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No. of Recommendations: 5
Tom Gardner said:

2. I don't think the 11 percent annual return is law, but it is statistically significant. If corporate earnings were to grow consistently at 6 percent per annum into eternity, I could see the market growing at 11 percent per annum into eternity. Why? Because the investing community discounts into future years.

I cannot believe no one has challenged this statement. Take a stock trading at $100 earning $5/share in 2000. By 2021 this stock's price, growing at 11%/yr, has reached $806.23, while its earnings have reached $16.03. This makes sense? What would be the logical explanation for an expansion of the multiple from 20 to 50?

Tom, in the very article you were reviewing, Buffett said that equity values growth cannot in the long term exceed earnings growth . . . did you miss that? Or do you just disagree? If so, on what basis?

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