philly value

I think the evidence being cited does not support the statement implied, namely that "GDP growth does not impact [or negatively impacts] stock returns" If you are talking about the entire market, then it is blindingly obvious that higher GDP growth, all else equal, equates to higher stock returns. But as I posted earlier, in addition to GDP growth, there is also (a) dividend yield, basically, what rate of capital reinvestment is required to generate the GDP growth, (b) corporate profit margins and tax rates, and © valuation multiples. Those are, mathematically, the four key forces influencing pre-tax, whole-market stock returns. So I guess the argument is really that there is a certain relationship between GDP growth and the remaining three variables that is causing GDP growth and stock returns to not have the same positive correlation one would see if they held fixed all other factors. But to me, that doesn't seem to be important in understanding the point of this topic. The point was, will the returns of the whole market [presumably, the whole U.S. market] be lower in the future than over the past 50 years. If one believes that profit margins, tax rates, and valuation multiples are unlikely to be more favorable in the future than today, and that GDP growth is likely to be lower as well, then this conclusion follows mathematically regardless of the studies being cited.

Philosophical Economics is a great blog to read IMO for thinking about general market valuation, and it tends to contradict a lot of common wisdom (i.e. a piece about a year ago which was negative on Shiller PE's predictive power) But yeah, the way I think about it is that if you invest in the market, your returns are (a) dividend yield, plus or minus (b) change in GDP, © change in corporate share of GDP (pre-tax profit margins), (d) change in tax environment (corporate tax rates), and (e) change in market valuation (required equity rate of return). It seems to me that the last three elements are unlikely to be a significant positive force in stock returns going forward, and may indeed be a drag on returns. Valuations are fairly high [iMO justifiably so given interest rates], corporate tax rates particularly for multinationals are fairly low, and corporations are taking a very big slice of the GDP pie compared to historical norms. Thus, I would rely on dividends and GDP growth only to drive returns, which is very different from the past 50 years, where all of the forces I mentioned have (for the most part) worked in tandem to produce an amazing return for the stock market.

While Amex is my go to and they have great cards for travelers (Amex Platinum for lounges and airline fee credit, SPG Amex is maybe most valuable rewards card if you stay in Starwood hotels) I would not recommend it for someone looking to have one card. Particularly outside of the U.S, Visa and MasterCard are more widely accepted.

There are two forces, the fundamental price of the stock (in CHF) and the change in exchange rate. The value of the company is declining by X% but the currency is strengthening by Y%, and generally today Y>X

He mentioned his track record in a recent talk at Wharton, and I believe it was ~19% going back to inception, but I could be remembering that slightly incorrectly. Do you have a link to the video or transcript? Unfortunately I don't believe the talk was recorded, or at least I haven't found a video online. It was a joint discussion with Klarman & Howard Marks.

He mentioned his track record in a recent talk at Wharton, and I believe it was ~19% going back to inception, but I could be remembering that slightly incorrectly.

I'm wondering if the answer changes materially for fund managers who may face large investor redemptions correlated with drops in their portfolio. The way I have always thought about cash is that holding a large amount of cash in an individual portfolio is usually not optimal, and probably a slight amount of leverage would be ideal, given that you have the ability to remain fully invested even if your portfolio declines significantly in value. But for a fund manager with clients who are not as patient, it seems that holding cash may be optimal so as to not be forced into selling positions far below their value, particularly if the manager is holding assets that are not highly liquid.