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Recent Insights

February 20, 2024

When attempting to explain movements in stock prices the media often overlook the key facts that for every buyer there is a seller and every outstanding share must be held continuously.  As we record this, the S&P 500 has surpassed 5,000, and it leads a lot of people to ask, ‘How could the market be

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January 11, 2024

The decade ending in 2023 was a great one for common stocks. Is the next decade likely to be as good? We provide an analysis using Damodaran’s equity risk premium (ERP) and a framework developed by Jordan Brooks of AQR. Hello and welcome back to ‘Reflections on Investing’ with the Cornell Capital Group. This is

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January 2, 2024

A market crash is nothing more than a low risk premium meeting risk aversion. —– John P. Hussman, Ph.D., November 8, 2021, When Bubble Meets Trouble  Risk Premiums and Stock Prices           In our third quarter memo, we stressed the importance of the equity risk premium (ERP) for understanding the level of stock prices and their relation to expected future

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October 31, 2023

Real Interest Rates have an immense impact on the stock market as well as the bond market. Nonetheless, they are widely misunderstood.  Hello and welcome back to Reflections on Investing with the Cornell Capital Group. And today we’re going to talk about the real interest rate. I use the word “the real interest rate” as

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October 10, 2023

Would you believe, that long-term US Treasury securities, historically considered one of the safest investments, have now dropped more than the stock market did during the great recession of 2008? What are the implications for fixed income investments going forward? Hello and welcome back to Reflections on Investing with the Cornell Capital Group.   It’s been

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Featured Publication

In this article, we assume that AI, which we recognize has many different forms, will be a major economic success in that it will lead to greater productivity and rising GDP in the United States. The question for investors is how will it affect stock prices? That depends on whether you are talking about the stock prices of selected individual companies or the value of the aggregate market. We start first with the aggregate market and then turn to individual stocks.Technological breakthroughs, of which we assume AI will be an example, increase social wealth by increasing the goods and services that can be produced from a given set of resources. This is measured by the growth rate in productivity. Productivity growth is a key determinant of real GDP growth per capita which determines the standard of living. The primary source of productivity growth is technological innovation.The chart below plots annual productivity growth from 1960 through 2022. The first thing to note is that the rate of increase is not large, averaging only 0.38% per year. The second thing to note is that the growth rate was variable, falling in recessions and rising in recoveries. Finally, it is difficult to tie

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