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Recent Insights


December 2, 2024

Download PDF  The implied equity risk premium (IERP) and theories of stock market bubbles both offer explanations for the current elevated level of stock prices, but they are strange bedfellows. Here we explore the relation between the two, starting with the implied equity risk premium. Estimates of the IERP depend on the model used and the

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November 19, 2024

As Herb Stein “if something cannot go on forever, it will stop”. The current growth of government debt is unsustainable. How will it stop? And what does that mean for investors?  Hello, and welcome back to *Reflections on Investing with the Cornell Capital Group.* Today, we’re going to talk about government debt. Of course, this

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October 30, 2024

A majority of stocks destroy wealth. In fact, most all of the wealth creation from stocks is attributable to only a handful companies. Today, we’re going to talk about something that is particularly important to investors: corporate value creation. Ultimately, the true hit investments are companies that create very significant value over and above what

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October 16, 2024

For more than four decades both Prof. Aswath Damodaran and Prof. Bradford Cornell have stressed the importance of the equity risk premium (ERP) for evaluating the stock market. This video dives into the calculations to explain why understanding the role of the ERP is critical for investors. 

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October 2, 2024

Stock Price Performance in Review We begin our Q3 2024 memo with a look back over the last ten years. The chart below plots both the standard S&P 500 index, which is value-weighted, and the equal weighted S&P 500 index over the last decade. The major difference between the two indexes is that large companies in

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Featured Publication


With stock prices at near record highs relative to measures like earnings or cash flow, many leading analysts have predicted meager returns over the next decade. Some have even suggested the return on the S&P 500 could be negative over the upcoming decade. Others have raised the possibility of a short-term collapse of 20% or more. For instance, famed investor Jeremy Grantham said, “As for the U.S. market in general, there has never been a sustained rally starting from a 34 Shiller P/E. The only bull markets that continued up from levels like this were the last 18 months in Japan until 1989, and the U.S. tech bubble of 1998 and 1999, and we know how those ended.” But still others have taken the contrary view that the high prices represent a new normal and do not portend meager returns ahead. To shed light on the dispute, we take a deep dive into the underlying data.A good place to start is with data from Prof. Robert Shiller’s website. His work on the CAPE (Cyclically Adjusted Price-to-Earnings Ratio) is fundamental. Exhibit 1 presents a scatter plot of the level of the CAPE against the S&P 500 real total return (annualized) in

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