Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (45097)	11/8/2005 4:56:08 PM
From: GraceZ	Respond to of 110194

It was a joke, the remark about risk and your buying the real bonds. I do make jokes from time to time (which almost no one gets, but that is another story). That aside, I'm assuming that the return on those bonds is priced for the risk. The biggest problem I have with my own clients is explaining why it is that it can be prudent to take on risk as long as it is in an appropriate measure. It's that old thing about the asymmetrical weight that people give to losses over gains. I've actually had people, after I explained the risk/return involved with a a particular investment, say things like, "Well I want to buy it if it is going to go up, but not if it is going to go down." I usually respond with, "I'll check next month's WSJ and let you know." it is not really an "antidote" to doom and gloom books Generally speaking any book that is long on the existing historical data is a good antidote to the doom and gloom books. I looked through the book briefly before I made that comment. i think $130 is pretty cheap for certain information. Oh, for sure. I imagine that when that price was set it was set with the idea that those who were capable of finding it valuable would have no problem re-cooping the cost and since by the author's admission they would be few in number. The price was set with the small audience in mind. I test in the top 2% of just about any standardized test that I've had thrown at me, but I'd never say math was something that came easily to me, I've struggled with it intermittently my whole life. Considering I spend a great deal of time explaining simple financial math concepts to people with far better educations than my own (or more expensive ones at least), I'd say he might have it right about the 2%. It's not that the rest aren't smart enough it's that people frequently just shut down their minds when confronted with a math sentence. They want the Cliff Note version but math does not accommodate them, it is already in a form that is as elegant as it can be. the example of wage indexing to inflation makes sense to me. i'm not sure why you think that contrasts with what i said. It makes sense to you because you think that is basically what has happened here so you aren't far off. But that is only because the rate of inflation has fallen or remained stable here for two decades. The Israeli example was of a policy which attempted to take the pain out of inflation, to make it completely frictionless... just adjust everything along with the CPI and nobody gets hurt. Ha! They wound up with 800% inflation. Imagine what that did to anyone holding the bond side of a mortgage or calculating the return on a business capital investment. Besides it didn't stop the ordinary wage earner from suffering. People had to get paid every day and shop every day. We have a small taste of the same sort of failed policy here, with COLAs and the like. The Fed is given this dual mandate (I like to think of it as the duel mandate), fight inflation but make sure it doesn't cost anyone a job. Labor prices should fall along with everything else, why should they be sticky on the downside in a free market? The Fed accommodates this racketing up with their policies, they provide the fuel for labor to receive wages in excess of productivity. Most like to think it's just a tug of war between capital returns and returns to labor, but both get hit by inflation, both take a turn in the barrel. The only thing that has saved us all is the tremendous unstoppable growth in knowledge and accumulated capital, but inflation makes everyone a little poorer than they'd otherwise be.