Subject: Re: OT: Jim's take on the market
Is the data that could be used to apply a similar analysis to Berkshire available?
It'd be interesting to see how much of recent years' BRK performance could be attributable to low interest rates and corporate tax rates that might never return.
And what that analysis would predict for Berkshire's future performance (all else equal), for comparison to the +2%/yr real return figure for the S&P 500.

According to the paper, the three things that really boosted broad market returns were, fairly equally weighted:
* Multiple expansion
* Reduction in the cost of taxes and interest
* Growth in EBIT

Growth in EBIT is the normal thing, the one that isn't about to end. I imagine real GDP will continue to rise apace.
Berkshire has not had any benefit from multiple expansion in the last 15-20-25-30 years, so the end of that effect isn't a worry.
Berkshire typically owns more interest-bearing paper than it issues in interest-costing liabilities, so that probably isn't a big worry either.

But we certainly have had a benefit from tax cuts. From Berkshire's income statements:
Aggregate tax divided by aggregate EBT FY 1997-2002 inclusive was 34.57%
Aggregate tax divided by aggregate EBT FY 2011-2016 inclusive was 29.53%, before the 2017 cuts.
Aggregate tax divided by aggregate EBT FY 2019-2022 inclusive was 19.08% (around 1% lower if you skip 2020)

Compared to the very old period, our net profits (on the books) are 23.7% higher than they would otherwise have been.
Compared to the pre-TCJA period, our net profits (on the books) are 14.8% higher than they would otherwise have been.

However, there is one offsetting factor: most of Berkshire's assessed taxes were not paid, but deferred.
In effect, they reduced book but added to an invisible type of float.
Higher taxes will hit Berkshire for sure, but not quite as much as the income statement might lead you to believe.

So, putting it all together, I think Berkshire's growth will do fine, somewhere on the same-old same-old spectrum sliding slowly downwards from the usual rate of real growth purely because of size...
Except for rises in tax rates, which are hard to predict.
I have pencilled in an expectation that headline corporate tax will rise to 25%, which would result in a one-time reduction in after tax profits (reported) by about 5%.
Berkshire is one of the few big firms that pays close to the headline rate.

The other potential factor is that not only have stocks done well in the last few decades, but also the US economy.
It's possible that we'll see a tough decade or two in the land of Uncle Sam, so value growth would naturally slow along with that.
39% of Americans polled think that civil war is somewhat likely or very likely in the next decade.
17% think that in 20 years the US will not exist as all the current states under a single national government.
However unlikely or fringe those views may be, such things are not good for business if any of them actually happen.
It's always good to at least ponder the implications of outlier outcomes.

Jim