BRIAN LAMB, HOST: James Glassman, co-author of "Dow 36,000." What happens if your
suggestion that within five to seven years the Dow will go to 36,000
fails? What happens to your--t--to your career?
Mr. JAMES GLASSMAN (Author, "Dow 36,000"): Well, it's funny, Brian.
I thought your were going to say what happens when--when I'm accurate.
What happens to my career? I hope my career continues. I think the
Dow is, actually, going to go to 36,000 soon. It's very difficult to
predict how long it's going to be. The point of the book is to say
that we have a new theory on valuing stocks. And based on our theory
the Dow should be at 36,000 right now, like this minute. How soon it
will take to get there, I don't think anybody knows. We say three to
five years. There will be dips along the way. But, you know, I'm
a--there's no doubt that Kevin Hassett and I are out on a limb. But
we firmly believe in what we say in this book.
LAMB: How many Americans own stock?
Mr. GLASSMAN: About 50 percent. It's quite remarkable. In 1965,
only about 10 percent of households owned stock. In 1990, about 20
percent. There was a survey in 1997 by--by Hart Associates that
showed ownership at 43 percent. And probably the best estimate today
is about 50 percent.
LAMB: Do you own stock?
Mr. GLASSMAN: I do. I do. It's certainly not all of my financial
assets, which is something that I say in the book and it's also true
of my co-author, Kevin Hassett. But I own a lot of stock. And I
think stock is a good thing for people to own if they're in for the
long term. That's important. If you ju--if you're just going to jump
in and out of the stock market, forget it. But if you can keep your
money invested for a long time, as we say in the book, makes a lot of
sense to own stocks.
LAMB: Where did you get the idea to do this book?
Mr. GLASSMAN: Well, it's funny because Kevin Hassett and I had
offices, we s--well, at that point we had offices next to each other
at the American Enterprise Institute. Kevin is a real economist. I
am--I just, as he--as Kevin says, `You just play one on TV.' But,
Kevin's a real credentialed economist and I am somebody who, at the
time, was doing work for AEI, a think tank, and also writing a column
for The Washington Post. And we both began to think about and talk
about the same thing at the same time, which is `What is going on with
the stock market?' The stock market continued to go up and up and up
and yet all the pundits, all the experts were saying, `It can't last.
The market's going to go into the tank. The stocks are overvalued or
at least fully valued.' And they were just wrong, consistently wrong.
So what we did was we set about to find a new way to value stocks
because we believed that the old way has been repudiated by history.
And that led to an article in The Wall Street Journal in March of
1998, to which we got a pretty nice response, and that led to a bunch
of publishers calling us about writing a book and so we decided to
write a book.
LAMB: Why the number 36,000? How'd you pick that number?
Mr. GLASSMAN: Well, 36,000 is a figure that we believe the market
will rise to and th--at that point begin to level off. We think
that--that stocks are, right now, undervalued--significantly
undervalued. A year ago when we began to write the book the Dow was,
actually, below 8,000. In late August, it was about 11,000. We think
it's going to 36,000 and the reason is the theory that we lay out in
the book. What p--the ratio of prices to earnings, a bunch of stuff
like that which is a little technical, although I think we--we make it
pretty simple in the book, brings us to a Dow of 36,000.
LAMB: What level of education, knowledge should you have to pick up
Mr. GLASSMAN: Not really all that much. The book is--is written
for--at the same level as my columns in The Washington Post. So it
doesn't require any grounding in economics. I, personally, only took
one economics course in college and I understand the book 'cause I
wrote it. It--it really tries to aim at a level of kind of general
intelligence, not specialized intelligence. And it really does two
things. It teaches people about the market in general and it lays out
this theory. And, actually, a third thing, which it tells you what to
do after that. You know, if you believe in the theory, and we
think--we think you probably will after you read the book, then here's
what you should do with your investments.
LAMB: Let me get off the book for a minute because I--I kind of want
to ask--I don't know when I first met you but I know that I probably
knew you the most--we did, as a network, and our audience, when you
were the editor and publisher of Roll Call.
Mr. GLASSMAN: Right. I was the editor.
LAMB: Your wife...
Mr. GLASSMAN: Mary Glassman was the--was the publisher.
LAMB: ...was the publisher. What did you do before that?
Mr. GLASSMAN: Before that--immediately before that I worked for US
News & World Report and The Atlantic Monthly, which is kind of ironic
since we have an exc--not ironic, but we have an excerpt in the--in
the September issue of The Atlantic Monthly, and I was on the business
side. I was the executive vice president of US News & World Report
and I was the publisher of The Atlantic Monthly magazine at the same
time. I did that for two years. Before that, I was the publisher of
The New Republic, again on the business side. And before that, I was
at The Washingtonian magazine on the editorial side. And before that,
I was running my own newspaper in New Orleans, doing both editing and
publishing. I've sort of bounced back and forth between the editing
side of journalism, which is, you know, fixing other people's stuff
and writing headlines and writing myself, and the publishing side,
which is running the business.
LAMB: How many years with Roll Call?
Mr. GLASSMAN: Six. I think that's right. I--I--I joined Roll Call
as editor, I believe, in 1987, and did it until 1993 when we sold the
paper. I originally got to Roll Call because I was being--I was
serving as a consultant to Arthur Levitt, who at the time was the
chairman of the American Stock Exchange and wanted to get into the
publishing business and was looking around for publications. I was
helping him. I helped him buy it with no intention of ever working
for it. I knew nothing about Capitol Hill, by the way. And--but
I--but he persuaded me and so I started to do that. And then, Arthur
Levitt ended up being chairman of the Securities and Exchange
Commission. We sort of both--we're both kind of in the same business
LAMB: How did you know him?
Mr. GLASSMAN: I just--I met him through--I, actually, can't even
remember who it was, but just a mutual friend. I had just left US
News & World Report and I was doing some consulting. And this friend
said, `Arthur, here's a guy you ought to talk to if you're thinking
about buying publications.' The first publication we looked at, in
fact, was National Journal, which is frequently mentioned on this show
and you've--you have--you have a lot of National Journal people here.
LAMB: I want to come back and ask you more about Roll Call. But
I--I've always wanted to ask you how did you get to--from being editor
of Roll Call to The Washington Post as a columnist, writing
aggressively about stocks and then all the way out of that to this
Mr. GLASSMAN: Right.
