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Comment by throwk8s

4 years ago

Is the math meaningful though?

> Is the math meaningful though?

"Meaningful" is squishy. Is it strongly predictive, and in some cases, definitive? Yes.

If we could all get a stable (guaranteed) 15% per year, everyone would invest. But the world economy doesn’t grow at 15%.

  • The US economy doesn’t grow at 7% a year but that’s what the s&p is expected to do

    • Well, the S&P (assuming the S&P 500) doesn't represent the entire US economy, but 500 companies that represent, arguably, the "winners" of the US economy, so expecting them to grow 7% while the entire economy as a whole grows less is not unexpected.

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    • Population growth + inflation + transfer of wealth from workers to capital owners + productivity gains has over the long run been pretty close to 7%.