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Pastimes : The Naked Truth - Big Kahuna a Myth
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To: Jack of All Trades who wrote (71266)10/22/1999 3:11:00 PM
From: BGR  Read Replies (1) of 86076
 
JCG,

I posit that CD's are only marginally safer, and on hindsight not so much safer in the long run as to justify their low yields. (Guess why bankers are such good golf players? Practise helps.) As I have posted several times on this thread, if someone buys and holds the index for 25+ years, the probability of them underperforming CDs is in single digits, and the probability of them losing any money is negligible. In particular, such a person will vastly overperform the market with a nearly 70% (from memory, may not be accurate) probability by my past calculations. Given this risk-reward ratio, CDs are overpriced (i.e. lower yielding than they should be). The fact that investors are being aware of this is reflected in the lowering of the risk premium.

As for public transporation, I live in the Boston area and would not dream of driving to work. In any case, change my analogy to add the additional clause, "where public transportation is available", if you please.

-BGR.
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