LAMB: In other words, what was going on in your own mind about all
Mr. GLASSMAN: Well, in--just before I went to Roll Call, I wrote a
column at--it was really Marty Peretz's suggestion, the editor in
chief of The New Republic, for The New Republic called The Money
Culture. And I did it for about a year and a half and I really
enjoyed writing it. I wrote--it was like every two or three weeks and
it was about Wall Street and society. That was basically it. And
even before that, I wrote a p--a personal finance column for The
Washington--for The Washingtonian. And even before that, when I was
running this kind of alternative, almost hippie newspaper in New
Orleans I covered business. I was just interested in the subject.
And so when I left Roll Call, when we sold the newspaper to the
Economist, I really was at--delightfully out of a job and really
didn't have anything to do. I went to go to talk to Don Graham, who's
the--he's the CEO of The--of The Post and I said, `You know,
I've--I've lived in Washington most of my life. I grew up here. I
would really like to do something with The Washington Post.' And he
said, `Well, what do you want to do?' And I said--I mean, it was
really a question whether it was on the business side or on the
writing side. I said, `Well, you know, I'd like to write the column
that I was writing for The New Republic for The Washington Post.' And
he said, `Great. We've got a new business editor, David Ignatius,
talk to him.' And so I did. The timing was--just happened to be
perfect 'cause David was taking over as--as editor of the section and
so that's what I did.
But as it evolved, it wasn't really the--the column that I wrote for
the--for the--for The New Republic. It was a completely different
column. And I got more and more interested in stocks and in investing
in general. And I, actually, wrote two columns. I wrote for The Post
for six years, up through the end of June. I wrote a--an investing
column and I also wrote for three of those six years an op-ed column,
which was political economic. I stopped doing that back in--in
January. But what I found was I was more interested in the financial
side and so were my readers. I've certainly kept an interest in
politics and there's some politics or public policy kinds of things in
LAMB: But one of the things that comes through so strong--strongly in
this book or--and the reason why we were interested in it here is
that--it's "Dow 36,000," it's about the stock market. But there's a
chapter in which you say that the crash of '29 led to almost all the
things that we have now that were brought about by government, from
Social Security to welfare and all that. Explain that.
Mr. GLASSMAN: Well, the crash of s--of '29 was an enormously
important event in American history. Franklin Roosevelt stepped in
and--in an emergency and essentially said, `Look, we can't have
the--we can't--we can't have people starving on the streets. We can't
have people in the s--in dire poverty.' Unemployment was at 25
percent. The stock market, at one point, was down by 75 percent. And
at the time, a lot of individuals were in the market. A lot of them
were margined, which means that they borrowed money to go in the
mar--in the market. It was--it was really a devastating time. So at
the--at that point, Roosevelt put in place, with the help of Congress,
the New Deal, which was a s--a structure that really bought government
into people's lives in a much more aggressive way than it ever had
We--we got Social Security out of it. We got, pretty much, welfare as
we know out of it. We got a lot of regulations, a lot of the federal
regulatory agencies that are around now are th--were the result of the
crash and its aftermath. What we argue in the last chapter of the
book is that broad stock ownership is creating the same kind of change
that the crash created 60 years ago--70 years ago now. And as more
and more Americans own stock, it's going to have a big effect on
politics and I think a big effect on policy because they'll have much
more of a stake in American companies than--than they do if they don't
own stock. They will probably change their views and we're alre--I
think we're already seeing that on such issues as taxes and
regulation. And were already seeing a--kind of a dismantling of the
New Deal and I think that will proceed very quickly as more and more
Americans own stock.
LAMB: You mentioned Arthur Levitt and he's the head of the Security
Exchange Commission. What does that organization do?
Mr. GLASSMAN: The Securities Exchange Commission is the main
regulatory agency for the markets, for the t--the financial markets
and also takes care of the reporting of companies whose stock is
traded in those markets. They, by the way, run a terrific Web site.
They have--they have something called EDGAR, and you can find out
about--all the filings are now just up there on--on the Internet. A
lot of what the SEC does, actually, is done not necessarily by decree
or by law as by pressure or a persuasion. The exchanges, actually,
are self-regulated as much as that is possible. But frequently, they
self-regulate, they--they kind of p--institute rules at the urging of
the SEC. And it's--it protects--I--I guess if you asked Arthur
what--you know, what his main job is, he would say to protect
investors. And while I am generally skeptical about the role of
government in our lives, I think the SEC does an excellent job of
making people confident when they invest their money. Doesn't mean
there's anything guaranteed. But what they know is they're getting
honest figures from the companies that are reporting their profits and
their--and their sales because if they don't give you pro--accurate
information, it's fraud and people can go to jail.
LAMB: Now you say he bought Roll Call...
Mr. GLASSMAN: Correct.
LAMB: ...when he was head of the American Stock Exchange.
Mr. GLASSMAN: Right. He was the chairman of the American Stock
Exchange. He wasn't the--he wa--I, actually, don't know exactly what
his--the difference between the chairman and the--and the president.
W--I don't know if he was actively running it on a day-to-day basis,
but he was the chairman of the American Stock Exchange. That's
LAMB: Why did he want to own Roll Call?
Mr. GLASSMAN: He wa--he was always interested in publishing. He had
gotten into publishing ba--I think it was his first job or his second
job out of college he worked for Time--Time-Life, as it was called at
the time. And he likes Washington. I mean, he's--he--he enjoys--now
he enjoys living in Washington. He didn't at the time.
LAMB: What was and what is that publication for people--you know...
Mr. GLASSMAN: Sure.
LAMB: ...most people outside of Washington don't read it.
Mr. GLASSMAN: Roll Call was a publication that was started in 1955
by a guy named Sid Yudain, who was a staffer for a Republican
congressman. And it wa--and the way Sid conceived it and the way I
think it still is is as a--kind of a hometown newspaper for Congress
and for the people who work on Capitol Hill. It was a brilliant
concept. It was kind of a cross between a small-town newspaper, a
newsletter and a trade publication. Then in 1986, I think it was,
Arthur Levitt came in, bought the publication from Sid and pumped a
lot of money into it to improve the quality of the reporting. We went
twice a week, we aggressively sold advertising and really made it
into, I think--I think--Mary Glassman and I think, with Arthur, made
it into a financial success, which it had not been although it was
quite influential. And made it, I think, much more influential on the
Hill. Now it's a--really a thriving enterprise.
