In September 2017, Warren Buffett predicted the Dow Jones Industrial Average would reach one million points during the next century. The Dow closed at 22,370.80 that day, and the earlier century’s rise from about 81 to that level represented roughly a 280-times return. Reaching one million from 22,370 would require about a 45-times return over 100 years, assuming the United States continues similar performance. The implied annual compounding rate is about 3.9%. Buffett also noted he would not be alive to celebrate, given his age. The prediction was framed as aiming low rather than being unrealistic.
"Whenever I hear people talk pessimistically about this country, I think they're out of their mind. He pointed out that the Dow had been at 81 a century earlier. The climb to 22,370 amounted to a roughly 280-times return. Getting to a million from there would require only a 45-times return. Over 100 years. With the United States doing more or less what the United States has done for the last 100 years."
"Buffett was 87 years old when he made the call on Tuesday, Sept. 19, 2017. The Dow closed that day at 22,370.80. He was speaking at a black-tie event in New York commemorating Forbes magazine's 100th anniversary, sitting on the cover of an issue that featured "100 of the world's greatest living business minds.""
"To get from 22,370 to 1,000,000 over 100 years, the Dow needs to compound at roughly 3.9% a year. That number was calculated at the time by Mario Gabelli, the value investor and CEO of Gabelli Asset Management, who tweeted that night, "one million in one hundred years ...has Buffett turned bearish?""
"Buffett also acknowledged he would not be around to take a victory lap. "When I hear talking about making it to 100, I get excited," he said. "I'm 87.""
Read at 24/7 Wall St.
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