Ron Baron, Baron Capital chairman and CEO, says the market will continue to move higher, and explains why he consistently invests on a monthly basis.
On April 9th 2021, Bruce Greenwald, the founding director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, sat down for a Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital as part of the 13th Columbia China Business Conference. Q1 2021 hedge fund letters, conferences and more Read More
what i think is that the stock market is likely to go with the economy, almost 7% a year, for a very long period of time, ten years, 20 years. and if it’s 7% a year, that means you double your money in ten years. if it’s for 20 years which i think is likely, you’ll see a doubling again in the next 20 years. so that means 30,000 for the market in 2,000 and — i’m sorry, ten years from now and 60,000 in 20 years. that’s what we talked about before. it might sound like a huge number but that’s what compounding is. it makes small numbers get to be real big. when i started baron capital in 1982 and the market was 880. and now it’s 16,000. 16 times, 17 times. i think that the most important thing i think about is that the stock market is a hedge against and if you go back to — should i give you a chance? no, no, no. one question i have for you. you say you put in a substantial amount of money every month. does it vary? same amount every month. this year it’s 25% more than it was last year. but every single month is the same amount. sometimes i do it every week. you know, divide the monthly amount into one-quarter. sometimes i do it at the end of the month. it’s every month is what i do. so you point out 7% growth. a lot of people we talked to will say we’re looking at 2% to 3% gdp. where do you get the 7%? well, when you add inflation. okay. and the nominal growth for our economy since 1960 is 6.6% a year. that’s including inflation. and the real growth is 3.1% a year. so our gdp in 1960 when president kennedy was president, was 529 billion. 529 billion. wow. it’s now 17.1 trillion. so that happens to be 6.6% a year. the stock market was 600 then and it’s 16,000 now. that’s 6.2% a year. when you add back dividends that gets you to 8% a year. that’s the norm since 1960 and it’s the norm since 1900. so i don’t think every now and then as everybody is talking about before, we’ve had an unusual decade where we’ve had all these extraneous factors that have had an impact. when you have an attack on terror and you have these wars and overleveraging. fortunately for us we’ve had investment bankers, you know, chairman of the fed. we’ve had bernanke and now yellen. when you read the newspapers over the weekend with youio sue important yellen was while all this was happening. and fortunately, joe might not