>The 6% percent figure is stock market *returns*. It's stock *prices*
>that can only grow as fast as the economy long-term, right? The growth
>of stock prices (capital gains) is only one part of stock returns, the
>other part being the dividend yield. So it makes sense for the return on
>stocks to be higher than than the growth rate, no? Or am I missing
>something?
Stock prices should, over the long term, grow at the same rate as profits, since that's what they're a capitalized claim on, and profits should grow roughly in line with GDP, also over the long term. Dividends are paid out of profits (unlike corporate interest payments, which is deducted before profits are computed). So isn't there a double-counting of dividends, once as they paid out and once as they capitalized? The double capitalization of dividends, to paraphrase the coporate tax cut flacks? Damn, I've got to think about this.
Doug