In my previous column, I related that Sir John’s predictions had evolved from one of great optimism during the pessimistic years around 1990, when the Dow Jones Industrial Average was around the 2500 level, to periods of pessimism around 2000 and 2007 when the Dow was around the 14,000 level. Yet I also intimated that I thought he might have been buying a few carefully selected stocks during the panic of 2008 when the Dow dropped to around 8,000. I should explain why.
In early 1999, Sir John asked me to co-author an article about why the Dow might probably rise to the one million level during the next century. The article was intended for his friends at Equities magazine, which had interviewed John annually for quite some time. To be quite honest, my initial reaction was to question John’s judgment this time! After all, he had also predicted the Dow would be flat during the coming decade. But I’d learned over the years, often the expensive way, not to question John’s financial insights. So I pulled out a financial calculator and discovered the Dow would only have to rise less than 5% annually for the Dow to reach one million. In essence, it was difficult for even me to believe the Dow might rise at one-half the rate it had during the twentieth century. Yet at the time, everyone around me believed a computer bug would end Western civilization! Many even believed the Second Coming was imminent.
