The Dow Jones Industrial Average is currently at about the same level it was in early 1998. This means that, ignoring dividends, investors have earned nothing in 10 years.
In March 1999, immediately after the Dow broke above 10,000 for the first time, James Glassman and Kevin Hassett published their now infamous op-ed in the Wall Street Journal called Stock Prices Are Still Far Too Low. They argued that investors were overestimating the risks associated with investing in stocks. They argued that stocks were no more risky than a government bond.
Perhaps to demonstrate just how bullish they were on stocks, they also published a book that same year titled, Dow 36,000. They weren't trying to imply that the Dow should reach 36,000 some day. No, they were insisting that the Dow should be at 36,000 right now (i.e., in 1999).
Their point was that investors were wrong to think that stocks were risky simply because stocks were volatile. Because history showed that stocks outperformed bonds over the long term, the authors argued that stocks were really no more risky than bonds. In fact, they argued that the appropriate risk premium for stocks is zero.
This reminded me of a debate I had many years earlier about mortgages. My opponent at the time was arguing that the best mortgage is always the one with the lower interest rate. My point, however, is that cash flow must also be considered. A one-year interest free mortgage is clearly cheaper than a 30-year mortgage at 6%, yet there aren't many borrowers who have the kind of cash flow needed to service that one-year mortgage.
Likewise, stocks have outperformed bonds over the long term and may continue to do so in the future. But not all investors can stomach the volatility. Investors have cash flow needs. They can foresee some of those needs, but they can't foresee them all. This is why investment advisors never tell their clients to put all their money in stocks even though they believe stocks will do well over the long run.
Stocks are not risk free, but from a long-term perspective, they are probably less risky today than they were when the Dow was at 14,000. Yet at 14,000, investors were happy to buy stocks--many using lots of margin. But now, most investors are simply too scared to buy. Who knows when (if ever) the Dow will hit 36,000, but it's a good bet that it will hit 10,000 again--perhaps sooner than we think.