Glassman is Half-Full: The Julia Child of Investing is Driving the True Believers Mad!

It was standing room only in the Pierpont Morgan Library meeting room. Oil paintings and dark wood gave the space a warm, intimate glow. The setting was old and so was the money; indeed, for Jim Cowperthwait and his newly formed investment company, NewBridge Partners, it was a coming-out party of sorts, and a good chunk of his 500-strong client list was in attendance. Blue-suited men and their wives, with their pearl chokers and fading summer tans, filled the room. NewBridge Partners may be new-it split off contentiously from its ex-parent U.S. Trust last March-but its client list is not only impeccable, but choice. The client account minimum is $5 million, and many surpass $100 million. And they are invested in tech. “New-economy” tech-big, bold names like Cisco, JDS Uniphase, AOL and Qualcomm.

As everybody settled into their seats, Mr. Cowperthwait took to the podium. There may be a bear market in tech stocks out there, but you wouldn’t think so from hearing Mr. Cowperthwait speak. “We at NewBridge Partners think the free enterprise system works, and we believe and invest in the new economy,” he announced. “A lot of people are worried that stock prices are too high. We don’t believe that-that’s why we have asked Jim Glassman to speak to us.”

Enter James K. Glassman, former New Republic publisher, Washington Post columnist and, most recently, co-author of Dow 36,000 -his controversial book where he baldly states that the real value of the Dow Jones industrial average is not today’s 10,600 but 36,000. He was here to feed some red meat to a hungry crowd. Small, gray and sprightly, he bounded up to the microphone and launched into his well-oiled spiel. The echoing boom of his speaking-tour voice belied his slight frame.

“The message I have is reassuring,” he confided to the fully invested audience. “It’s what you want to hear. Stocks are not only cheap, they are undervalued by a factor of three.” The pundits and naysaying journalists who talk of a crash? They aren’t stupid; they’re just using the wrong model, he said. Mr. Glassman had the feel for an audience that comes when one does 100-plus speaking engagements a year. He mixed in Tiger Woods jokes with the perfunctory Al Gore diss. Why is the market so weak lately, fresh off his 36,000 prediction? Blame it on Al Gore’s recent bounce in the polls, as well as the possibility of the Democrats taking control of the House of Representatives. He raised the specter of the powerful House Ways and Means Committee chair passing from the safe Republican hands of Bill Archer to New York Democrat Charles Rangel-“who, you know, has a rating from the American Conservative Union of 4 percent,” Mr. Glassman darkly forewarned, to a low rumble of concern and head-shaking from the crowd.

But not to worry-in the end, Dow 36,000 will happen regardless of who is in power, he said. And that will make all of us rich. “We are on the verge of a tremendous wealth explosion, the likes of which has never been seen,” Mr. Glassman concluded excitedly to a robust round of applause.

The crowd swarmed around him as he stepped down. Some of the younger types asked him to autograph his book, which he did with a flourish. You can sort of tell: Mr. Glassman likes being swooned over by high-net-worth individuals.

Mr. Cowperthwait had the broad smile of a proud father. He is in his 60’s and manages money for an old, distinguished crowd, but his investment philosophy is as nouveau as it comes. The $7 billion that he oversees is concentrated in about 23 stocks-new-economy growth names like Cisco, AOL, JDS Uniphase and EMC. No value stocks, nothing international. He buys growth stocks and damn the valuation; so when he read Mr. Glassman’s book last year, he knew he had found a kindred spirit. “It confirmed what I had been thinking for a long time-that stocks were no more risky than bonds,” he said.

Personal Bull Market

Tech stocks may be going kerflop, but Mr. Glassman himself has been living out his own personal bull market. When his book came out in September 1999, there was a predictable reaction of derisory snorts from academics and journalists alike. Paul Krugman, the noted economist and Op-Ed columnist for The New York Times , accused Mr. Glassman and his co-author, Kevin A. Hassett, of getting their math wrong. And the academic community shook its collective head. But the financial services industry devoured their message with relish- the message being (boiled down as it may be) that stocks today are no riskier than bonds, and thus deserve no risk premium (the extra rate of return that an investor demands for holding a stock as opposed to a bond). On that assumption, the market is undervalued and should be trading at 36,000. Today.

Whether you are Jim Cowperthwait or a Merrill Lynch retail broker, that is the kind of song you want sung to your clients. And Mr. Glassman has happily obliged; two to three times a week these days, he speaks to the likes of Goldman Sachs, Salomon Smith Barney and Merrill Lynch.

