Who? Charlie Munger, Warren Buffett's partner for the past 45 years. Anyway, he has a great perspective on the investment market and knows whereof he speaks.
Charlie Munger has been Warren Buffett's partner and alter ego for more than 45 years. The pair has produced one of the best investing records in history. Shares of Berkshire Hathaway, of which Munger is vice chairman, have gained an annualized 24% over the past 40 years. The conglomerate, which the stock market values at $130 billion, owns and operates more than 65 businesses and invests in many others. Buffett's annual reports are studied by money managers. But Munger, 81, has always been media shy. That changed when Peter Kaufman compiled Munger's writing and speeches in a new book, Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger ($49.00, PCA Publications). Here Munger speaks with Kiplinger's Steven Goldberg. ...Do you think the stock market will return its long-term annualized 10% in the next decade?
A good figure for rational expectation would be no higher than 6%. I think it's unreasonable to assume that the world is going to try to arrange itself so that the inactive, asset-owning class is going to get a much higher share of the GDP than it normally gets. When you start thinking that way, you get into these modest figures. The reason the return has been so good in the past is that the price-earnings ratio went way up.
Read and learn.
(HT: SMI Weblog.)
An economy grows by conquest or by improved efficiency. Now, there are few new lands to conquer (there's resources in Antarctic, Alaska etc. of course).
Industrialisation improved efficiency by magnitudes, but more recently growth is spurred by making "efficient use" of cheap 3rd world labour. Really useful technological innovation is required to continue growth.
Given the finite resources available, any economy has a theoretical maximum. After a point, the only way for people to get richer is to reduce the population.
Continual economic growth is not a sustainable condition. Eventually, we must either let it level off or let it collapse. (or conquer more planets... but that's pretty outlandish)