Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

The Prophets of Profits

by talos Tue Oct 28th, 2008 at 07:06:54 AM EST

AR Geezer's comment in yesterday's Salon de News, mentioned David Hassett and the book which he co-wrote in 1999, rather extravagantly titled Dow 36,000. Mr. Hassett is today apparently "working at the American Enterprise Institute... and serves as the senior economic adviser to the presidential campaign of Senator John McCain" - where his has abandoned his cornucopianism and just peddles fears of voter fraud by the Democrats to the more paranoid part of McCain's fan base - an act of unparalleled shamelessness, coming from this republican party.

Looking up the "Dow 36,000" book, I came upon such wealth of hope-mongering, that I'm posting the content of my comment on the thread as a diary, here. I had too much fun reading about this stuff not to share...

A taste of what was presented in "Dow: 36,000", is given in this Atlantic article by its authors. They then returned in 2002, after the dotcom crash, to insist on their insight in the pages of the WSJ: In an article titled "Dow 36000 Revisited - Hey, be patient!", they claimed that they were still on target, temporary setbacks nonwithstanding. And they didn't miss the opportunity of damning the dastardly socialists like Krugman that were bent on class war and could not see the light of the Incredible Rising Market.

Speaking of really wild optimism, note that the authors of "Dow: 36,000" were at the conservative end of the bull-market visionary-book-sellers crowd. Thus Dow:40,000 and Dow:100,000 (by 2020 no less). More conservative, but printed after the dotcom bust, and thus deserving its own special place in the annals of unbridled financial optimism was, the now hilariously titled "Dow, 30,000 by 2008": Why It's Different This Time" by Robert Zuccaro, a guy whose fund had already earned him a Forbes booby prize by 2004. (Some comments on all of these books' pages are hilarious and well worth browsing through). A recent comment at Krugman's blog offered the opinion that maybe "Zuccaro was thinking of 30,000 pesos".

Chiliasm, I think is the word to describe all this. Chiliastic numerology. And what else but a standard chiliastic cult's revelation-postponement (see here for a standard example) is shown in this 2006 article, where the authors of both 36,000 and 100,000 remain confident in their predictions - its just that they were off a bit:

Glassman, 59, defends "Dow 36,000's" original premise as well. The prediction -- that the Dow would triple by 2005 -- is still valid, he says, although he's pushed the deadline out to 2021...

Glassman and Kadlec say their out-of-print books, offered for sale on Amazon.com for as little as one cent, are still relevant.

"Dow 36,000" held that stocks were safer than bonds over the long term. When investors recognized this, the Dow would triple in value, the authors wrote.

"There's nothing that's occurred over the past few years that's changed our minds about the original thesis," said Glassman, who writes a syndicated investing column and is a resident fellow at the American Enterprise Institute, a Washington-based think tank.


Speaking of failed prophesies however, my all time favorite and a book of historical significance, surely, is without a doubt, David Lereah's "Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them (2005)".

This awesomely titled book is by the author of The Rules for Growing Rich : Making Money in the New Information Economy (2000), where he was plugging Internet stocks a few months before the dotcom crash. Undoubtedly this man is the epitome of timely financial advice. A true oracle of the New Gilded Age. David lereah is so reviled for his role as bubble-blower chief communications officer, that there actually is a David Lereah Watch blog.

The optimism of the realtor was matched, according to Amazon (I assume it was a blurb?) by David Berson, Chief Economist at Fannie May who had this to say about the book: "An important book, whether you agree with the author (as I do) that housing will remain an excellent investment or are convinced that home prices are poised for a plunge, David Lereah lays out a compelling vision of housing as a continuing positive investment--and how you can profit from real estate if you already own the home you live in, are looking to move from rental housing to an owner-occupied home, or want to use real estate as an investment."

Note that the Amazon page for the Real Estate Rapture book, contains a large number of ferocious comments, and especially note this gem of a recommendation.

The author lately wishes he could change the title of the book - and that people would go beyond the title to the substance of the book:

"Obviously I would change the title," says David Lereah, the former chief economist of the National Association of Realtors and author of "Why the Real Estate Boom Will Not Bust - And How You Can Profit From It," published in paperback in February 2006. "There are places in the book where I actually say the boom is not healthy. But people don't read the book, and they just look at the title and they criticize it."

Ah, how last year's prophets have fallen...!

