The 12% figure doesn't refer to return on stocks, they refer to company's return on requity. Just because a company is compounding their equity at that rate it

The 12% figure doesn't refer to return on stocks, they refer to company's return on requity. Just because a company is compounding their equity at that rate it doesn't mean your investment in that company's stock will get that return: it depends on the market conditions when you bought and sold. > With bonds yielding only 3 or 4%, the right to reinvest automatically a portion of the equity coupon at 12% was of enormous value. Note that investors could not just invest their own money and get that 12% return. Stock prices in this period ranged far above book value, and investors were prevented by the premium prices they had to pay from directly extracting out of the underlying corporate universe whatever rate that universe was earning. EDIT: And adding to the above (i.e. it's "return on equity" that was 12% not, "equity returns"), here's a report from Goldman Sachs in 2012 where they estimate the return on equity of the S&P 500 to be around 15.5%. So it seems that at least when it comes to ROE it's not really different times. http://blogs.marketwatch.com/thetell/2013/07/26/sp-500-return-on-equity-rose-in-the-first-quarter-goldman/ http://blogs.marketwatch.com/thetell/2013/07/26/sp-500-retur...