Something that's bugged me since I've ever learned anything about finance: Philosophically(?) speaking, why does growth subtract from a perpetuity's return?
I know the mathematical explanation, but it's so counter-intuitive.
Why should a perpetuity with 0% expected growth be valued at the same proportion as one with high growth when holding the natural (risk free) rate constant?
Maybe if one uses the stock market as a transposition, you see that P/Es are higher with higher expected growth companies, reducing the net rate, explaining the $r - g$ in the denominator, but what about a natural rate of $X$ and a growth rate $g > X$? So, we're supposed to get paid for the privilege of holding this asset now?