February 24, 2011
Glassman’s Great Redemption?

Reuters’s Wasik asks: “Is it time to absolve Glassman for his irrational exuberance more than a decade ago?”
 
In a word, no. Rather, when you write a book that redefines the word moronic and/or profits at the expense of others, you should be condemned if you choose to write another book (if, on the other hand, Glassman was to take up say gardening, perhaps he would left alone). This strict maxim falls under the somewhat exaggerated notion that unlike getting caught for armed robbery - which after serving your time in jail you can slowly be integrated back into society - Mr. Glassman has not had to pay for his transgressions. Rather, Glassman spent most of the last decade defending almost everything in “Dow 36,000”, except for the prediction itself, and as
recently as 2009 contended “I’ve never regretted what we wrote in the book”.  Isn’t it funny that while promoting a new book Mr. Glassman finally stirs up a half-hearted apology?

In his new book, which I will not be reading, Glassman purportedly recommends a 50/50 split between stocks and bonds, with the equity portion of this mix being made up of developing market stocks, microcap stocks, dividend stocks, and value stocks.  He also makes the case for hedging, suggesting that investors write covered calls and purchase puts (a topic which itself warrants more than a book worth of study). Finally, while doing the circuit, Glassman talked about his previous book:

“I advocated the same strategy of heavy and diversified U.S. equity holdings that most sensible advisors espoused — but with an extra dollop of optimism. And I was wrong.”

From everything I have read about his new book, Mr. Glassman is still ‘wrong’. Why? Because he is still promoting the same drivel that most advisors espouse – namely that investment success relates to strict diversification ideas, that developing markets must be owned, and that hedging strategies (don’t worry, Wall Street has a product for this) are necessary in today’s uncertain world. 

Back during one of the most profound stock market manias in history, Mr. Glassman started with the platform of ‘new paradigm’ and built outrageous theories around his super-bullish case for stocks. The marketing ploy then was to take advantage of those afflicted with bullishness by being the most bullish. Now, with uncertainty raging and his previous platform completely sunk, Glassman adopts the roll of Mr. Hedger.  Question is, if Mr. Glassman followed his own advice, how much money does he have left to hedge?

In short, even though he has avoided any extra dollops of optimism/pessimism, Mr. Glassman is still offering what most of Wall Street is selling. 

How Now, 36,000 Dow? The Ominous Undertone of Rallies WSJ
"Dow 36,000" Author Changes His Tune, Now Touts Buying More Bonds TTicker  Fox News

 

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