Dow 100,000

Dow 100,000

Here at ILAF we are an optimistic crew, and whether you are smarting from the 2025 stock market rally or simply riding a tsunami of schadenfreude, it is poignant to consider what the future may hold.

As described in the 2025 Stock Trader's Almanac: The fifth year of almost every decade is the best in terms of stock market performance, as is the 1st year of a new presidency. If Santa Claus comes to the rescue again this year, whatever results 2025 brings might be the best of the decade. But like an old curmudgeon, we at ILAF are not satisfied with simply average returns, or even the best, we dream of stellar, euphoria-inducing returns. Read on dear investor.

Assuming several economic events break our way and AI can deliver the productivity boost it is capable of doing, ILAF predicts...wait for it...Dow 100,000 in 5 years (say Christmas of 2030.)

Dow 100,000 in 5 years assumes a 15% return per year for the next five years. As we all know, linear returns are a fallacy. Developed by the big ETFs and fund companies to convince people the stock market can be tamed and silo'd into discrete linear patterns, linear returns are the original "fake news." Day-to-day, week-to-week, and month-to-month movements CANNOT somehow be converted from a Four-dimensional marketplace into a glossy Two-dimensional marketing brochure. It don't work that way.

How it does work is daily chaos derived from fear and greed trying to maximize return while taking as little risk (allegedly, see 2007-2009) as possible to do it. That 15% annual growth rate can be had, and double the Dow to 100,000 if we can significantly improve productivity, while somehow keeping unemployment under 5%, inflation tame around 3%, and real wage growth exceeding inflation. Big "ifs," but the likely scenario to reach Dow 100,000 may not be what investors suspect.

My theory is that "this time around" AI is going to replace entire job sectors, and as robots improve their dexterity almost every industry that has a "touch" component is vulnerable. California should lead America, if not the world, again...but for all the wrong reasons. California is a great example of where the fusion of AI and robots should have an increasing immediate impact (and a lasting one at that) because of the extreme difficulty in both having a business in the state and even more dangerous having employees.

Look to where there are poor incentives to do business, and there is where AI and robotics will flourish. Keep an eye on places with a heavy labor union presence. Onerous taxes. And lots of lawyers. AI and robot adoption will help transform heavily regulated industries with high plaintiff-cost to productivity darlings. Coastal America looks ripe for massive productivity surges, and given their existing high population densities the Al and robot utility spikes will translate directly to the bottom line of corporations, and possibly even local, state, and federal government.

In the next five years it will be more important than ever to be an OWNER of AI and robotic assets, which for many of us that means owning shares of companies immersed in the sectors. As an owner you should be able to ride the wave of increasing profits, increasing dividends, and sector share ownership. Woe to those who do not own a piece of the action...the downside of all this productivity increase almost assuredly will be job loss.

It is hard to believe AI and robots will INCREASE the numbers of jobs, or increase real wages. At some level (think control or ownership) they might, but for the vast population AI and robots will not be creating jobs, they will be eliminating jobs and lowering the collective standard of living...save for those who are owners of the tech.

Dow 100,000 has a good probability of happening within 5 years, but there is also a good possibility of significant societal changes to effect the stock market doubling. As usual, buy or create assets.

Rule of 72

 Rule of 72

The magic in investing is in compounding. That is why knowing your personal "Rule of 72" is so important. This ratio tells you how quickly your net worth is doubling. It is simple and quick to calculate.

First, you will need to know your net worth over a period of time. And that's basically it. For argument's sake let's use 1-year as the base timeline and a $100,000 start value and a $110,000 end value a year later. Utilizing the "Rule of 72," ie subtracting $100,000 from $110,000 yields $10,000 or a 10% yearly return which then is used to divide 72 resulting in the number 7.2.

7.2 would be your personal "Rule of 72." Assuming an average lifespan of 78 in the United States, that would be ~ 11 doubling cycles. Or that $100,000 would turn into about $205,000,000. That is a nice chunk of change! Very few of us start off with $100,000 at birth and perhaps more importantly, very few can avoid touching that stash for a lifetime. Life happens. That is the great challenge we all face.

But the take-away from this post is this: If you know your personal "Rule of 72" you can modify it. Compressing it is like compressing time; even marginal decreases in your personal "Rule of 72" can have meaningful, life-altering results. Better housing. Better food. Better education. Better healthcare. Better outcomes at almost every life touch point.

In a typical life, just adding one or two more net worth doublings can make drastic differences. That is the difference in a 7.2 versus a 6.0. Imagine doubling your net worth every 5 years! This is why typically most people who can survive in the investing game the longest win, they have more doubling cycles at their peak net worths. Consider, Warren Buffett made more than 95% of his net worth in the last 10 years.  Staggering.

Start investing young, ideally at birth. Continue investing throughout your life. Keep a low "overhead" to avoid interrupting your net worth doubling cycle. Avoid losses. Spend judiciously. 

The Rule of 72

The Rule of 72 is an essential concept for investors to master who wish to Invest Like a Farmer; it is one of the, if not THE, most important proverbial "rules of thumb" that can be used on nearly every investment opportunity you'll encounter.

Simply stated, The Rule of 72 approximates your investment's doubling time. It accomplishes this by a rough (yet oddly accurate) approximation of factoring compounding interest which is a logarithmic function by using a relatively simple linear calculation. What? OK, basically if you know your interest rate or rate of return, divide 72 by that number and it will give you an approximate time to double your investment.

Why is this important? As financial farmers we want to know our projected yield ahead of time; it allows us to allocate capital, plan for land expansion, and a variety of other tasks and goals. The "double time" is also important because it helps separate the wheat from the chaff; all things being equal, a faster double time is better (we want the return of principle as soon as possible, with the resulting yield or growth then becoming a matter of self-sustainment.)

Besides "Buy Assets," the next most important tool in your financial farmer work shed is "The Rule of 72"; it quickly and accurately gives a financial farmer a quick idea of the viability of an investment.