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Politics : Ask Michael Burke
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To: BGR who wrote (71294)12/2/1999 2:42:00 PM
From: Michael Bakunin  Read Replies (1) of 132070
 
This interview did a good back-of-the-envelope estimate: pathfinder.com Alternatively, try the hackneyed constant-growth model. The Russell 3000 yields 1.3%. Say dividends increase with GDP, and GDP increases 5% (nominal) per year. Total value of that index is now around $12 trillion, so your expected return is 6.3%, just about what 30-year bonds now yield. To get near the historical equity premium under this model, GDP has to grow 10% (nominal). Whew -- punk rock. -mb
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