Let me add to this compedium of the terminally optimistic, two cases of "past performance does not guarantee future returns":
- Harry Dent's, "The Roaring 2000s: Building the Wealth and Life Style You Desire in the Greatest Boom in History (1998)". The author had predicted the 90s stockmarket boom and was projecting the same trends to the future. As the wikipedia article on Dent notes:
In 2000, Dent predicted that the DOW would reach 40k, a prediction which was repeated in his 2004 book. In his book, he also predicted the NASDAQ would reach 13-20k. In late 2006 he revised his forecasts to much lower levels, estimating the Dow would reach 16-18k and the NASDAQ 3-4k. In January 2006, he predicted that the DOW would reach 14-15,000 by the end of the year. It ended 2006 at 12,463, 11% below the lower end of his prediction. It ended 2007 at 13,264, again significantly lower than Dent's revised prediction of 15,000 by early 2008. Since then, the Dow crossed 14,000 in late 2007 before retrenching.

Dent is currently forecasting gloom:

"This is like winter coming," adds Harry Dent, an author and consultant who says the U.S. is headed for a slump that will last until 2020. It will take that long for the financial wreckage from this boom-bust cycle to be cleared away, he says, and for the 79.4 million strong "Millennial Generation" -- most of whom are still in high school or college -- to enter adulthood and start buying homes, cars and gadgets of their own.

"It happens once every 80 years," Mr. Dent says of this sort of demographics-driven economic cycle. "It's going to be difficult."

- Another person who had correctly forecasted the stock boom back in 1974, had made even more spectacular projections in 1999. Roger Ibbotson, was predicting in 1999 that the Dow will reach 120,000 by 2025:

"It's a mathematical exercise where we draw from history," says Mr. Ibbotson, who in addition to the Yale post is president of his own financial research and consulting firm in Chicago. "The assumption is that the historical data over the long run give you a forecast of what is going to happen in the future."

The author teaches at Yale, and is a Hedge Fund Manager.

My conjecture is that, when the market is up, there are enough market analysts reading exponential trends in (recent) past performance to help sustain a bubble for a small period of time. Another conjecture would be that were I for some reason intent in seeing patterns in TV static, I would surely hire a market analyst to lay the mathematical groundwork for it.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Tue Oct 28th, 2008 at 08:09:32 AM EST
were as funny as the ET citizens.


They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Tue Oct 28th, 2008 at 08:16:37 AM EST
[ Parent ]
And let's not forget George Gilder, who almost single-handedly bubbled the tech bubble.

The evolution of George Gilder - The Boston Globe

More books followed, the latest of which, this year's ''The Silicon Eye," narrates the story of Foveon, a Valley-based firm perched upon the cutting edge of digital photography. By the mid-'90s, Gilder was confidently touting ''telecosm" (the convergence of communications systems and computers) as the next big thing -- and making a fortune giving speeches and investment tips. Telecom stocks soared whenever Gilder flashed them a thumbs-up, a market phenomenon that became known as the Gilder Effect. He was earning $100,000 a speech, and his company was being groomed for a $200 million public offering. Then the roof caved in, as hundreds of telecom companies went bust overnight.

''Most subscribers came in at the top of the market," Gilder recalls of those dark days, when even his chief financial officer filed a lawsuit against him. ''So the modal experience of the Gilder Technology Newsletter subscriber was to lose virtually all of his money. That stigma has been very hard to overcome."

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Oct 28th, 2008 at 08:55:41 AM EST
[ Parent ]
''Most subscribers came in at the top of the market," Gilder recalls of those dark days, when even his chief financial officer filed a lawsuit against him. ''So the modal experience of the Gilder Technology Newsletter subscriber was to lose virtually all of his money. That stigma has been very hard to overcome."(my bold)
Amazing how unforgiving the wealthy can be!  Burn me once, shit on you!  Hopefully Gilder is now practicing his arts in some sunny clime of a developing nation, refining his art of gilding bubbles.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 28th, 2008 at 01:52:28 PM EST
[ Parent ]
It's well worth reading the rest of the feature, because it makes sich a clear connection between the mental states that give rise to evangelical fundie kookiness and evangelical economic kookiness.

The process is very meta, but also very predictable - all it takes is a certain kind of emotional signalling and you can sell almost anything in the US. (And to a not so obvious extent elsewhere too.)

Without common sense or restraint, disaster follows.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Oct 28th, 2008 at 03:13:33 PM EST
[ Parent ]
It is one thing to maintain the compatibility of science with religion, especially with the theory of evolution, which Ayala, a PhD molecular biologist and ordained Dominican Priest, uses to resolve the problem of evil in Creation with the nature of God  in the most recent Scientific American.  It is something else to do what Gilder seems to attempt with Intelligent Design.  

