Posted by: donmihaihai | January 7, 2021

Growth

Nasdaq last 10 years annualised return (1/1/2011 to 1/1/2021) was 17% annualised and about 11.6% for S&P 500. Outstanding returns. If the same rate of return continue, Nasdaq and S&P 500 will be at 49,789 and 7,507 on 1 Jan 2031 & at 191,302 & 14,972 by 1 Jan 2041.

Annualised return of 17% and 11.6% for 10 years happens but it is not a norm especially the 17%. Over 20 or 30 years? I don’t even want to bet a single cent on it even when I don’t know the exact historical annualised return of Dow, S&P 500 or Nasdaq at this point, it should be below 10%.

Nasdaq 20 years annualised return (1/1/2001 to 1/1/2021) was 8.6% and S&P 500 at 5.4%. Now this tells another story. Nasdaq return was still very decent and S&P 500 is at 5%. But most of the return came from the 2nd 10 years with the first 10 years being 0.8% and -0.5% for Nasdaq and S&P 500 respectively.

I didn’t choose the period, If I do and measure the return from peak of 2000 Tech bubble to 1/1/2021, Annualised return for Nasdaq and S&P 500 will be 4.56% and 4.36% respectively. 0.2% differences and Nasdaq cut by half! Let not forget, at this point while we are not at the Tech bubble level kind of insanity (I believe so), we might be close.

Will high rate returns continue? Some say yes. Some say there will be a crash, but then expect the market to go right back up.

Some say this time it is different. We are in new digital ages that lead to singularity soon. Stock market will reflect it.

Really?

High exponential growth rate never last long. Everything is constrained by something. At 17 annualised rate, Nasdaq double at just about every 4 years!

If Alibaba revenue exponential growth is 30%, Alibaba revenue will reach 1.8trillion from the current 80billion in another 12 years!

WB BH growth was from started from a small base and last long enough for it to grow 20%pa for about 55 years. But going forward, BH equity will grow to 3.7trillion in 12 years at 20% growth rate from $425 billion!

If there is no constraint, even elephant can populate the whole earth with its slow birth rate.


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