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Recent Insights

April 2, 2024

The S&P 500 ended the year 2023 at 4,769. During December, several leading financial firms were asked for their forecasts for the year-end 2024. The results are shown below. The most optimistic forecasts were by Fundstrat (a well-known bullish firm), Oppenheimer, and Yardeni. Considering the strong returns during 2023, four major firms, including Morgan Stanley

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March 6, 2024

Professor and Nobel Prize winner Eugene Fama put forth the efficient market hypothesis and based on that concept Warren Buffet suggested that holding a passive investment in the S&P 500 was the best advice for most investors. If the market were efficient and if passive investing was best for everyone, how can that be reconciled

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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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Featured Publication

Updated March, 6th 2024In 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 the key determinant of real GDP growth per capita which, in turn, determines the standard of living. The primary source of productivity growth is technological innovation.            The chart below from the Federal Reserve plots quarterly productivity growth, stated as an annualized rate, in the United States from 1960 through 2023. The first thing to note is that the rate of increase is not large, averaging only 2.0% per year. The second thing to note

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