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Dow 36,000 Is Coming

|Includes:Alcoa, Inc. (AA), AMZN, CAT, GOOG, HD, XOM

In their bestselling book "Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market", James Glassman and Kevin Hassett boldly predicted that the Dow Jones Industrial Average would eventually top the then outlandish price target of 36,000. Unfortunately, the book was published in 2000 and their timing proved peccable as several market crashes since then have left the pair with egg on their face, shirt, and britches.

However, with recent strength in the stock market about to push the Dow above 15,000, it is becoming apparent that they weren't necessarily wrong, possibly just a bit early. Most genius is not recognized during one's own lifetime, or in Glassman and Hassett's case their short lived financial careers' lifetimes, and their assertion is looking less pathetic and more prophetic with each passing day.

With Captain Ben Bernanke's steady hand guiding the Federal Reserve rudder that is steering the economy into prosperous ports while Europe flounders in stormy seas and threatens to run aground on Cyprus, the future bodes well for the U.S. stock market as it becomes the default destination for the ever increasing world monetary supply. Such a tsunami of easy money will be a rising tide that lifts all boats, including the juggernaut that is the Dow.

With Admiral (let's face it, he deserves a promotion already) Bernanke seeming to have finally cracked the code allowing Keynesian economics to unleash their awesome power and flourish worldwide, other nations like Japan are embracing similarly loose monetary policy as the performance enhancing drug necessary to get their economy back into the major leagues and ushering in an era of juiced investment returns. This has led to a spectacular rise in the Nikkei of 19% in the first quarter of this year alone, making the Dow's 11% gain look positively pedestrian.

With China not wanting to be left behind with their measly single digit economic growth rate, they will begin shoveling more currency into the furnaces of their engines that drive the global economy. Some of this overflow will find its way onto the U.S. Government's balance sheet by joining the Fed in buying the long term treasury bonds that no one else wants, because their performance will surely pale in comparison to the performance of stocks.

This should lead to even lower interest rates and a virtuous cycle that will spur further economic growth, most notably in the revived real estate market, both in China and the U.S. If real estate prices were merely to return to the historic growth we saw back in 2005-2006, this could add whole percentage points to both countries' GDPs and supercharge Dow stocks like Caterpillar (NYSE:CAT) and Home Depot (NYSE:HD) that are tied to construction and housing.

With commodity stocks like Alcoa (NYSE:AA) and Exxon Mobile (NYSE:XOM) also benefiting from these afterburner induced tailwinds, it's certainly conceivable that the Dow could continue its unrelenting march higher and approach Glassman and Hassett's 36,000 target sooner rather than later. After all, if the DJIA were just able to manage to sustain only half its first quarter performance, it should top 18,000 by year end and be halfway there.

Such strong performance would likely lead to a reevaluation of the overall potential of the Dow, not to mention a revaluation of the piddling 13 P/E ratio it currently commands. A well deserved expansion of this multiple would push the index well above 20,000 early next year. This is not even taking into account that by then laggards should be replaced with companies more deserving of a place in such a pantheon of performance, like Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN).

These new economy stocks will bolster the Dow even further and should return it to the double digit quarterly growth rates that this most recent quarter proved are not much of a hurdle even in the face of minor worries like the collapse of Cypriot banks under staggering amounts of bad Greek debt, or the possible downgrade of other bit players with even worse balance sheets, like Slovenia and some other country that was named after an obscure Italian explorer named Vespucci.

However, these smoldering concerns should be smothered by the blanket of currency being dropped from fire fighting helicopters around the world, leading to a utopian economy where the Dow can finally top the magical 36,000 barrier. I'll be cheering from the sidelines as I build fireproof lines out of silver to avoid the conflagration contagion, but I encourage the rest of you to join in and wish you all a happy April, fools!

Disclosure: I am long CAT, HD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.