X-Message-Number: 1813
Date: Wed, 24 Feb 93 10:49:32 EST
From:  (Perry E. Metzger)
Subject: CRYONICS: Equities Investments

> From: MICHAEL RISKIN <>

>           The financial advice on SECURE investments by the ex-advisory
> commitee could at best, have produced 2 to 3 percent greater return on the
> endowment fund or $8 to $12,000 in 1992, hardly enough to make up for
> operating deficits as you profess. If you believe the advisory commitee
> (specifically Eric Klien) should be listened to and have our moneys be
> invested in stock market equity positions, then you are willing to risk 
> significant downside results (along with the possible gains) of our money.
> That is an idea that is consistently rejected by the board.

I must respectfully disagree with Mr. Riskin on the relative merits of
equity and "safe" investments.

Although I have no capacity to judge whether Mr. Klein's specific
recomendations were any good (I do not know what they were), I think that
its fairly easy to comment on the question of "safe" versus equity investments.

Some people, believing the assinine propaganda of statists, would have
you believe that the stock market is some sort of gambling casino, and
that investing in Government securities is somehow safe.

First, real return in the long run on Government bonds, tends to be NEGATIVE.
Thats right -- you tend to LOSE money investing in T-Bills. Especially
on the long bonds, inflation tends to exceed income in the long haul.

On the other hand, real return on a basket passively invested in the
stocks of the Dow Jones average or the S&P 500 average tends to be pretty
good in the long run. This is not a fluke -- it actually makes sense. So
long as the economy expands, the value of a pool of equities investments
will tend to grow in real dollars as underlying companies are growing.

Furthermore, Goverment securities are NOT, I repeat NOT safe. We have all
been lulled into a foolish sense of security in the capacity of the U.S.
Government to pay its debts. Many other countries have defaulted on their
debts, or effectively defaulted, in the past. Even were the U.S. Government
merely to inflate the currency to pay the debt, the value of bonds would
plummet as interest rates rose.

There are substantial risks involved in any investment decision -- I will
not deny that. However, the notion that some investments are "safe" and
that equities are "dangerous" is a way of shoving your head in the
sand. There are NO safe investments whatsoever. Every investment involves
risk. The risk in the equities market, properly managed, actually appears
to be substantially less than the risk in the bond markets.

This is not to say that one should invest solely in equities -- it is to
say that an irrational fear of equities investments is dangerous and
counterproductive.

Perry Metzger

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