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"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
"synopsis" may belong to another edition of this title.
Most books that predict a sky-high stock market make their forecast either by extrapolating the trend line of the market's recent past or by looking at the demographics of the baby boom and the vast amounts of retirement funds chasing stocks. In Dow 36,000, James Glassman and Kevin Hassett see a bright future for stocks, but rather than looking at external factors, the two base their prediction on the intrinsic value of equities and their ability to generate cash.
At the heart of Glassman and Hassett's argument is the idea that stocks have been undervalued for decades and that, for the next few years, investors can expect a dramatic one-time upward adjustment in stock prices. Why? While Wall Street has focused on valuation measures such as P/E ratios, it has virtually ignored how stocks can work as cash engines (the good ones, at least). The authors cite example after example of the growth in dividend income for stocks and how it has consistently beaten the annual payouts of long-term Treasury bonds. One example they cite is Exxon, which you could have bought in 1977 for about $6 when it was paying a dividend of 37 cents, or about 6 percent a share. Twenty years later, the dividend had grown to $1.63 or 27 percent of your initial $6 investment. Compare two $1,000 investments over 20 years in Exxon and 7.5 percent Treasury bonds: payments from the T-bonds would amount to $1,500; the Exxon dividends would add up to $3,585--not to mention that shares in Exxon went from $6 to $61 during that same period. To get to their target of 36,000, the authors project dividend growth of the 30 stocks that make up the Dow and apply a valuation measure that they call PRP ("perfectly reasonable price"). Many will dismiss this kind of thinking as wishful, but they're probably the same Chicken Littles who have been calling the market overpriced for years (think back to January 1993, when the Dow was hovering around 3,300).
In addition to making their case for undervalued stocks, the authors toss off some good investment advice about stock picking, portfolio allocation, and buying mutual funds, and they go to great pains not to bulldoze readers with investing and economic jargon. As you might expect, Glassman, an investing columnist for the Washington Post, and Hassett, a former senior economist with the Federal Reserve, are firmly in the buy-and-hold camp, and make the case for working with a full-service broker as a check against churning, something that's all too easy to do when trading over the Internet. This book is sure to rile some, but no matter where you think stock prices are headed, Dow 36,000 is a provocative read that belongs on the bookshelf of any thoughtful investor. Who knows? We may come to think of these guys as value investors on steroids. --Harry C. EdwardsFrom the Publisher:
CONTRARIAN . . . CONTROVERSIAL . . . COMPELLING . . . PRACTICAL
What's the message investors have been getting from media pundits and so-called market "experts"? "Stocks are in the stratosphere . . . they're risky . . . we're headed for a fall."
Jim Glassman and Kevin Hassett heard this message for years, but wondered why the opposite kept happening. Instead of declining, the prices of stocks kept rising. Was financial gravity being defied or were other forces at work? Were investors being frightened away from profits they could be enjoying from a market that will continue to boom?
Dow 36,000 is the result of their investigation. It is one of the most important and provocative books on markets and investing written in recent years. Its original and compelling analysis and practical program for profiting from the continuing rise in the stock market is one that every investor -- from neophytes to the most experienced -- must understand and act on now.
* Stocks are undervalued, not overvalued. Stock prices will double, even quadruple, within a short period of time. The Dow Jones Industrial Average will soon reach 36,000. Astounding profits can be made, but the time to act is now! Dow 36,000 tells why this one-time rise is coming and how to adjust your portfolio and invest without fear.
* The Perfectly Reasonable Price. Prices are too low because investors and Wall Street have been looking at stocks the wrong way: at valuation levels of the past (the traditional ceiling of the price/earnings ratio, for example). Dow 36,000 provides a new model -- a new way of valuing the worth of any stock by figuring out how much money it will put in an investor's pocket.
* How to Invest with Confidence. Glassman and Hassett show investors a sensible strategy for making money by becoming a disciplined "36er." Their practical advice includes why many investors should not be active traders and why it's important to hold on to stocks and mutual funds even when they go into a downturn.
* Practical Program to Maximize Your Portfolio. Glassman and Hassett not only provide their picks for the best stocks and mutual funds. Just as valuable are their ideas on how to think about the kinds of stocks and mutual funds that will help earn the most money. Examples include not only stocks such as Cisco Systems, Microsoft, and GE, but many you may not have thought of, including Tootsie Roll and Biogen.
Investors have long needed a new way to understand what is happening in the stock market. Dow 36,000 provides that understanding. It is the new paradigm.
JAMES K. GLASSMAN, for many years a columnist for The Washington Post and host of the PBS show, Techno-Politics, is currently financial columnist for The Reader's Digest and a fellow at the American Enterprise Institute. Earlier in his career he was the publisher of The New Republic and president of The Atlantic Monthly.
KEVIN A. HASSETT is a resident scholar at the American Enterprise Institute who formerly served as a senior economist at the Federal Reserve Board. He received his Ph.D. in economics from the University of Pennsylvania. He is the co-author, with R. Glenn Hubbard, of The Magic Mountain: Defining and Using a Budget Surplus.
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