Super Boom by Jeffrey A. Hirsch is a modest book with an immodest title. Stocks will return 9%/year over the next 15 or so years. Dow 38,820? C’mon, round it to 39,000 or 40,000!
Or is the book so modest? The Lehman Aggregate yields 3.5%. Puny. Moody’s Baa bond index yields 6.05%. Since 1967, we are near the lows on that yield. In relative terms, also puny.
It would be extraordinary for stocks to move ahead at 9% while low investment grade long bonds yield 3% less. The same applies to the wider spread over the Lehman Aggregate.
Bonds are saying that the returns to capital are low, and given the artificial capital created by quantitative easing, that is not a surprise. The Fed has consistently stopped the healthy process of failure, which redeploys capital to healthier and more profitable uses.
Now, maybe we get inflation to show up in a big way, and Dow 38,820 is the new 20,000 in real terms.
I agree with the thesis that the stock market has tended to move in waves. I think Hirsch is jumping the gun a little on the next wave, and overstating the amount of likely return.
Now, as for the book blurbs — they are all overdone. Better to understate the case. As to the book itself: Hirsch thinks we will work through our problems. So do I, but with more difficulty. With hindsight, he critiques those who wrote Dow 36,000 ably. He then critiques current bears, and I think he is right there as well.
He describes the last few stock market cycles of stagnation then boom. But is past prologue? I think it is in qualitative terms, but maybe not in degree, unless inflation reduces the real value of stocks. The author thinks that is likely, even with the biased measures of inflation employed by the government.
Finally, he shares some investment strategies that he thinks will be useful in the future. They aren’t worth buying the book, in my opinion.
If my father were the notable Yale Hirsch, I would have spent more time going over the stock picks in the book's appendix; the performance is better than the author conveys.
Who would benefit from this book:
If you lack optimism, you could benefit from this book. If you are optimistic already, you don’t need this book. Just realize that things are not likely to be quite so good as the author portrays.
Full disclosure: This book was sent to me, and I did not ask for it.