WTF Headline of the Day: "Dow 18,500? Believe It"

by: Barry Ritholtz

I got a huge kick out of this headline Tuesday night:

Dow 18,500? Believe It
http://biz.yahoo.com/ms/080212/228434.html?.v=1

Morningstar based this number on the "fair value estimates" of the index's components. I have no idea how fair value is derived -- earnings? ROI? cash flow?

Regardless, this is Morningstar's forecast over the next 3 years; that translates to 14.8% annualized price return, excluding dividends. With divvies, returns are 17% per year.

And why I was so amused? Well, first off, it's precariously close to exactly half of the infamous Dow 36,000 book by Glassman & Hassett we all know and love so much. Could the timing of that book have been any better, published as it was on October 1, 1999?

Second, I find that high degree of certainty in the headline, well, cute. It ignores the basic reality of forecasts, that no one knows what the future will bring. And that is always amusing to me . . .

Source:
Dow 18,500? Believe It
Jeffrey Ptak, CFA, CPA
Morningstar, Tuesday February 12, 7:00 am ET
http://biz.yahoo.com/ms/080212/228434.html?.v=1