I’ve posted Entry #313 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The True Stock Return Can (Almost) Never Be Negative.
Juicy Excerpt: I believe that there is hardly ever a year in which the true stock return is negative. The businesses that underly the U.S. stock market possess assets that grow in value over time. Rational investors would not permit short-term developments to influence their assessments of market value too much. They would respond with a shrug of the shoulders to negative economic developments, assuring themselves that the U.S. economy has for over one-hundred years been generating sufficient growth to support an annual price increase of 6.5 percent real and that the best bet is that that will continue to be the case. The true stock return (that is, the amount that the market as a whole would increase in value if only investors were as rational as the Buy-and-Holders assume them to be) is always 6.5 percent real or something close to it.