re: innumeracy

1/.6=~ 1 2/3, or 2/3 more, after 40% ‘markdown’..

.667 is not ‘approximately’ .800, actually, there’s a 20% Gulf ‘tween them..

fair enough, but when did this turn into a 401k conversation? I was simply saying that the statement you made above that all asset classes did worse than cash over the last 18 months was not true. Very few qualified plans have “cash” as an option anyway, lets not fool ourselves into thinking stable value funds are cash. If you think they are, how safe were you feeling when Lehman went down last year? Ever see how much MBS is jammed into one of those?

I don’t exactly agree that there was a lot of risk holding the TLT the last 18 months, more volatility, of course, but not much different risk, the main risk to an investment like that is inflation so cash was basically the same risk, unless you thought the US was going to default in the last 18 months.

Mom and pop, for the most part, would be better off only contributing up to the employer match in the 401k, if they are lucky enough to get one, and all other savings should go to a Roth IRA, where they can indeed buy things like the GLD and TLT as an owner, not a participant.

Math error. The price was marked down 40%, so the same dollar now buys (approximately) 80% more.

Good job, you came up with 3: GLD, TLT and privately-held REITs. Not exactly the types of asset classes that Mom and Pop are told to stuff into their 401Ks, but good choices anyway, and they indeed outperformed cash. Of course, these returns came with the kinds of risk and volatility not found in holding cash, you be the judge if those returns were worth it.

ben22 also said: I’d be willing to bet over the next 18 months both stocks and bonds do better than cash. I’m no Buffett groupie but cash is trash right now.

That “trash” today buys 40% more stocks than it did in October 2007. If this trend persists, the “trash” will be able to buy even more of those stocks and bonds in 18 months.

since we are talking asset class, privately held REITS also would have beat cash in terms of % return over the last 18 months.

You said 18 months correct? So I’ll go back to the end of September 2007. Not sure exactly what cash means to you, or what rate of return you are using for cash but I’ll use the GLD as my measure of gold, it traded at around 66.50 then, it is at 90 now. I’ll let you do the math on that one to figure out the %, it’s higher than any cash products I know about, certainly higher than any risk free cash, the GLD closed at 90.69 Friday.

Long treasuries beat cash over that period as well. For example, you could have put money in the TLT at the end of Sept 07 @ around 88, it closed at 104.56 on Friday. What cash did better than that exactly? the TLT was at 120 early 09.

I’d be willing to bet over the next 18 months both stocks and bonds do better than cash. I’m no Buffett groupie but cash is trash right now.

OK, we’ve got a ‘gentleman’s bet’ – GLD vs. cash for the next year.

Cheers!

I think gold bugs are going to be disappointed with its performance during deflation, and I believe a deflation is well underway. In fact, it’s just getting started.

drey also said: I’ll make you a friendly wager, your cash versus a simple investment in GLD going forward over the next year, year and a half. 2,000 an oz. by end of 2010 without breaking a sweat.

Good luck with that bet drey!

Ben22, please provide the asset class, including the percentage return, over the last 18 months that has outperformed cash.

Regards.