Dow 36,000? Try Dow 3,600

If you've read the case for the double-top market crash, you'll notice that it projects a decline of about 75% in the stock market, roughly taking the S&P 500 to around 400 from its high near 1,600 one year ago today.

The Dow isn't as representative as the S&P 500 so it doesn't track it exactly, but a similar decline would take the Dow from its 14,000+ high to somewhere around 3,600. That figure is 1/10 of what James K. Glassman and Kevin A. Hassett wrote about in Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market, published in 1999, when the Dow ranged from 9,000 to 12,000. The book not only argued that the Dow would some day reach 36,000 (which is obvious) but that the market was a good investment at the time, and even argued that if people had their heads screwed on straight and knew something about risk, the Dow would shoot to 36,000 immediately, because that was the fair value of the Dow at the time with "proper" risk analysis.

Now, nine years later, the Dow is back at the low end of its 1999 range. Those who "bought and held" in 1999 have learned a thing or two about risk. What the authors didn't take into account was the fact that we were in a financial bubble at the time, not a serious re-evaluation of the worth of industry. Now we're in another bubble bust, and the Dow very well could see 3,600 before it sees 36,000.