Citing Claude Shannon of Bell Labs in this regard is particularly offensive to me, given my regard for his contributions: grounding information and communications theory in thermodynamics through the recognition that the meaning in a text or the usefulness of a library was due to the work that had been done against entropy in the creation of that order and that transmission degradation constituted an increase in entropy.  He and Warren Weaver presented this in an accessible form in  The Mathematical Theory of Communication, University of Illinois Press, 1949.  This was after writing a Masters Thesis at MIT in which he described vacuum tube operational amplifiers; described their possible applications  mathematically and showed how they could be applied as analog computers continuously solving the problem of aiming naval guns on a moving platform aiming at a moving target.  His Masters Thesis at MIT  was immediately classified and used to design the fire control systems on allied ships during WWII.

Gilder's arguments that the amount of information contained in the genetic code and the elegance of its organization  can only be explained by the presence of an intelligent creator remains a giant non sequitur.  It is and has been refuted by experiment over and over and only reveals his predisposition: there must be a theistic deity "up there" like a super father who is making sure everything is ok.  That is a far cry from Ayala's position, which is essentially naturalistic.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 29th, 2008 at 01:06:54 AM EST
[ Parent ]
Yes. See below. And the Ayala article is an interesting  find-thanks.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Wed Oct 29th, 2008 at 06:36:07 AM EST
[ Parent ]
It's hardly Gilder's argument. He stole it from some chaps at the Institute for Creation Research [sic]. An entire subsection of the Index to Creationist Claims is devoted to it.

Creationists (and Intelligent Design Creationists) have only about 20 arguments all told, and not one of them is younger than I am - they just dress them up in different language all the time.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 29th, 2008 at 01:20:44 PM EST
[ Parent ]
Yes- good feature indeed. Revealing, but gently so.
In conversation, Gilder is something of a rhetorical hummingbird, darting from topic to topic so rapidly it's difficult to get a word (much less a question) in edgewise. Each topic arrives with its own set of footnotes, reference texts, and unvarnished -- some might say unhinged -- opinions. Predictable Gilder is not, however. On balance, it's much easier to peg him as a hip-shooting contrarian than a cookie-cutter conservative or raving holy roller.

Much kinder description than mine would have been, I fear.
The most interesting issue for me is this:
I think these guys- these "Prophets"- believe their own bullshit.
Gilder assembles packages of useful self-delusion--marketable self-delusion. Like Uncle Milty, like Leo Strauss, etc, they cherry-pick the data to assemble marketable (and internally satisfying) narrative packages, and use their considerable skills in selling them.
Yes, there is a ready market for camouflage for plunder a la the "Chicago School" and Friedman, and the scent of frying neurons- slow-cooked over a fire of megalomaniac desires- is strong with George also. Along with more than a whiff of Authoritarian, patriarchal needs. When faced with alien evidence, they just change the conversation, and are incredibly resistant to change the shtick.  
So is there a unified field theory to Gilder's work? Some thread that connects his interest in everything from supply-side economics to stay-at-home moms? Yes, says Gilder, looking beyond his balcony and across the verdant valley adjoining the farmland he still calls his own. There is.

''Much of what I've written about has been in reaction to the materialist superstition," he says, ''the belief that the universe is a purely material phenomenon that can be reduced to physical and chemical laws. It's a concept that's infected the social sciences as well."

And, he adds, ''it's preposterous."

In this, he's right.
The bold portion represents perhaps the single overlap between my world view and that of Gilder.

We do, however, see very different ways to resolve the failure of the "clockwork universe" as an adequate description of the world.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Wed Oct 29th, 2008 at 06:33:19 AM EST
[ Parent ]
by das monde on Tue Oct 28th, 2008 at 09:14:27 PM EST
Back in the early half of this decade, Krugman actually quipped that the authors of Dow 36000 had a digit too many "let's just hope," he added, "that it's an extra three, not an extra zero."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 29th, 2008 at 01:24:23 PM EST
[ Parent ]
Thanks for a really enjoyable read, talos!  Let's hope that in this crisis few people will fall for the latest regrouping of self-appointed prophets that are now in all media:  Everyone wants to be the next marketable guru.

Had a good time reading.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Tue Nov 4th, 2008 at 11:34:30 AM EST

Go to: [ European Tribune Homepage : Top of page : Top of comments ]