Prediction: Dow 40,000!

pic by king89 @ Flickr

I got you, didn’t I?

This headline is a classic propaganda technique. The Nazis called it the “big lie.”

Extreme predictions are more widely accepted. It seems counter-intuitive, but the more outrageous the prediction, especially financial predictions, the more likely it is that these predictions will be accepted.

There are a few reasons for this.

To begin with, outrageous predictions draw more attention, so they are easily distributed. In other words, the big lie is the viral lie.

Second, people who make wild predictions are often believed because of their extreme view. Who would risk their credibility on such wild estimates? You would need inside information to make such a bold assessment.

Extreme predictions tend to follow trends.

It was just a few years ago that Dow 36,000 was one extreme prediction that gained acceptance. This happened during a Bull market. Now, those same ideas are widely discounted. But, several Elliot Wave theorists have made predictions recently of Dow 1,000.

Is Dow 1000 impossible?

No. Nothing’s impossible. However, Dow 12,000 is more likely than Dow 1000. Dow 8,000 is more likely than Dow 1,000. But, for the human mind that swings between extremes, such tame, but probable estimates would gain neither traction nor credibility.

And, by the way, we will hit Dow 40,000.

I just didn’t say when.

9 thoughts on “Prediction: Dow 40,000!

  1. Balance Junkie

    I guess it’s just human nature to be curious about what could possibly cause someone to make a prediction of Dow 1000 or Dow 40,000. Headlines can induce me to read an article, but I carry the sole responsibility for what I choose to do with the information it contains.

  2. Kevin@OutOfYourRut

    A lot of the reason for the credibility of wild predictions is that we live in an outrageous culture. People gain fame by being outrageous, even if they aren’t “great”, so obviously, outrageousness has market value.

    There are so many things that SHOULD be shocking but aren’t because shocking has become the norm. Predictions of subtle outcome then have little response or credibility.

  3. Kevin@OutOfYourRut

    Yes, but she has boatloads of company! The plethora of “reality” shows has elevated hundreds of marginal talents to star status. People are often more known for outrageous behavior than for talent.

  4. JoeTaxpayer

    The dow index doesn’t include dividends, so the index growing at 6% is a market return of 8.
    At 6% it will double in 12 years. So Dow 40K in 24 years, give or take 10.

  5. matt Post author

    And there you have it.
    But, on the optimistic side, this is barring any new breakthrough in technology.

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