LAMB: What did you learn about Capitol Hill as the editor of Roll
Mr. GLASSMAN: Well, I earn--I learned a lot. I mean, wh--I
knew--you know, I was born in Washington. And I have to say that I--I
rarely, if ever--I don't even know how many times in my entire life I
had been on Capitol Hill. It was not--it was kind of alien territory.
One of the things I learned about Capitol Hill is that it, indeed, is
a self-contained community, somewhat insular, has its own culture, has
its own kind of style. And it's difficult to understand that unless
you're kind of in the middle of it and that's what I think--I think
that's a contribution that Roll Call made. The thing about Roll Call
is it doesn't report on policy, which is what most people do in
Washington. You know, like the progress of a specific bill, that kind
of thing. Instead, it reports on what's going on within this little
town, let's say secure--important security issues, who--or who's going
to be the n--next chairman of what committee, a lot about politics,
about congressional politics, who's going to get re-elected, that sort
But what did I learn? I think I learned that Congress is a very
different kind of institution from the executive branch. A--it's much
more, kind of a self-perpetuating insular sort of place. I generally
was impressed with the level of intelligence here, maybe more with
people in the House than in the Senate. It--a--and--and the level of
intelligence and incredible hard-working activities of--of--of the
LAMB: From what you know from traveling around the United States and
talking to people, should they know more than they do about Congress?
Mr. GLASSMAN: I think so. I think they really should. I mean,
C-SPAN does an excellent job. I think Roll Call does a good job.
But, in general, most newspapers don't report very well about the
goings-on in Congress. That changed a little bit after the House Bank
scandal, which was a story I proudly say that Roll Call broke, Tim
Berger, who is now I think at The New York Daily News. But--and after
that, you know, it became clear. Wow, things that go on within
Congress can actually affect whether my congressman survives or not.
So--so there was--there certainly was more interest in what happens
internally as a result of that, but I think, in general, people don't
know am--enough about what goes on in Congress. Lots of very
interesting hearings, the battles for committee chairs, things like
that, I think are very interesting. But the press has mainly focused
on what happens in the White House, which is also very much more
orchestrated than what happens in Congress.
LAMB: Go back to your book, "Dow 36,000," and Arthur Levitt, and your
view of how all this works. 'Cause you're basically saying that
because the stock market is becoming so successful that it's going to
lead to deregulation.
Mr. GLASSMAN: Right.
LAMB: Why is it--i--and, Arthur Levitt is the chairman of the
Securities and Exchange Commission, he came out of the American Stock
Exchange, what's your view of people coming out of industry and then
Mr. GLASSMAN: Well, I think that's something you gotta watch out
for, but in general, I don't think it's a--I don't think it's a
problem. I don't think there are--there are very few people who come
in from industry and then become reluctant regulators. Maybe they
should be more reluctant than they are.
LAMB: Why do you think that's serious?
Mr. GLASSMAN: I--I don't know. I think they kind of--they get
imbued with a--with the culture of Washington and the culture of their
own institution. It's very hard when you come from outside to become
the head of a department and not have the--the bureaucrats, the people
who've been in the--in the department for a long time and the
traditions of the department influence you. I mean, you know, think
about Bill Bennett, head of the Education Department, you know, he's
the kind of person who might have wanted to, let's say abolish the
Education Department. There's never any chance that he would do that.
Even--probably even better example is Lamar Alexander, who, you know,
talked about deregulation and how he was going to, you know, get
government out of everybody's hair and really didn't--certainly didn't
do that when he was head of the Education Department. Even Jack Kemp,
as the head of Housing and Urban Development, I mean, you
won't--you--it's hard to find a more--someone who's more skeptical of
the role of government in--in that kind of area. And he certainly
didn't act in that way. So I think you get kind of co-opted by--by
the institutions themselves.
LAMB: Go back to your book, again. The crash of '29 led to all the
new programs and you say the stock market will lead to the
Mr. GLASSMAN: Right.
LAMB: The chicken and egg thing here, though. What is the
government--is the government doing anything to create this stock
Mr. GLASSMAN: Well...
LAMB: ...you're suggesting could go to 36,000?
Mr. GLASSMAN: I think that's a--that's a good--that's a very
important question and it's--it's kind of a complicated answer. The
argument that--one of the arguments we make in this book is that
people have been really scared of stocks, much more than they should
have--they sh--than they--than they should be. And when you're scared
of a particular kind of investment, it means that you don't want to
pay a high price for it. And as a result you get a pretty big return.
That's essentially what's happened with the stock market. Now we--we
see people becoming less scared of the stock market, understanding
that it's not as risky as they thought it was. And therefore, are
bidding up the prices of stocks. And we think that's a rational
Now how much of that decline in risk is the result of government
policies? I think some of it is. And we say that in the book. We
list about 10 different risk factors we think have de--are declining.
And one of them really is better government management, both on the
monetary side, which is what the Federal Reserve is in charge of, and
on the fiscal side, which is essentially, taxes, and on the regulatory
side as well. Also, national security has generally improved. You
know, if you're in a cold war, if you're worried about a nuclear bomb
going off, you're apt to be a little bit more reluctant to put a lot
of your money into the stock market. So in those senses, government,
I think, has had something important to do with the rise in the stock
LAMB: What's driving it?
Mr. GLASSMAN: What is driving what--what government is doing or...
LAMB: No, you was talking about the efficiencies and the better-run
government and all that. What is driving it?
Mr. GLASSMAN: I think it's really--I think it's--I think it's pretty
much evolutionary. In a way, the New Deal was an aberration, in my
opinion, that America has always been a country which--on the spectrum
of freedom or private enterprise or, you know, slug it out in the
marketplace, competition being the best way to solve problems and get
the best products, the best services at the lowest cost. I mean, this
country, throughout the 19th century and through most of the 20th
century, was on that part of the spectrum.
