IT'S "LEAP DAY" ! ! !

Happy February 29th ! ! !

Leap Day Traditions

I have a friend who was born on February 29.  She's only 14.

Candy, I have been very pleased recently, when I consider that I don't own stocks. Not that I have shown any particular wisdom in that regard in the past--I had that pounded into my skull when the Dubya recession hit and I lost 70% of the vaue of my portfolio. Never again!

The trouble with stocks as an investment is that some bullshit can come along and wipe out most of the value of your investments--bullshit that you can't foresee and isn't under your control. Also, the stock market would be MUCH more attractive as an investment vehicle if there was some rational connection between the intrinsic value of a company and the price of its stock.

Does anyone really believe that the value of every single company (with the exception of 3M, the guys who make those masks) on the NYSE has dropped by 10% or more because of a "deadly outbreak" that has so far this year killed 0.0003% as many people as have died of the flu?

Also: lightning deaths worldwide annually: 2,000. Hippo deaths: 500. Deaths from being hit by lightning while being attacked by a hippo: 4.

And to return to the original topic, did you know that 1/1461th of all deaths occur on a Leap Day??? Something must be done at once!!!

Lot's of stats, but none about the history of the Dow or S&P 500.  You've been prudent to not participate in the 777% increase in the S&P 500 over the past 30 years.  

You should not have put an apostrophe in "lots."

I didn't talk about the history of those two stock indexes because I was talking about the stock market in general, not stock indexes. Most common stocks on the NYSE are not listed on either index.

If your point (which I often have to guess at because you're not very articulate) is that the stock market has overall gone up in the last several decades, that's true, but not to an extent where it would have provided a much better return than investing in debt instruments. And the real trouble is that it's quite possible to lose half of your investment or more. It's tremendous risk (as people are currently finding out) for a relatively small return.

Even if the bigly Orange One keeps boasting about it.

Kevin, I don't disagree with you at all about stocks.  The same happened to me in 2008, and I was riding high at the time.  I held on, finally lost my nerve, got out just in time to miss the bounce that would have helped tremendously.  Soul crushing.  Clawed my way partially back by, ummm, a third.  At least my investments (managed by another) are not all stocks this time.  Damned virus and chicken-shit companies.

Kevin, please give me some "debt instuments" that approached 770% since 1990.

First of all, since the 2020 dollar has the purchasing power of roughly half of the 1990 dollar, that figure should be more like 335%. I assume you're referring to the Dow Jones Industrial Average.

Second of all, a "debt instrument" such as a long-term bond, if it carried the prime interest rate of 9.50% (as of the end of 1990), would, over the intervening thirty years, have resulted in a return of over 1,520 percent. That should also be adjusted for inflation, making it roughly 760 percent. Thus, a debt instrument paying prime interest rates would indeed have not only approached but far exceeded that (adjusted) 770% figure (actually 335%, as explained above).

However, most debt instruments pay a much higher rate than the prime rate--which is the rate that the absolute best borrowers get. Corporate debt instruments, such as bonds, generally pay considerably more than prime--because if those institutions could borrow what they need from banks at prime, they would do that rather than sell bonds. If we assume you made your hypothetical investment at one "point" over prime, your thirty-year return would have been 1,999%---999% when adjusted for inflation.

Additionally, had you invested in corporate debt rather than the stock market, you would not have been subjected to the volatiity that the stock market experienced. The "long term" is great, but only if your timing is fortuitous. For example, anyone who bought stocks immediately before the dot.com crash or the Dubya recession still might not have have broken even by today.

So debt instruments can approach and often exceed the returns that the stock markets provide. The exact extent depends on world economic conditions as well as a host of other factors. The salient nature of debt investment is its steadiness--you don't get to ride the rocket ship of a boom, but you also don't have to stay on board the sinking ship of a crash.

I'm glad to educate you, though it was probably a quixotic exercise.

Once again Kevin shows his ignorance of finance as his claim of a 1,520% return is way off. 

Using his 9.5% return one can double their money every 7.6 years. So over 30 years the return would actually be less than 400%, NOT 1,520%. He also ignores the risks that the purchase price of a bond can decrease due to economic factors. 

All studies that show 10/20 years returns, the stock market wins.