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Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It

Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It

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Published by ritholtz
by Jeff Hirsch
by Jeff Hirsch

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Published by: ritholtz on Apr 13, 2011
Copyright:Attribution Non-commercial

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04/14/2013

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5
CHAPTER
Yale Hirsch and the500 Percent Move
If I have seen further, it is by standing upon the shoulders of giants.
—Sir Isaac Newton
I
n January 1977, my father, Yale Hirsch, founder of theHirsch Organization, published a special report in his thennewsletter,
Smart Money 
. It was this special report—a predictionthat the Dow would rise 500 percent over the next 13 years—that would later serve as the foundation of my Dow 38,820super boom prediction. Yale had published several articles over the previous three years proclaiming that the market had hit bottom during thefall of 1974. In 1974, with the Dow at 605, he printed a bold-faced headline of “BUY! BUY! BUY!” 18 times across the front page of 
Smart Money 
. After nearly two years of a debilitatingbear market that drove the Dow down 45 percent, the S&P 50048 percent, and Nasdaq 60 percent, Yale courageously went contrary to the crowd. Watergate, the OPEC oil embargo,
57
 
58
THE FORTUNE TELLERS
and a devastating recession that began in November 1973 and would not end until March 1975 had destroyed consumer andinvestor confidence. But Yale sensed the tide had turned. Theissue mailed a few days later on Friday, October 4, one day after both the S&P 500 and Nasdaq posted their lows for theremainder of the twentieth century.In the January 1975 issue, published two days after the Dow’sintraday low of 570 and three days after its closing low of 577.60,the two headlines on the front page of 
Smart Money 
read: “TheDarkness Before the Dawn” and “Dow 800 by April 1975.”By April, the Dow had cleared 800 as Yale forecasted.Perhaps a bit too exuberantly, Yale then forecasted, “Dow2,000 by 1980!” The Dow did not hit 2,000 until January 1987for various reasons, one of which was the infamous double-dip recession of the early 1980s. Around the corner was Yale’s500 percent prediction, initially published one year later in April 1976. The January 1977
Smart Money 
Special Report wasthe culmination of many articles Yale wrote during 1976 as heresearched super booms. It is a prescient forecast and the foun-dation of my own research into the trends—political, historical,and financial—that cause super booms. It is a glimpse into thehistory of the information super boom, the origins of the HirschOrganization, and the discovery of the 500 percent equation.So I have reprinted sections of it here with my annotations andthoughts on similarities between 1976 and 2010. The full articleis included as Appendix B at the end of the book. Appendix A includes Yale’s portfolio recommendations from 1977 with my commentary and a quick review of each stock selection.
Smart Money—January 1977Special Report
Invitation to a Super Boom
A
SUPER BOOM rarely comes more than once in a generation.Unfortunately, it seems to follow a severely inflationary era
 
Yale Hirsch and the 500 Percent Move
59
which destroys stock values and leaves investors demoralized anddisenchanted. Consequently, when the market begins its phoenix-like riseout of the ashes, the average investor, “scarred” and still rememberingthe pain of the past, fails to recognize the genuine buying opportunity ofhis lifetime. This report presents what I believe to be the most convincingevidence that a SUPER BOOM has already begun and is now in progress.Don’t be late!
Yale Hirsch, Editor 
 Yale’s opening paragraph could have begun the May 13,2010, investor alert I sent to Almanac Investor subscribersdetailing my Dow 38,820 super boom prediction.
Stocks Catch Up with InflationEventually
500% Moves After Both WW 1 & WW 2Can It Happen Again? Dow 3420?
A
number of acrophobes perspired a bit and donned parachutes whenthe Dow crossed 1,000 recently. If they are uneasy now, what will theydo if the market climbs higher? And higher? And higher . . .?Perhaps we can relieve some of their anxieties by putting Dow 1000into perspective, considering the extent of inflation we have experiencedin recent years and the fact that the market does catch up with inflationeventually. There have been three highly inflationary eras since the CivilWar’s 74 percent rate of inflation. These periods of high inflation were alsowar related—World War 1, World War 2 and Vietnam.
There’s evidence that postwar super booms have existedfor longer than previously thought. In mid-1862 the market bottomed. The Civil War had just begun. The New York StockExchange was not yet established at Broad and Wall and wouldnot be until 1865.

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