And then the crash occurred and then government stepped in. It was an
emergency and I think it was perfectly appropriate to do that. Now I
think over the last six years we've seen a--a slow evolutionary
dismantling of the structures that were put in place during a period
that began with the New Deal and probably ended arou--with Lyndon
Johnson, maybe ended with Richard Nixon, somewhere in there. Since
then, things have changed and why? I think it's probably because
people have--have become more understanding that markets are usually
the best solution, especially to economic problems. And more and more
people have come around. You--you take somebody like Larry Summers,
who's the secretary of the Treasury, his tradition--certainly the
tradition in which he was schooled was generally Keynesian in the
sense that government intervention was almost a very necessary part of
running any kind of an economy. Well, based on what he's been saying
in recent years, he doesn't believe that anymore. He believes that
markets are the best way to solve problems.
LAMB: Have you ever worked in government?
Mr. GLASSMAN: No, I never have.
LAMB: Do you ever want to?
Mr. GLASSMAN: I don't think so. I mean, maybe if it was--if it was
the right job I would want to. But--and I don't--I'm not exactly sure
what that right job would be. Secretary of the Treasury, I would take
LAMB: Do you have--do you put a label at all on yourself? Any way to
define your own politics?
Mr. GLASSMAN: Well, I--the label I put on myself is libertarian,
which is--no, not Democrat, not Republican. It means that I think
that--that liberty as opposed to other kinds of political values is
the most important one. I mean, I'm not a--kind of a raving
libertarian. I don't believe that everything ought to be privatized,
that--you know, H Street in downtown Washington should be privatized.
But I do believe that private solutions are frequently a lot better
than government solutions, partly because they give people personal
freedom, which I think is something that's enshrined in the
Declaration of Independence and the Constitution. So that usually
puts me on the side of Republicans on economic issues and frequently
on the side of Democrats on social issues. In other words, I don't
believe, as a lot of conservatives do, like--let's say, Bill Kristol,
the editor of--of--of The Weekly Standard or even Bill Bennett, whom
I've--both of whom I really like personally, that government should
play a role in kind of enforcing a--kind of a moral code for
Americans. I think that's--that's not the role of government. So in
that sense I'm a libertarian. I'm actually a registered Democrat,
although I frequently vote Republican in elections.
LAMB: Where do you live?
Mr. GLASSMAN: I live in Washington, DC, but I spend a lot of time in
New York, and I think more and more I'm moving to New York. I would
say, at this point, it's probably half and half or maybe even more New
York than Washington.
LAMB: You made a reference to the American Enterprise Institute
Mr. GLASSMAN: Mm-hmm.
LAMB: Are you no longer with them?
Mr. GLASSMAN: No, I am with them.
LAMB: Oh, I thought you said you weren't.
Mr. GLASSMAN: Hmm-mm.
LAMB: What are you doing with them?
Mr. GLASSMAN: No, I'm very much with them. I was--I've been with
the American Enterprise Institute since October of 1996, and I am--I
do lots of different things, but mainly research on different
subjects. They're very tolerant of things like writing books. I
mean, in the last year, I've been writing my book, writing columns and
that's something that the American Enterprise Institute is very happy
for me to do. Before that, I did a project on charter schools, which
interested me a lot, and on Social Security--reforming Social
Security, which I continue to be interested in and I've--I te--last
year testified--or this past year testified in Congress three times on
the subject. I'm really interested in Social Security, but I've not
written about it too much lately.
LAMB: Let's start with the title of your book...
Mr. GLASSMAN: Mm-hmm.
LAMB: ...for a moment, "Dow 36,000." What does Dow mean?
Mr. GLASSMAN: Dow is shorthand for the Dow Jones industrial average,
which is a group of 30 stocks, including companies that most people
have heard of, like General Electric, Exxon, J.P. Morgan, which is a
bank, a diversified group of stocks, which represents the US economy
pretty well, remarkably enough, even for 30 stocks. So the Dow has
been taken as a--kind of a proxy or a substitute for the market as a
whole, throughout--well, certainly throughout the last 70 or--70
years, at least. And so when we wanted to kind of use a shorthand for
the market as a whole we use the Dow. There are other kinds of
indexes and averages that you could use, like the Standard & Poor's
500 stock index, but the Dow is what--what most people follow and it's
actually a pretty good reflection of the market.
LAMB: Standard & Poor's 500, what's that mean?
Mr. GLASSMAN: That's another index and that includes 500 stocks
instead of just 30. And that's put together by a company--investment
company called--research company called Standard & Poor's. It's kind
of a funny name. And it's 500 stocks and they're weighted or
their--their--their value in the index is according to how big they
are in the stock market. So the number one stock in the S&P 500 is
Microsoft. Number two is General Electric. Microsoft is not even in
the Dow 30, so you have two different averages that most people tend
to use. And curiously enough, they've been pretty consistent over the
years. In other words, the Dow, even though there are only 30 stocks
in it as opposed to 500 stocks, is a good reflection of the market.
And the whole--the stock market as a whole--if you take the three
exchanges, th--that most people trade their stocks on, the New York,
the American and the NASDAQ, they're to--a total of more than 7,000
stocks. So it's very convenient to have an average like the Dow that
reflects the whole market.
LAMB: What's the Russell 2000?
Mr. GLASSMAN: The Russell 2000 is another one of these averages and
it's--it's put together by a company called Russell, which is based in
California, that focuses on small stocks, what they call small cap or
small capitalization stocks. The capitalization of a company is the
number of shares it has outstanding times the price of the share. So
it's really the value that stockholders put on it. So Microsoft,
right now, has a market cap or a value of a half a trillion dollars,
$500 billion. In other words, if you wanted to buy Microsoft today
and you happen to have $500 billion, you could theoretically buy it at
that price. The small cap stocks that are in the Russell 2000
generally have market caps that are below $2 billion and a lot of them
are in the few hundreds of millions of dollars.
LAMB: How do you determine the market cap?
Mr. GLASSMAN: You--you take today's stock price--so let's say
Microsoft's stock price is--let's make it simple. Let's say you have
a company that's got a market--a stock price of 100. Let's say
Microsoft is 100. It's not really, but let's just say it is. And
let's say there are five billion shares outstanding. In other words,
stockholders own five billion shares. You just multiply five billion
times 100 and you get $500 billion and that's the value or market cap
LAMB: Which company has the largest cap?
Mr. GLASSMAN: That's it. Microsoft...
LAMB: Number one.
Mr. GLASSMAN: ...has the largest. Is number one and that just
happened last year. Microsoft is a--is a very new company. I mean,
it's less than 20 years old. It's quite remarkable what's happened.
