> In the context of investing there is a correct price for financial assets that is given by trading everything back to dollars in the present.
replyThis doesn't make sense though. The only reason I would buy an investment is if I believe it will grow in value from the point that I bought it. That means I'm pricing it at its future ccost.obviously other people are doing the same, so the actual cost of the investment will always rise above current value if people believe its a good investment.
I didn't write out enough to fully explain the idea. Here is the wiki page where you can find the details: https://en.wikipedia.org/wiki/Stochastic_discount_factor
replyThe reason the stock market is generally "priced right", which we see in the strong long term returns of index funds, is because the winners get more money and get more influence, and the losers get less.
replySo you have a self selecting system, that have (over time) proved itself. Whatever you might think of the effect of certain effects (such as immigrant labors) you can end up reflecting in your investments, as others do - and if you end up being correct, you'll have more power to influence the price in the future.