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Originally posted by Tyrone Slothrop
And why 1926 as a starting point?
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Because it was the first number I found, and it was suitably long ago to capture the very worst years of stock returns. Would you prefer that I begin after the Depression?
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And what about the observation in his posts about PE ratios?
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A PE ratio is essentially a meaningless number. To the extent that it should be relied on at all, it is a useful shorthand whether a give stock is over or under valued in the market.
But it should surprise no one that PE ratios are higher than ever in times when there is more money than ever invested in stocks (i.e. people will pay more for scarce commodities). Indeed, this phenomenon alone suggests that stock prices (and returns) can increase faster than GDP growth (i.e. they already have).
As for the Drum posts, to the extent that they even oppose privatization, they argue only that Social Security may not really need to be fixed. Which is something you and I are not discussing. (in other words, don't take anything I am saying to be specifically support the President's or anyone else's, plan)
Further, Drum says, "However, lower population growth means lower GDP growth. No way around that," which I am not sure is true.
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In the midst of the Great Depression, one can see why the idea of betting government money on the stock market seemed like a bad idea.
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Yup. Totally understandable mistake, but that doesn't mean it wasn't a mistake.
