The Objection of Gross’ Affection

I agree with John Carney at DealBreaker, it’s time we lay off Daniel Gross. Almost.
Gross, as you may know, promised to eat the first chapter of Dow 36,000 if Bush nominated an A-list Wall Streeter as the next Treasury Secretary. Well, you don’t get much more A-list than Hank Paulson, so we all had a good laugh at Gross’ expense.
But here’s a question: Of all the books to eat, why did Gross choose Dow 36,000? I mean, why not go for, say…Finnegan’s Wake? It still gets the point across, plus you get points for pretension. Or he didn’t even have to eat a book at all. I think a hat is more traditional. Or he could have gone with “I’ll eat Cleveland.” You really have lots of options to work with.
But there’s something about Gross and Dow 36,000. He has a rather bizarre history with this book. I’m not sure what to call it. An obsession? Gross simply MUST reference it, no matter how tangential it is to his topic. He can’t not do it. As “wine-dark” is to sea,” so Dow 36,000 is to…well, everything! Especially everything Republican.
Consider this from his Web site last year:

Of course, very few of the proponents of HSAs actually have them. How many people at the American Enterprise have them? Probably the same number who think the Dow should be fairly valued at 36,000–which is to say, two.

See! The book must be mentioned, even when it doesn’t help his argument. Perhaps the idea of Republican journalists entering financial economic theory is just too much. (Hassett, of course, is a professional economist.) How come Gross doesn’t refer to Paul Krugman’s “stock bubble” call of three years ago? I’d eat that column (someone’s got to).
But no, it’s always Dow 36,000. There was this from a Slate article last December:

There was a nice jobs report on Friday. The folks at CNBC are busting out the “Dow 11,000” hats again (though the “Dow 36,000” Windbreakers remain in deep storage).

Why? What does that even mean?
We can even go back in time. Here he is January 2003, attacking the Bush tax cut:

Council of Economic Advisers Chairman Glenn Hubbard, the Bush administration’s one-man-economic-policy-band, apparently believes that this move will boost the market by 20 percent. “This will provide a lot of juice to the market,” said Kevin Hassett, a co-author of Dow 36,000, told the New York Times. But if they believe that this proposal will achieve such results, then I’ve got some calls on Dow 36,000 to sell them.

Well, that’s no so bad. At least Hassett is mentioned so it’s not coming out of left field. Incidentally, was that another prediction?
Here he is in the New York Times last December:

In 2001, the stock market meltdown and a brief recession threw cold water on the widely held belief that the U.S. economy, juiced by a technological revolution, had entered a new era of limitless, inflation-free growth. But today, as bubble-era books like “Dow 36,000” collect dust on library shelves, evidence is mounting that there may be a New Economy after all.

Yuck. I certainly hope he doesn’t eat a dusty copy. DealBreaker has been kind enough to offer to buy a new copy for him. Gross noted that at Amazon, the book is going for four cents. But look! He’s checked the price before:

Why is Bush’s strategy stalled? I’d propose a few reasons:
1) Long Muscle Memory. It’s been five years since the market peaked. Though the S&P 500 has notched up three years in a row, Americans remain scarred by the bad end of the ’90s boom. (The mere mention of the words Dow 36,000, a copy of which is available on Amazon.com for 11 cents, can cause a room to empty.) It took nearly two generations for investors to get over the debacle of 1929. Psychological recovery from the ’90s bubble is going to take time.

Gross just can’t let it go. There were two other books written at the same time as Dow 36,000. One was Dow 40,000, the other was Dow 100,000. Neither had the benefit of being written by James Glassman.
Here’s Gross again:

And as we know from bitter experience (Dow 36,000, anyone?), optimism is always highest just when stocks are about to tank.

From his Web site, more parentheses:

Now, as deputy chief of staff at the White House and director at OMB, Bolten has been present in the room when every decision on fiscal policy was made–the reckless tactics, the reckless spending, the creation of the Medicare drug program, the absurd Social Security reform proposals, and so on. Brad DeLong has rightly dubbed the Bush administration fiscal policy as a “clown show.” I think it’s clear who the Bozo of the bunch. But Bolten has been putting on the red noses, frizzy wigs, and oversized shoes with the rest of them. Kevin Hassett may earnestly believe in what he says. (He also may earnestly believe that the Dow would be fairly valued at 36,000 today). But it doesn’t mean a reporter should (a) credit it; and (b) end the piece with it.

I could go on. There are more D36K mentions here and here.
Gross is one of my favorite business writers (look, he’s on my blogroll). But he clearly has an obsession. It’s madness! It’s hysteria! Wait…what was Dow 36,000 about again?

Posted by on June 2nd, 2006 at 6:05 am


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