It passed General Electric last year as the largest--largest
LAMB: And who are some of the other companies you'll find--or what
are some of the other companies you'll find on the Dow 30?
Mr. GLASSMAN: The Dow 30, companies like Johnson & Johnson, which is
a big pharmaceutical company; Coca-Cola, which is one of the largest
companies in America; Exxon; let's see, there are a couple of other
oil companies; J.P. Morgan, which is a--a bank. And then there comes
some--some sort of outliers that you wouldn't expect, like Union
Carbide, which has been on it for a long time and are still there.
The Dow gets changed every once in a while. Every few years the
people at Dow Jones revise the index. And it's interesting that the
last time they added a few technology stocks. It used to be
called--well, it still is called the Dow Jones industrial average.
But these stocks are not really industrial. I mean, the--J.P.
Morgan, the bank, is not industrial.
They added a few years ago Hewlett-Packard, which is a technology
company that's based in California. They didn't add Microsoft and, in
fact, if they had added Microsoft, the Dow would probably be a lot
higher today. But in general, it's a pretty good
reflection--it's--it's quite amazing how you can just take 30 stocks,
and as long as they're diversified--you know, you've got one
in--the--General Electric's a very diversified company itself. It's
in finance, it's in lightbulbs, it's in--you know, it makes airplane
engines. You've got banks, you've got oil companies. You've got a
pretty good ref--reflection of the stock market as a whole.
LAMB: Who owns the New York Stock Exchange?
Mr. GLASSMAN: It's owned by the members, who are--who bu--who own
seats on this--the exchange, which allow them to trade. So in a--in a
way, it's like an association or almost a club. Now you can buy a
seat. If you would personally like to buy a seat today, seats are
actually, you know, go--are--are--are offered. You know, if I owned a
seat, I could sell it to you. And there's a--an active auction market
in seats. The New York Stock Exchange has announced that it is going
to go public--it hasn't said exactly when--which means that it will
offer stock to the public rather than having the stock just owned by
the--the members who do the trading.
LAMB: Who owns the American Stock Exchange?
Mr. GLASSMAN: The American Stock Exchange actually just merged--or
merged recently with the NASDAQ, which is the--used to be called
the--it's the stock market for sort of smaller companies. Not really
even true anymore. And the NASDAQ also has given some indications
that it may go public, so that people can own stock in the NASDAQ.
Well, what's interesting, actually, about the exchanges lately is that
there's--competition is springing up through the Internet from kind of
virtual exchanges or--electronic exchanges is a better way to put it
rather than sort of bricks and--brick-and-mortar exchanges, where
there are people on the--on the floor who are trading stock.
Now you've got companies such as Island that are trading
electronically, and they are threatening the existence of
old-time--of--of--of these traditional exchanges. I think that the
New York Stock Exchange, which is a--a very well-run organization, is
probably going to survive and NASDAQ will survive, but in a different
kind--maybe in a different form.
LAMB: Who was Dow and who was Jones?
Mr. GLASSMAN: Let's see, you got me there. Dow--I actually don't
remember their first names, but they were--if--if I remember
LAMB: So it's not Mr. Dow Jones.
Mr. GLASSMAN: No, no, they're--there is--there was a Dow and there
was a Jones. And I can't remember their first names, but they were
two guys who came up with this brilliant idea of somehow getting--by
just selecting a few stocks, giving the public an indication of what's
going on with all stocks. Now there are lots of ways to do--there's a
thing called the Wilshire 5,000, which is an--Wilshire's another
California-based investment company that tries to take all the stocks,
all traded stocks, into account. All--they say 5,000, but actually
there are more than 7,000 stocks in the Wilshire. So you have lots of
ways to figure out what's going on with the stock market now.
LAMB: Who was Russell, or who is Russell?
Mr. GLASSMAN: Fr--I think his name is Frank Russell--Frank Russell
and Company, an investment firm.
LAMB: Is there a Mr. Standard and a Mr. Poor's?
Mr. GLASSMAN: I don't--I think you--I'm not really sure. That's a
really good question. I don't think so, but it's kind of a--it's a
funny name. When I first saw it before I knew anything about
investing, which is not too long ago, I used to think Poor's--I
thought it had something to do with, you know, like, these were the
poor stocks, plus a few of the standard stocks. But I don't think
that's--that's what it means.
LAMB: So if somebody buys your book, "Dow 36,000"...
Mr. GLASSMAN: Yeah.
LAMB: ...what do they get? I mean, what--who--who would you--who do
you envision reading this?
Mr. GLASSMAN: I hope that--that the average American will read this
book. I mean, I don't--it--it doesn't require any special
intelligence to read it. Certainly people who already own stocks and
people who are--50 percent of Americans who are already in the
market--many of them really scared. They've seen the market go up and
up and up; they've heard the pundits say that stocks are overvalued or
fully valued and, `Watch out. Things are going to get bad.' They've
heard this for years and years, by the way, as the market has tripled,
quadrupled. In fact, the market has gone up by a factor of 14 since
In other words, if you put $10,000 into the Standard & Poor's Index,
into those stocks, or even into the Dow--actually, into the Dow--let's
use the Dow as an example--you would today have $140,000. Started off
with $10,000, you have $140,000 even if you didn't reinvest the
dividends. You also get the dividends; you can spend those. It's
been an amazing increase. And as a result, people are scared. I
mean, you--you--you can't blame them. They think, `Gosh, I made all
this money. How long can this last?'
Then you've got other people who are not in the stock market who are
saying to themselves, `It's too late. You know, I--I missed the big
increase in the market.' They've probably been saying this for the
last five years as the market has continued to go up. So our book
gives those people a level of comfort because we explain that, in
fact, the market's not overvalued and we--we show why.
LAMB: What's the Charlie Chaplin story?
Mr. GLASSMAN: Oh, this is a neat story. And, actually, it's a story
that I got from Martin Frisdon's book. It was--the book is called "It
Was a Very Good Year," which is a book about specific interesting
years on Wall Street. And we elaborate--Kevin and I elaborated on it
in the book.
