Dow 36,000? So Much For Predictions

Emma Johnson MSN Money December 31, 2009

A decade ago, some stock market soothsayers forecast that the 2000s would bring staggering gains. Even more staggering now is how wrong they were.

These people owe us, right? The analysts, the pundits, the experts. Every year they look into their crystal balls and tell us how to invest, what to expect and what the future looks like. Sometimes we listen to them. Yet much of the time it's all stunningly wrong.

"When something happens, you can always go back and find someone who predicted it. And many predictions are totally wrong. After all, there are all sorts of disasters looming over us at all times, most of which don't happen," says Michael Mandel, an economist and former BusinessWeek writer who has forecast some economic whoppers, though he also admittedly has missed his fair share of major financial events.

"There must have been 10,000 predictions made at the beginning of the decade. Some of them will be right; some of them will be wrong."

We looked back to what some soothsayers were saying 10 years ago and compared their predictions with the realities of 2009. Who was spot on? Who was dead wrong?

This exercise isn't about pointing fingers, and certainly MSN Money's own stock pickers have had a few duds (Jon Markman's 2007 prediction that the Dow would rise to 21,000 by 2012 could still pan out, but it's a steep climb from here). Think of this as a cautionary article, and keep the accuracy of such predictions in mind as you start hearing more about 2020. More from MSN MoneyWhere to invest your money in 20103 reasons 2010's economy looks iffyFarewell to Wall Street's decade of hubris7 companies that may not see 2020The Men of the Broken DecadeStock gains that weren't It was relatively easy to be wrong about the stock market's performance in the 2000s. Stocks have, with some degree of regularity, gone up over time. In the 1980s, the Standard & Poor's 500 Index ($INX) provided total returns in excess of 200%; in the 1990s, better than 300%.

The S&P 500 since the turn of the century? A negative 23%. So even what seemed to be conservative estimates look ridiculous in retrospect. Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.vcq": "videoByUuids.aspx?uuids=d366da8a-4e7d-4114-8635-3f111b607b44,5b56c2c3-f5d5-4ebe-8a84-23ac0a9f11df,f7fe0244-d4e8-4593-8447-643ea2fa993c,705d397a-a212-4233-a7cb-6dce641f888b", "player.fr": "iv2_en-us_money_article_SavingandDebt-SaveMoney-inline"}, 'PlayerAd1');At the end of 1999, Edward Kershner, then of PaineWebber and now with Citigroup, told The Wall Street Journal to expect the Dow Jones Industrial Average ($INDU) to ring in 2010 at 25,000. Though it's easy to chuckle at such an estimate when that index is down more than 8% for the preceding 10 years, Kershner based his forecast on a modest 7% annual compounded gain.

And trying to be specific about which stocks to buy at the end of the 1990s, when overpriced technology shares were still all the rage, proved even more perilous. SmartMoney boldly predicted a handful of stock successes, most of which turned disastrous. Though we give SmartMoney credit for its confidence, there were some doozies in the bunch.

To start, the magazine designated Toronto telecom equipment manufacturer Nortel as a winner. But soon after that blessing, the company lost its early-decade market edge and ultimately declared bankruptcy in early 2009, liquidating all assets and marking one of Canada's largest business failures in history. Similarly, the article plugged MCI WorldCom (now just MCI Inc.), which in 2002 also made history as the largest bankruptcy case in the United States at that time.

The stock market's worst decade ever

SmartMoney also fouled by positioning AOL (AOL, news, msgs) as an obvious pick for the new millennium:

"If some of the best investments are the most obvious ones, then America Online should continue to excel. Along with Yahoo (YHOO, news, msgs), AOL has established itself as the dominant brand on the Internet, a position that will be difficult for others to undermine (think of Coke and Pepsi). Currently, AOL and its subsidiary, CompuServe, enroll more than half the 35 million Internet subscribers in the U.S., which gives AOL enormous leverage in virtually every aspect of its business."

At the turn of the century, AOL grossed $7.9 billion and had 35 million subscribers, 15,000 employees and a stock price at $120. Subsequently, the company merged in 2001 with Time Warner (TWX, news, msgs), suffered a customer-service scandal and a related investigation, and saw its customer base dwindle.

