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Marty Fridson on the 40-year fall in interest rates
A veteran bond trader reminisces about bond trading during the high inflation 70s and during the 40 year bond bull market which ensued after Fed Chairman Paul Volker raised the overnight lending rate to around 20% in June ‘81. Covers effects of changing rates and inflation expectations on many types of investments: bonds, utilities, insurance, etc.
Looking back at historical returns, you have to stick with equities over time. Bonds will dampen volatility and can offer ballast, so they have a place in the portfolio. But stocks generate the more solid real rate of return.
Of course, we don't usually have the S&P 500 up at 44.7x current earnings. Its a dilemma.
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Of course, we don't usually have the S&P 500 up at 44.7x current earnings. Its a dilemma.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Check out the "value of $100 invested in 1928" columns.