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|Subject: Re: Stock prices in the next decade||Date: 3/7/2003 4:33 PM|
|Author: yobria||Number: 35844 of 76078|
Yep, that's true. But what Shiller shows to be historically correct is logically correct as well.
For example, if you're thinking of buying two hot dog stands...each costs $100,000. One generates $5,000 in annual income (PE=20) and one generates $33,000 (PE=3). All things equal, you can make a good guess as to which of these will be worth more in the future.
Per Shiller, when you aren't getting much for your investment (like the first hot dog stand) your future return is limited. While this may not hold in the future, it does make sense, at least to me.
>>There was one in the '90s that claimed the stock market would collapse when all the boomers decided to cash in their stocks and retire.
This theory is alive and well...there was an article a while back on http://www.jeremysiegel.com/ stating that this may indeed happen (barring an uptake in demand for equities from the developing world).
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