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  • bee January 23
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How To Maintain And Compound Inherited Wealth

edited January 23 in Fund Discussions

How To Maintain And Compound Inherited Wealth
First, a brief history of financial markets:

Stocks beat bonds over a 25- to 50-year time span.
Volatility of fixed income investments can equal that of equities in both directions.
The market (S&P 500 Index) can sell at book value, now at two times book. Bond yields can range from 1% to even 15% when inflation rages.
Thirty-year Treasuries, currently yield 2%, but in 1982 during FRB tightening hit 15%. Five-year paper, a comparable trajectory.
Inflation, now at 2%, rose to 8%, early eighties. It made our country uncompetitive, as in General Motors.
Dollar depreciation or appreciation can range between minus 25% to plus 25%.
Deep-seated financial risk lurks in almost every type of asset. Banks capitalized at $200 billion can self-destruct with hidden bad loans. American International Group needed a government package of $180 billion to remain solvent after guaranteeing sub-prime loans.
Municipalities, even countries, in turn can bankrupt themselves. Consider Greece and Venezuela. Brazil, Iceland and Thailand were world destabilizing forces through their overleveraged banks even though their GDPs were miniscule. Chicago, Detroit, Sacramento, possibly New Jersey currently and New York City some 20 years ago saw the wolf at their door.
Puerto Rico now hovers near basket case status, even shamelessly falsifying their hurricane mortality numbers.


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