Matt Levine’s Money Stuff: Stocks for the Long Run

The long term

In theory, a share of stock is worth the present value of all of its future cash flows. A dollar of earnings today is worth more than a dollar of earnings in 10 years, because you use some non-zero discount rate in computing the present value. But a dollar of earnings today is worth less than $10 billion of earnings in 10 years, because the discount rate isn’t 900% either. Investors should pay more for the stock of a company that makes no money now but will make a ton of money later than they would pay ...