Subject: Re: OT- Guy Spier on Podcast/ limited BRK discussion
I learned to my cost many years ago that there is only one Warren E. Buffett. One.

Oh, I imagine there are others that are close enough.
The bigger insight is finally realizing that I am not one of them.
I'm still dumb enough to keep trying to beat the market, but I certainly don't plan my finances on the assumption that I will succeed.

So, if I'm not expecting to beat the market, what do I expect from the broad US market?

If things remain much as they have been since 1995 in terms of growth of S&P 500 smoothed earnings and valuation levels, I'd expect something like inflation + 2.8%/year real total return from the S&P 500 in the next 7 years.
(another similar model I have suggests only inflation + 1.26%/year, but let's be optimistic and stick with the 2.8%).
That prediction is for the average of the annualized rates of return across all holding periods of lengths 4-10 years starting today, on average a 7 year hold.
In case this post is around ten years from now, that's starting from S&P at 4,405.71 and CPI 305.7
The prediction will certainly be wrong, but being my best guess I figure it's a 50/50 shot whether it's too high or too low. And I think it probably won't be wrong by more than a couple/few percent.

Other random observations that fall out of that analysis:
Compared to the range of valuation levels since 1995, the S&P 500 has been more expensive than this 26% of the time and cheaper 74% of the time. So it's expensive, but far from record breaking.
If you graph the earnings yield (using smoothed earnings) since 1995, there is no overall trend of rising or falling valuation levels to speak of.
From 2004 to 2007 inclusive, the valuation level was almost spot on the 1995-2023 average the whole time. Same for the stretch 2014-2016 inclusive.
On my smoothing method, the average valuation level since '95 has been an earnings yield of 4.04%, equating to a P/E of 24.8 on smoothed real earnings.
The current level works out to a trend P/E of 28.9 measured the same way. By extension, a fall in the S&P by only -14.25% to 3778 would bring it down to the average valuation level since 1995. That 3778 number will rise with time and with inflation, so it has a "best before" date.
I would hesitate to call that number "fair value", but I suppose that's one possible interpretation.

The fly in the ointment: This exercise is done by looking at net profits in the last several years, not sales. Consequently the forecasts implicitly assume that the recent very high net margin profitability of US companies doesn't drop back to levels that used to be normal. In that case, returns would be a fair bit lower than the forecasts above.

Jim