Chapter Seven

When the Good Times

No Longer Roll

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What Happens If

Future Returns Are Lower?

REMEMBER THE UNFAILING principle described in

Chapter 2: in the long run it is the reality of business—the

dividend yields and earnings growth of corporations—that

drives the returns generated by the stock market. How-

ever, I must warn you that during the past 25 years—the

period examined in the three preceding chapters—the

12.5 percent nominal annual return provided by the U.S.

stock market included a speculative return of nearly 3

percent per year, far above the business reality