3 ms·

I suppose that 'future earnings' holds a pretty nebulous value. Still, to the writer's point, how long do you think today's children will be working/investing?

• cameldrv 18y ago
  The question is really that if you buy stocks now, what is the discount rate necessary to make the current valuations reasonable, and how does that compare to what the boomer generation enjoyed? The theory of the article is that the children who are buying stocks right now are going to enjoy a superior rate of return at the expense of the retirees. I don't think that's true. Corporate profits expanded to an unusually high percentage of economic output in the past decade and a half, and I would expect that to go down. Even if you anticipate that the corporate profit fraction remains constant, and that earnings will be twice their current level in a couple of years, the stock market still would have a 14 P/E ratio, which is historically a bit high. Even at the current depressed valuations, I think that you have to be a pretty big optimist to expect big gains in the market over the next decade or so.