In Box: Feedback, Comments, Dialogue Click here to send us your comments. August 26, 2002 - from the Editors of IPM Glassman Still Gives Bad Advice    James K. Glassman was giving investors bad advice four years ago when he predicted "Dow 36,000" (yes, it's that Glassman) and he's still at it. Here are a few things he got wrong in his recent long piece on Asset Allocation (we saw it in The Washington Post National Weekly Edition, July 29-August 4):    1. He still claims to be clairvoyant. "Put $600 a month into a portfolio that's allocated 70 percent to stocks and 30 percent to bonds . . . [and] at the end of 30 years, your nest egg will exceed $1 million." [That's our italics, but it's his word.] How does he know what will happen? Because an expert who studied "three-quarters of a century of history" told him. Silly us, we thought the past doesn't guarantee the future.    But for those still not convinced, he quotes more "fascinating" history from another expert: "Peter Minuit's purchase of Manhattan from Indians in 1626 for $24 worth of trinkets . . . would be worth $78 billion today." Presumably the Indians would have invested it properly for 375 years.    2. Like others, he argues that there is just one proper stock/bond allocation for every investor who's 30 years old, another for every 40-year old, and so on -- regardless of any financial differences between investors. What about whether the investor's home is paid off, or whether her salary is $50,000 or $150,000, or whether she's single or a single mom with two kids? Same allocation for the same age in every case? We don't think so.    3. The allocations he advises call for gradually reducing the investor's portion in stocks. "In your thirties, the allocation should be 90 percent stocks, 10 percent bonds. In your forties, move to 80 percent stocks 20 percent bonds." In your "early fifties" you should be 70/30 and "late fifties" 60/40. However, his argument for equities was a long-term argument (see 1. above), based on an investor maintaining the same allocation for 30 years. The reason for maintaining the allocation is that no one knows just when during the 30 years equities will do their thing. "In the short term, anything can happen," he admits.    So does it make sense to apply a long-term argument when we're making short-term changes? What should we do in our "early fifties," for example, if we haven't made any money from equities over the previous five or ten years? Not to worry. "Lock in your gains and switch to bonds," he advises. Does this remind anyone else of Will Rogers? "Investing is easy," Will said. "Buy a stock, and when it goes up, sell it. If it doesn't go up, don't buy it."    Glassman isn't alone in arguing "the case for stocks in the long run." He just seems to have worse luck and less shame than others when he's staking out his unfortunate claims. Back to In Box

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