The S&P 500's historical earnings growth is ~6.7%. The ~9% growth of the last decade was an exception, driven by the unprecedented hyper-growth of a few mega-cap tech firms. As the law of large numbers catches up to these giants, investors should anticipate future index returns to revert to historical, lower norms.

Many accepted financial rules are not timeless. Stocks only began consistently outperforming bonds after WWII, and inflation-adjusted US home prices were flat for a century before 1997. This reveals that much financial advice is based on recent history, not immutable laws, making it a poor guide for the future.

Analyst Harry Markopoulos identified Madoff's Ponzi scheme in five minutes, not with insider information, but by recognizing his promised 14% returns with no risk were mathematically impossible. Consistently perfect results are a major red flag, as even the best investors have down periods.

Despite his reputation, Marks made just five significant macro calls in his career. These were not based on economic forecasts but on 'taking the temperature' of investor behavior when it reached extremes of euphoria or despair. This highlights the rarity of true, high-probability moments to make major portfolio shifts.

Investors expecting an 'average' 8-10% return each year are often mistaken. Historical data shows returns are not normally distributed; the most common bucket of annual performance is actually 15-20%, followed by 30-35%. Years with average returns are relatively rare.

The historical outperformance of stocks has a standard error so large (2.1% on a 5.4% premium) that the true premium could be anywhere from 1% to 9%. This statistical uncertainty makes history an unreliable guide for future returns.

J.P. Morgan data shows that buying the S&P 500 when its P/E ratio is 23 has consistently led to 10-year annualized returns between -2% and 2%. This suggests investors should seek alternatives when the market is overheated.

Current S&P 500 valuations, with near-record profit margins and a 26x multiple, make historical 10.5% annual returns mathematically improbable. Achieving this would require absurd P/E expansion to 43x or margin expansion to over 20%, suggesting a best-case scenario of only 5% annual returns.

Investors often expect an average 8-10% annual return from stocks. However, historical data shows the most common yearly outcomes are monster returns of +15-20%, with +20-35% returns also being frequent. This demonstrates that market performance is characterized by periods of extreme gains, not steady, average growth, a concept investor Ken Fisher termed "normal market returns are extreme."