What happened was Charlie Chaplin was a big investor in the stock
market. Charlie Chaplin, the--the famous actor, in his heyday was
really--gets--in--in the '20s and the teens and--and on up into the
'50s. And he had a lot of money in the stock market, and he--he was
friendly with Irving Berlin, the great songwriter; wrote "White
Christmas," among many others. And just before the market
crashed--actually, the day before, according to the story, he urged
Irving Berlin to get out of stocks. He, himself, Chaplin, had sold
his stocks about a year before, and--and Chaplin was saying, `You've
got to get out of stocks. The unemployment rate is 14 percent in
America. Things are really bad. You've just got to get out of
Well, the next day, of course, the market crashed. And in a sense
Chaplin was right. Of course, he was wrong about the 14 percent. The
unemployment rate was not 14 percent. No, it wasn't 14 percent. He
said there was 14 million Americans out of work. There weren't 14
million Americans out of work. In fact, the unemployment rate at the
time was very low. So Chaplin was right, but probably for the wrong
But what we talk about in the book is that even though Chaplin was
right for the short term--and Berlin lost a lot of money in the
crash--if Berlin had stayed in the stock market, it wouldn't have
taken very long before Berlin would have been considerably ahead of
Chaplin--of course, depending on when Chaplin got back in. And you
would assume, if you were Charlie Cha--and we don't know this for a
fact, but we conjecture in the book that if you're Charlie Chaplin,
you're not going to get back into the stock market during the
Depression. It was the--the '30s. Most likely you're not going to
get back in during World War II. That was--that seemed to be a bad
time. And yet by the early '40s the market had recovered all of its
And if Berlin had stayed in the market until his death, he would have
had--I can't actually remember the figure but well up into the many
tens of millions of dollars Berlin would have had, despite this large
loss. And the c--there's a slight catch, which is Irving Berlin lived
to be 101. But, still, the lesson is that you should be a long-term
investor if you're in the stock market; that there will be ups and
downs. And we even believe, even as optimistic as we are, Kevin
Hassett and I, about the--about the market, that there're going to be
dips, there may even be short-term bear markets. But in general, the
market is going to go up.
Mr. GLASSMAN: That's been the history, and we think that's
the--that's what's going to happen.
LAMB: ...where did the bull and the bear references come from?
Mr. GLASSMAN: I don't know.
LAMB: What do they mean?
Mr. GLASSMAN: Well, bull--the bull is the indicator of optimism and
of a market that is going up and up. A bear is the indicator of a
market that is going down and that has been down for a long period of
time, in some cases.
LAMB: So should we assume that you're the bull--bullish--or
Mr. GLASSMAN: We are very--we are--yes, Kevin and I are very
bullish. We are very bullish on the stock market. And it's--it's
actually not easy to find bulls these days. There are people sort of
moderate bulls; people who will say, `Yeah, I think that the market'll
go up a little bit--or keep going up a little bit.' But, in general, I
would say that the tenor of the market, from the people on Wall
Street, is they're nervous and, if not outright bearish, they are only
moderately bullish. We are superbullish.
LAMB: But you do dance in this book around the Internet stock issue.
Mr. GLASSMAN: Right.
LAMB: And even as we record this, there are a number of weeks before
it'll air, the market could fluctuate a lot. Somebody has lost a lot
of money in the last couple of months for the Internet stocks. Who?
Mr. GLASSMAN: Well, there are a lot of people who have invested in
Internet stocks and have not done very well. First thing, let me say,
is that the Dow Jones industrial average does not include Internet
stocks. There's certainly companies that are influenced by the
Internet, but it's really--these are not Internet stocks.
In the book, we talk about Internet stocks. And what we say is
something that I've said in my column in The Washington Post many
times, which is that it's very difficult to analyze these companies
because most of them don't have any earnings. The value of a company
really depends on the earnings or the profits that it's making.
That's--that's one of the major points we make in this book. As Kevin
and I say, we like things we can count. Basically, we like dollars.
We like cash that we can count, profits. And you can't count the cash
with most Internet stocks. So for that reason, we tell people to be
wary of Internet stocks.
On the other hand--and this is what you mean by dancing around--we do
believe that the Internet is changing the world and will continue to
change the world. And it's--it's a phenomenal advance and will
probably have a huge effect on the economy as well--a huge positive
effect. And for that reason, our advice is to own s--in your
portfolio of stocks, somewhere between zero and 15 percent in
companies that have something to do with the Internet; certainly no
more than 15 percent.
But it's very har--hard to analyze those companies, and it's my own
belief that you ought to buy those companies more out of love than out
of reason because you really can't analyze it. If there's a good
idea, I don't see anything wrong with putting some of your money into
the Internet stocks, as long as you're diversified. Don't put it all
into one Internet stock.
LAMB: Well, why don't we just take your beginning there of a
scenario? Let's take $100.
Mr. GLASSMAN: Mm-hmm.
LAMB: You say, `Put $15 in the Internet stocks.'
Mr. GLASSMAN: At the most. At the most.
LAMB: At the most. Where would you put the rest of your $85?
Mr. GLASSMAN: I would put--we recommend putting most of it or let's
say $50 or $60 of it into growth stocks; that is to say larger
companies that have shown in the past that they can increase their
earnings at a pretty good clip and have a--what we call a moat around
their business, a kind of a franchise. Good example of a moat is the
brand name of Coca-Cola. I mean, nobody else can make Coca-Cola. One
of the companies we talk about in the book is Tootsie Roll. Now I
have to say I'm not a great fan of Tootsie Rolls. I don't sort of eat
them every day. But Tootsie Roll is a--is an old brand name that is
an extremely well-run company. And while there may be competitors in
the candy business, nobody's going to make a Tootsie Roll. Tootsie
Roll also makes other stuff like Charms and Junior Mints and that sort
So brand names can--can--can form a moat. So we like that kind of
company. But we also think that it's important to own at least a
little--little part of your portfalio--portfolio should be in foreign
stocks, international stocks because there are--there are lots of
things going on outside this country, even though our theory is mainly
a US-based theory.
And you should also own stocks that have been generally overlooked by
the--by the market, which are called value stocks; stocks that are not
really high priced, stocks that people tend not to like very much. So
that--that--that's about it. We go into this in great detail because
a lot of it depends on your own circumstances, like: How old are you?
What is your tolerance for risk? That sort of thing.
LAMB: But--but look ahead, we get back to the government connection.
Mr. GLASSMAN: Yeah.
