale predicted in 1976. “Many before me have been burned by predictions that never came to be,” admits Hirsch, yet he's convinced that a super boom (defined as “a steady rise by a major market index of 500 percent or more over a given period of time, uninterrupted by any significant or long-lasting negative or flat trends”) “is not only plausible, but mathematically and historically probable.”

At the risk of oversimplifying Hirsch's thinking: He expects a sharp rise in inflation, which tends to result in an even sharper rise in equity markets, at least when inflation occurs in conjunction with a period of great innovation, one which might soon be produced by the biotech or pharmaceutical fields. (Notably, the book also features a chapter on investment strategies and ideas for exploiting the coming boom, including recommended Exchange-Traded Funds (ETFs) and stocks for “ten years & beyond”.)

Of course, Hirsch can't help but sprinkle a few “nothing is certain” caveats throughout the book, yet he seems remarkably confident. “All the elements of the 500 percent equation are in place: a diminishing war effort, a coming period of peace, high government spending, and the likelihood of significant inflation,” he writes. “History has repeatedly demonstrated, there are big, identifiable patterns in the stock market, and when the right variables are added together over the right period of time, the resulting effect is a super boom the likes of which we have seen many times before.”