HoweStreet.com

HoweStreet.com: "'The historical experience from the 20th century suggests that stock values grow at nearly 7% real (assuming that dividends and inflation offset each other),' writes Au. 'At this rate, they would double every 10 years, go up four times every 20 years, and 8 times every 30 years. Knowing this fact, and hypothesizing that previous peaks will not be regained for almost 30 years, one can divide the previous peak by 8 to arrive at a discounted interim value for the Dow, in much the same way as one could do with a zero-coupon bond.'
'Rounding the year 2000 peak upward to 12,000 and dividing by 8 gives 1,500 as an indication of how low the Dow could go past the year 2000. This figure is roughly one half of the 3,000 'investment value' [calculated in 2000], a relationship that approximates to the previous market bottoms in 1932 and 1974. The Dow may trough at a somewhat higher number, but mainly because of adjustments for inflation.'"