LAMB: Money is what we talk about all the time on this network and
the way the government distributes it. What about the--the constant
reference that Alan Greenspan is the most powerful human being in the
United States, in any government? Deal with that.
Mr. GLASSMAN: Well, I think that that's accur--well, I'd say the
president is the most powerful person, but I would say Alan Greenspan
LAMB: Why? What does he do?
Mr. GLASSMAN: What Alan Greenspan does is regulate the money,
regulate the--the dollar, which is the unit of currency that we all
use, whether we like it or not--the value of that unit of currency.
And he does that mainly by taking actions in the bond market that
adjust interest rates, OK? So people say, `Well, the Fed raised
rates.' And that's shorthand for what--what the Federal Reserve does.
He's the chairman of the Federal Reserve.
So the main thing he's worried about is that inflation will erode the
value of the dollar. For example, if inflation jumps to, let's say, 7
percent--well, in the next--that means in the next--less than 15 years
from now, the va--the value of a dollar will drop from a whole dollar
to 50 cents. And that can be very demoralizing. It can cause all
sorts of problems with businesses making decisions for the long term.
Inflation is not a good thing. So what the Fed does to prevent
inflation is it ratchets up, raises insert--interest rates. And it
does that through kind of an arcane method of going into the market
and buy--either buying or selling bonds. But the effect is to raise
LAMB: What's a bond?
Mr. GLASSMAN: A bond is a loan, which a lot of people don't
understand. It's a--when I buy a bond, I am making a loan either to a
company or to the federal government or to a--a municipality. And in
return for that loan, I get an IOU back, which is a bond. So in
simplest terms, let's say you buy a Treasury bond, US Treasury bond,
that matures in, let's say, 30 years, which is the longest term
Treasury bond. Let's say you pay $1,000 for it. What that means is
you're lending the federal government $1,000, so it can use the money
to--to pay for government programs because, in the past, the
government has been running a big deficit. The government starts
running a surplus for a long time, it's going to end up retiring all
of its bonds, but that's another story.
OK, so I lend the government $1,000. The government pays me on a
twice yearly basis a total of $60 a year, let's say, if the interest
rate's at 6 percent. And I've got that as a guaranteed payment from
now for the next 30 years. And at the end of 30 years the government
will give me back my $1,000. It guarantees it.
Now in the meantime, I can actually go into the bond market if I
decide, you know, `I don't want to hold this bond for 30 years. I
want to sell it. I need the money,' I can go into the bond market
through my banker or broker or sometimes do this sort of thing
yourself and sell it to somebody else--sell the bond to somebody else
and get maybe $1,000, maybe $1,500, maybe $750. Depends on what the
market is like at the time. But if I hold it all the way to the end,
I'm guaranteed to get $1,000. My loan is being repaid.
LAMB: So what do you make of, you know, the next year or so in
politics and what a candidate can do when they--is--is this country
really humming along right now? Is what we see in the market
Mr. GLASSMAN: This country is really humming along right now. And
that's--there's no guarantee, you know, that it won't--that we won't
run into some rough economic times as a result of some outside
influences. I mean, if there's a war, if there's--you know, something
happens with oil in the Middle East. And certainly it's...
LAMB: But we had--but we had a--a number of wars and--and...
Mr. GLASSMAN: That's right. That's right. We have--we should not
underestimate the fact that we have an enormously powerful economy.
Why is a good question. I think part of it is that businesses
restructured themselves in the--beginning in the early '80s.
LAMB: To do what?
Mr. GLASSMAN: To organize, to--to run better. I mean, that's a very
important thing. We had a lot of companies that--in this country that
were run mainly for the benefit of the managers rather than for the
benefit of the shareholders. And sharehar--holders can be a very
demanding audience. And what they want is more efficiency. So
businesses cut their...
LAMB: But what created this? Why--why--why all of a sudden in the
Mr. GLASSMAN: I think a lot of it actually had to do with the
activities of people like Michael Milken, who ran into some trouble
later, but who got the notion that a lot of companies in America were
not run as well as they should be and that they should be making more
money. And that if he financed certain people who might want to take
over those companies or other companies that might want to take over
them, that they would become better run, either because the companies
themselves would get scared and make the changes themselves or because
the new owners would make the changes. So that's one thing.
I think another thing is that we got a lot of competition from abroad,
as a result of freer trade. The auto companies are a great example.
I mean, if they had been insulated from competition from Japan, I
don't think they would have improved their operations as--as much as
they have. The auto companies--they're not finished, but a company
like Ford is an extremely well-run company today, much, much better
than it was 20 years ago.
LAMB: So if you were--pick your Democratic nominee or your Republican
nominee, and you had to stand up in front of audiences and talk about
the future, what would you tell them on both sides?
Mr. GLASSMAN: I would tell them, first of all, to be very optimistic
about the economy because anyone who's betting--for example, a
Republican candidate who's betting on a big decline in the economy so
that he can blame--he or she can blame Bill Clinton or Al Gore is
making a big mistake because the economy is extremely strong today.
LAMB: OK. Is there enough time for it to go bad before the next
Mr. GLASSMAN: There is time. There is time. And
there--there--there--there are no guarantees in this business, and
we've had the largest--the longest peacetime expansion and we
are--very shortly, we'll have the longest expansion that we've ever
had. Expansion means a period when growth, as measured by Gross
Domestic Product or the total of goods and services, is increasing.
We're now seventh--I think we're now in the eighth year of an
expansion. Pretty amazing. So--but can things go bad? Yes, they can
certainly go bad, but I think the chances of that are--are not all
LAMB: So if you're the Republican nominee....
Mr. GLASSMAN: Mm-hmm.
LAMB: ..and you're looking at eight years of prosperity, what do you
say to make it better?
Mr. GLASSMAN: Well, I do think that a Republican can--can say that
things are great, but they can be better. And one way to make them
better is to improve the ability of Americans or the incentives for
Americans to continue to invest. And if I were a Republican or a
Democrat, I would--one of the things I would point out is that about
half of Americans have no wealth at all. They're not in the stock
market. And, in fact, they have almost nothing in their bank
accounts. And that's a real shame. I mean, we've had this 17-year
increase in the stock market, and yet not all Americans have been able
to participate in that and I think that they should. And our
Republican candidates should be saying that, at least probably more
than the Democratic candidate.