Continued: 3 'superbulls'

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Enter symbol or company:MSN Money Video Msn.Video.createWidget('Gallery2Container', 'Gallery', 120, 350, {"configCsid": "MSNmoney", "configName": "new-todays-investing"}, 'Gallery2');Video Hub: Prepare for the new year and review 2009, decadeAll videosSearch by tickermore ...MSN Money InsightSuperModelsTop Stocks blogCompany FocusMutual FundsContrarian ChroniclesSmart Spending blogNew Investor CenterResourcesTrack InvestmentsFast AnswersCommunityMessage BoardsYour LettersDecision CentersStart InvestingMutual FundsFind Hot StocksSimple StrategiesPower ToolsInvesting for IncomeReal Estate InvestingFund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8');msft.msn._ic.cid='aicc98qft4w9gjqw5dmmdpm7g9928mj5';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Join the discussion!Add a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 10 of 92PreviousNextEkonoman #1Tuesday, December 29, 2009 7:09:32 AM"If you're going to predict, predict often." - John Kenneth GalbraithReplyReport Abusewt1947 #2Tuesday, December 29, 2009 7:44:41 AM

The DOW will never reach the heights predicted. We have the usual right wing theft that happens regularly that keeps the market a place like a crooked Vegas run by the mob.

The fight against regulation just keeps people from investing, seeking safer, less favorable returns while the crooks are happy fighting over the few who invest and stealing their money...to wit Madoff. Hey 60 billion is no small time crook.

ReplyReport Abusedeeeeman #3Tuesday, December 29, 2009 7:46:13 AMThank you, Emma.ReplyReport AbuseJanuary up then down #4Tuesday, December 29, 2009 7:55:19 AMEven now on CNBC, the majority of "analyst's" are saying stocks will move higher into 2010. Because the stock market is a ponzi scheme, in other words, pay older investors with new investors money, (buy low, sell high to the greater fool), the analyst are right the majority of the time. Just keep saying buy and you will be right over time, always. But a sell off is coming soon I believe. ReplyReport AbuseRev. F #5Tuesday, December 29, 2009 7:56:29 AMShame we didn't let all the Social Security receivers invest their money in the stock market a few years ago....ReplyReport Abuseseeker942 #6Tuesday, December 29, 2009 7:59:22 AM

Interesting rant.

A much better rant and more useful rant would be how to grow your own food and like it.

The US Dollar is going to be worth less than a good roll of toilet paper in the very near future.

Screw stocks. Love potatoes and beans.

ReplyReport Abusesouthern home builder #7Tuesday, December 29, 2009 8:10:59 AM

wt1947

You are aware that Madoff is a democrat, aren't you? You know, just like ALL the super rich.

Real basic info here: The very rich, and the poor both vote democratic (as do the uneducated, fringe affiliated, etc). Why would the rich vote for a party that doesn't help them? Duh! They don't! They vote for the party that helps the rich (dems), screws the poor (dems), and lies about it!

Check it out. Read the polling data for proof on who votes what. Read the actual bills Passed by the parties, and far more telling, the Regulations pushed by each party when in power.

The Democrats screw the poor and tax the middle class to give it to the rich. The Republicans (until fall of 2008) give no one anything, except opportunity.

ReplyReport Abusesuede1965 #8Tuesday, December 29, 2009 8:14:14 AMSince Sept 11, 2001, I find it interesting how the S&P's -23% decade performance relates to the same period gripped by war and conflict. So much for war being a catalyst for economic growth; especially given the barrell price of oil, production capacity and inventory levels are all relatively flat through the same period. ReplyReport AbuseD from Chi-town #9Tuesday, December 29, 2009 8:15:51 AMThere are still 3 trading days left! LOL Buy low and sell high, I want to wish a happy healthy prosperous New year to all americans in 2010!ReplyReport AbuseAvgAmerican #10Tuesday, December 29, 2009 8:45:52 AM

Good Lord. Is there any topic that does not turn into a pi$$ing match about who's party is better? How about both parties have done poorly? These predictions are the equivalent of a weather man guessing the weather a year or decade from now. Guessing is the key word and if anyone invested their money on these predictions they would have been be better off betting on the ponies.

ReplyReport Abuse1 - 10 of 92PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/Extra/dow-36000-so-much-for-predictions.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite map© 2009 Microsoft/*