This is your brain on the CFA: https://twitter.com/ValuentumBrian/status/1352522809810018305 …
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The real problem with using this formula is that if you plug in some vaguely reasonable inputs you get infinity or a negative number out.
The whole question is basically the equity risk premium puzzle restated. SPX offers a stream of dividends that grow at inflation plus a bit, so why does it trade at such a low multiple?
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I continue to contend his fatal error in framing was to make this a direct obligation of the UST.
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I can see why this breaks people’s brains. When you’re used to reasoning with arbitrage arguments, using market segmentation + limits to arbitrage is hard.
End of conversation
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