LAMB: Pick the viewer watching, never bought any stock, doesn't know
anything about this, listening to a lot of this language for the first
time and they have $1,000 to invest. What would you advise them to
do? Not--not necessarily who--who to invest in, but what would
you--what's the first, second and third steps?
Mr. GLASSMAN: Well, the first step is to figure out your own--to--to
make some--to--to sort of put down on paper or at least think out your
own plan, financially, for your life. In other words, are you about
to retire in two years or 30 years? That makes a big difference.
Do--are you going to buy a house in the next six months? Are you
going to have to send your kids to college? You need money to do that
in the next few years. That is the first thing to do.
LAMB: Now let me jump beyond because we don't have a lot of time
Mr. GLASSMAN: OK.
LAMB: And let's say you've decided you want to own stock.
Mr. GLASSMAN: Great. OK.
LAMB: What do you do? I mean, physically, I've never talked to a
stockbroker, I don't know where to go. What would you do?
Mr. GLASSMAN: Well, we have a wonderful system in this country where
it's not necessary to talk to a stockbroker. We advise that people
get help. I think it's a good idea to talk to a stockbroker. But you
don't have to do that. And, in fact, you can go on the Internet, open
an account at a discount broker, electronic broker...
LAMB: But I'm afraid. I don't know anything about this, and I want
some contact with a human being.
Mr. GLASSMAN: The first thing...
LAMB: How do you find a stockbroker?
Mr. GLASSMAN: The first thing I would do is call a stockbroker or
another kind of financial adviser. I think that's an--I think it's a
LAMB: Where do you find the listing? Where do you find the names?
Mr. GLASSMAN: Oh, they're all over the phone book. You can read the
ads. You should--you should call them and talk to them. We list in
the book 10 questions you ought to ask a broker before you actually
sign up because some brokers are--are in it for the commissions rather
than in it to help you.
LAMB: So if you take $1,000 and you give it to a broker, how much
does the broker keep for himself, personally?
Mr. GLASSMAN: Well, this is a--something that's--that's changing
now. And the way the brokers used to be compensated was through
trades. In other words, if you--if you invested $1,000, on average,
the broker kept $20 of it and that was the broker's--that's how the
broker made a living. Today, more and more brokerage firms are moving
toward a--instead of a--what's called a transaction-based system,
toward one that--toward an asset-based system where the broker takes a
percentage--or the firm takes a percentage of your total investment
year by year and--which might be 1 percent or 1 1/2 percent. It might
be 2 percent even. It might be 1/2 percent. Depends. You can
negotiate that. Or you can skip the broker entirely and go into--and
go do it yourself, which I, frankly, don't recommend for people who
don't know anything about stocks because it's dangerous.
LAMB: Would you buy mutual funds? Would you buy municipal bonds?
Would you buy penny stocks? All that--you know...
Mr. GLASSMAN: The easiest thing to do is to buy mutual funds. And
if you don't know very much about the stock market, it makes sense to
buy an index fund. We were talking earlier about the Standard &
Poor's 500 stock index. That's an index fund. That's the way to
ho--own the whole market--or not the whole--or 500 big stocks, very
diversified and very liquid. In other words, you can buy and sell
whenever you want, although we tell people to own for the long term.
So that's something you can do very quickly.
Now in the book we really do urge people to consider owning individual
stocks. But to put all your money into one stock is a big mistake.
The big problem that people have is not so much buying the stocks in
the first place, either doing it through a broker or doing it
themselves, but what they do after they own the stocks.
And so we talk a lot in the book about ha--building a relationship
with your stocks, trying to modify your behavior. I mean, one of the
behaviors that people have when they own stocks is the market goes
down a little bit, they get really scared and they sell, which is
almost always a mistake. So we tell people little tricks to keep them
invested in the market when that's the right thing to do. But it's
not hard to own--to get into the market. But we advocate getting some
LAMB: You have a dedication in your book to two women, I believe.
Mr. GLASSMAN: Right.
LAMB: And I would--just guessing, are they your daughters?
Mr. GLASSMAN: You're right. They are my daughters. Yeah.
LAMB: And--and I'm trying to--desperately trying to find their names.
Mr. GLASSMAN: Well, I know their names. So I...
LAMB: Is it Jo or Zoe?
Mr. GLASSMAN: I don't know--I don't know--I don't know Standard &
Poor, but I know Zoe and Kate.
LAMB: It's--it's Zoe and Kate.
Mr. GLASSMAN: Yeah.
LAMB: Who are they?
Mr. GLASSMAN: My two daughters are--are Zoe Glassman, who is my
26-year-old daughter who lives in New York and who is in the
entertainment production business; used to--used to work here at
the--at the Kennedy Center. And my other daughter is Kate Glassman
Maddox, who just got married in April to Justin Maddox, and the two of
them moved to Las Vegas, where I just recently visited them. And Kate
is a columnist for the Las Vegas Sun. She used to work, actually, in
this very building at CNBC.
LAMB: Now of all the things you've done, columnist, editor,
magazines, Roll Call and that stuff and this book, where would you put
this book's experience on the--I mean, how would you rate it?
Mr. GLASSMAN: I would rate it extremely high. I mean, writing a
book is--is very difficult but extremely rewarding. And it was
something that my agent--my book agent, Raif Segalin, told me 15 years
ago. He said, `You know, if you're a writer, you really have to write
a book to be a s--to be considered a serious writer.' And I used to
say, `Oh, Raif, I don't have the time. I don't'--I mean, he kept at
me for 15 years. I finally wrote the book. So it--it was a very--it
was a difficult experience and I think the fact I wrote it with
somebody was a big help. Kevin Hassett was great, was a terrific
collaboration, but I would put it very high up on the list. I really
enjoyed doing Roll Call, and I also enjoyed doing my--my very
first--my very first newspaper in New Orleans called Figaro. But this
is right on top.
LAMB: We'll check with you in five to seven years and see whether or
not the Dow is at 36,000.
Mr. GLASSMAN: ...(Unintelligible).
LAMB: Our guest has been Jim Glassman. Thank you very much.
Mr. GLASSMAN: Thank you, Brian.
Copyright National Cable Satellite Corporation 1999. Personal, noncommercial use of this transcript is permitted. No commercial, political or other use may be made of this transcript without the express permission of National Cable Satellite Corporation.