Dow 40,000

Strategies for Profiting from the Greatest Bull Market in History

McGraw-Hill, 1999

15 min read

10 take-aways

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What's inside?

Good times are here to stay — at least until 2016.

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Editorial Rating

Qualities

Bold

Recommendation

Call David Elias an optimist. He expects the Dow Jones Industrial Average to hit 40,000 by the year 2016, and he stands by his prediction, even in the wake of the stock market downturn. His target doesn’t sound so outlandish if you consider that, in order to hit 40,000, the Dow must rise by only 9% annually in the next 16 years. (Investors already have accustomed themselves to much grander annual returns.) However, Elias, an investment adviser, might strike some readers as a bit too cheery. He says interest rates and inflation will remain low for a decade, and he predicts that the developing world will goose profits by buying ever-increasing quantities of products from U.S. companies. Elias also argues that the much-feared backlash from Baby Boomers pulling out of the market after they retire will prove a myth. While Elias’ outlook is relentlessly buoyant, getabstract recommends his information to investors and his book’s ripe conversational fodder to futurists and analysts.

Summary

40,000 by 2016 The Dow Jones Industrial Average will hit 40,000 by 2016. Why? A number of reasons - the benefits of the new economy, foreign investment in U.S. stocks and rising savings levels.

Charles Dow created the Dow Jones Industrial Average in 1896. He listed a dozen companies, including American Sugar, American Tobacco, and Chicago Gas. None of the original 12 stocks remain on the Dow, which now includes 30 companies that account for about a fifth of the market value of all U.S. stocks. The Dow is a price-weighted index, not an average.

The Dow has grown exponentially since Charles Dow’s days. A $100 investment in 1900 would have been worth $70 million by 1998. This trend should continue. In fact, for the Dow to hit 40,000 by 2016, the index would have to climb by just less than 9% a year, assuming a year-end 2000 close of 10,693.

What’s Driving the Growth?

Several factors are driving the Dow’s upsurge, including:

The New Economy - Commercial transactions take place in cyberspace and global competition is the rule, accompanied by low inflation and low interest rates.
Foreign investment - This flow of cash includes...

About the Author

Longtime financial adviser David Elias is president and chief investment officer of Elias Asset Management. He is a frequent source for CNBC, CNN, and The Wall Street Journal. He is a contributing editor to Chief Executive magazine and a member of the national board of governors of the Money Management Institute.

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A. 1 decade ago

It seems to be a quite clever idea to do predictions for 2016 in 1999. Of course, the book will be out of print by then. But getAbstract readers will still have access to these prophecies in compressed form, the author won't get away with that so easily!
R. S. 1 decade ago

Still waiting...

David Elias