by Archie M. Richards, Jr., CFP^®
February 5, 2001

When the Dow was 10,200 recently, someone asked me whether I thought it could reach 30,000 in twenty years.

A lousy 30,000? That would be a return of only 5.5 percent a year!

Over the centuries, technology has proceeded in fits and starts. During the boom periods, such as from 1895 to 1929 and from 1940 to about 1966, new technologies come on strong and capital goods are in short supply. The economy has to build new capital goods while also straining to produce consumer goods the public wants.

During the bust periods, capital goods are in excess. Some are left to wear out. Others are replaced by new capital goods that utilize the new technologies. Bust periods are when broad new technologies establish a beachhead.

The boom and bust periods taken together average about fifty years long. The current boom, based on electronics and optics, began taking off in earnest around 1990. I expect the boom to last for another twenty years. The bear market we've been enduring is just a temporary jiggle. (Jiggle? The holders of hard-hit Nasdaq stocks would call it a real flapper!)

Recently, I watched my dentist sculpture the shape of a crown prior to its insertion in my mouth. I commented that the procedure seemed to require considerable skill. "There's so much you have to know these days," he replied, "the characteristics of the materials and all sorts of other things."

"I don't have to know anything," I said. "I'm just a writer."

Somewhere around 2075, here's how people are likely to get their teeth fixed: They'll swallow, probably in a glass of water, millions of tiny computers. Scientists beginning work on such matters refer to these devices as nanobots. "Nano" is one-billionth of a meter, and "bot" stands for robot. Each nanobot will have intelligence about equal to that of a human being. Able to sense, move, grasp, and communicate, they will remain in our bodies for maintenance and repair. When a tooth or anything else in the body needs fixing, the nanobots will refashion it, atom by atom, in seconds.

As technology advances, so does the stock market. Maybe there'll be an end to it, I don't know. My dad used to say that mankind can stand anything except prosperity. But I figure we can endure prosperity for at least another century. Many of the world's people, due to disasterous government policies partly sustained by U.S. foreign aid, haven't experienced prosperity at all.

The government of Zaire , for example, received over the decades about $2 billion in aid from the United States . The money was intended to benefit the entire nation, but Zaire 's brutal dictator, Mobutu Sese Seko, must not have read the fine print. Professor George Ayittey, of American University , informs me that, at Mobutu's death a few years ago, his estate was worth somewhere between $3 billion and $10 billion, while Zaire itself remained poverty-stricken and primed for civil war. The U.S. aid led to the concentration of government power and corruption. Real helpful, that foreign aid, real helpful.

From 1946 to 1997, the stocks listed on the New York Stock Exchange and on Nasdaq gained 12.2 percent per year - less, after discounting for inflation.

In the next twenty years, I expect stocks to return at least 12 percent per year. Unlike before, I expect little or no inflation, which is bullish. Technology is progressing more rapidly than ever. And voters, especially younger voters, are becoming ever more doubtful about the supposed benefits of big government.

If 12 percent turns out to be realistic, the Dow Jones Average, which closed at 10,864 on February 2, 2001 , would exceed 100,000 in twenty years. (The 12.2 percent NYSE and over-the-counter rate of gain cited above includes the reinvestment of dividends. Since the Dow Jones Average reflects price changes only, and not dividends, the average might attain less than 100,000. But I increase the final number to reflect dividend reinvestment.)

Except for the emotions involved, investing isn't all that hard. Just get into index funds broadly covering stock markets worldwide and stay there. If it seems appropriate to sell twenty years from now, you'll be the first person I warn.