The author was careful to point out that his firm does buy and sell the stocks he discusses. On an emotional level, I wanted to believe that the stocks would keep going up.
But my experience to date suggests there are a number of fundamental flaws with the author's reasoning.
1. There is no guarantee the foreign markets will create expected returns.
A. The fundamental problems that drove the Asian financial crisis are still with us. The currency and trade deficit problem has now mushroomed into a budget deficit and debt repayment problem.
B. Deflationary pressures continue worldwide. Rising debt in Asia, Latin America, the US Bubble, China, Japan and Russia. Apparently, these economic fundamentals are irrelevant to US corporations expanding market share, margins, or debt paying ability.
C. The solutions to the 1980s Latin American debt crisis are now coming undone. Ecuador recently defaulted on its speculative Brady Bonds. Venezuela, Argentina, Brazil, and Columbia are going down a slipper slope of debt default, and additional financial crisis.
D. What is to say these factors will not similarly affect the US in a mother of all bear markets?
2. Stock valuations
A. The author admits the stocks are overvalued.
B. Why buy overvalued stocks unless he was convinced that there were more fools that would buy? Sounds like gambling, not investing.
3. The author seems to believe that 9% growth rates are normal.
A. However, after checking the record back to 1800, I was not convinced with the author's assertion that populations changes resulted in stock price changes.
B. The author does not provide this data in his book--I consider this the major weakness in the author's thesis...for his argument that the Dow will reach 40,000 rests on the assertion that population changes will create a demand for stock.
C. And the author does not discuss the costs of creating more wealth. Where's the discussion of deflation and rising debt? Not there. Seemingly unimportant.
Summary
A. Even if the author is wrong, who's really going to make a point of asking for their money back in 2016? Distant forecasts, no accountability. A pipe dream. Nostradamas would be proud.
B. Dow 40,000 may happen by 2016, but it's sure going to be interesting to see how many land mines we as a world economy end of walking through.
C. I think it was a nice gesture for him to donate the proceeds to charitable organizations. Hopefully Elias won't need the money if the mother of all bear markets arrives.
Rating: I was going to give the book a 1-star, but my dog enjoyed the cover. Hence, my rating is skewed by the canine salivation index (CSI).
