The math of loss

A client sent me this cartoon.  Funny.  But also very common to hear this kind of nonsense math from many financial types and “stock-pickers”.  When they talk confidently enough… some people actually seem to believe them.

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3 Responses to The math of loss

  1. Mommybomm says:

    After watching the piece with El-Erian from PIMCO, and seeing this cartoon….I am going to go off the cliff and state, and you can quote me on it…that QE is coming much sooner than anyone is expecting, possibly by the end of this month (June).
    How can it not in a credit-based banking system? And the folks calling for deflation-driven gold through the floor boards had better cover their shorts. Fridays gold move was a pocket-pivot, not ‘just short-covering’…it was FEAR. Real FEAR. $ 2,500.00 gold is coming, mark my words. Anyone who can’t understand this are out of touch with reality, IMHO.

  2. Roberta says:

    Reminds me a popular female financial whizzard with initials S.O. asking her audience this question:

    Which is better:
    a) An investment that goes up 80% one year and down 50% the next, or
    b) An investment that goes up 5% each year.

    She did the math given a $10,000 investment in each:
    Investment a) First year you would have 18,000; second year you’d have 9,000.
    Investment b) First year you would have 10,500; second year you’d have11,025.

    Problem is, where can you get 5% today?

  3. Actually, you can get about 5% in preferred shares, but of course there is capital risk, as well as other risks depending on the type of preferred shares you are buying. As always, understand what you are buying BEFORE you buy.

    You can also get 4-5% in investment properties (low by historical standards), but RE is manic right now.

    Be careful.

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