About his mission, he minced no words. “I’ve become an evangelist for getting people into the market. I tell brokers, ‘Here is a rationale for getting your clients out of bonds and cash and into stocks, which is where they ought to be,'” he said from his small office in the Upper West Side penthouse he shares with his girlfriend. Mr. Glassman’s disposition is as warm and sunny as the sermon he preaches. He seems busy, but not punishingly so. “Sure, come on by,” he said cheerily when approached for an interview. “I have an opening between 11 and 2.”

He loves his new gig. Rubbing shoulders with Wall Street types can be fun; telling them what to do with their money even more so. Two years ago, he was writing a column for the Washington Post ; now he is lecturing money managers and brokers and getting paid for it. “Very few money managers understand the concept of risk. Most of these guys are hung up on things like technical analysis, interest rates and earnings. They tend to forget about the risk premium. I’m just trying to teach them something about that and stocks,” he said.

But wait a minute. How did an inside-the-Beltway journalist with no financial training whatsoever morph into a Manhattan-based stock booster who brags of one-upping Morgan Stanley’s Barton Biggs in a recent debate?

The trip has been long and not a little bit strange. In 1972, Mr. Glassman and his then wife Mary started an alternative rock ‘n’ roll weekly, the Figaro , in New Orleans. He sold it in 1978 and returned to his hometown of Washington, D.C. He soon became a media insider. A series of stints ensued: executive editor of The Washingtonian , a three-year run with Marty Peretz as The New Republic ‘s publisher and a brief flirtation with Mort Zuckerman overseeing the business side of The Atlantic Monthly and U.S. News & World Report . In 1987, he helped Arthur Levitt buy Roll Call , the Capitol Hill weekly, became an editor and part owner there and sold it-for a nice profit-to The Economist in 1992.

All along, though, he had a sneaker for stocks. In 1994, he began writing a personal investing column for the Washington Post and, as his politics began to tilt ever more slightly rightward-Mr. Glassman voted for George McGovern in 1972, Jimmy Carter in 1976 and Ronald Reagan in 1980; he has not voted Democratic since 1988-he also secured himself some office space at the conservative American Enterprise Institute, the resting place for such faded Reagan luminaries as Jack Kemp and William Bennett.

A Book Is Born

The genesis of Dow 36,000 was a Wall Street Journal Op-Ed piece in March of 1998. The response was favorable-the Dow was at 8,782 and the bull market was in full swing then-so Mr. Glassman decided to turn his sexy little number into a book. When the book came out in September of last year, the reaction was more pointed. At around 10,000, there was more resistance to the idea that stocks would forever soar skyward. The predictable round of inside-baseball spats followed: Mr. Glassman versus Paul Krugman, Mr. Glassman versus The Economist and more. It was a nice little boomlet, though; Dow 36,000 hit the Business Week best-seller list and went as high as the top 20 on Amazon.

But while the public excitement soon faded-perhaps in line with a waning stock market-Mr. Glassman’s popularity on the lecture circuit exploded. He took the stage with Goldman Sachs’ market guru Abby Cohen (she was video-conferenced in) and butted heads with Morgan Stanley’s Mr. Biggs. (“It was really fun,” Mr. Glassman said with a chortle of his encounter with Mr. Biggs. “He wrote later that he had been ‘slaughtered by Glassman’ and that I was ‘carried out in a sedan chair.'”) And while his book has slipped on Amazon to a rank of 23,000 (Robert Shiller’s bearish tome on the market, Irrational Exuberance , holds steady at 3,000), Mr. Glassman remains in strong demand on the lecture circuit. Indeed, he is now making much more from his speeches than in royalties from his book. “Not to blow my own horn, but I think that I can communicate these ideas very well, and there are a lot of people who don’t want to read a whole book,” he explained.

So he preaches on and continues to believe-even in the face of a stock market that looks increasingly woozy. Predictably, Mr. Glassman is now affiliated with a Web, a financial-cum-high-tech site where his own portfolio of stocks (the Glassman Tech Top 30) is prominently displayed. Since the portfolio’s inception, it is down 15 percent, as the usual suspects like Cisco, Qualcomm and Yahoo have swooned this year. Despite his sideline, don’t call him a stock picker-“it’s something I’m very reluctant to do,” he said.

You can, however, call him a New Yorker. He now spends about six nights a week in Manhattan-hanging out with various Tisches and with pundit/economist Larry Kudlow. He has been reunited with his high school girlfriend from 30 years ago, and he seems quite in love with the wraparound balcony that envelops his penthouse apartment. Every now and then, he makes the Upper West Side scene. “I like a lot of these Upper West Side places like Calle Ocho. I go every morning to the Columbus Avenue Bakery, which I love,” he said.

His latest project is a primer for novice investors. Indeed, he sees his mission as just beginning. “What Julia Child did for cooking, I want to do for investing,” he said. Glassman is Half-Full: The Julia Child of Investing is Driving the True Believers Mad!