Monday, May 12, 2003

Bull, Unbowed

"We're going to hit Dow 40,000 by 2016," says money manager David Elias without blinking. It is not the first time he's said it, either. Dow 40,000 was the theme and in the titles of his two books published in 1999 and 2000.Reviewers said they were a signal of a stock market about to go pop.

This time Elias' call is all the more gutsy, flying in the face of greatly diminished expectations for stocks. The prediction is also more of a reach statistically. To get to 40,000 by December 2016 from where we are now, the Dow would have to sustain an annualized price gain of 13%. Starting from December 1999's 11,400 level, it would have had to trot along at only 7.7%. To get a sense of how wildly bullish 13% is, note that over the past 100 years the index has climbed at a 5% rate.

And now we are contending with terrorism, volatile oil prices, high levels of corporate, government and personal debt, and a sluggish world economy. Mere mud on the hooves of history to Elias: "Over the last century we've had depression, recessions, the World Wars, all sorts of conflicts and tragedies," he says, "and yet look at the long-term trend of the stock market. It's up."

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