Finance:
Length: 510 words (1.9 pages)
Rating: Red (FREE)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Historically speaking, stocks have been found to be no more risky than Treasury bonds. Over the past twenty years vast research has been done on this subject. Jeremy Siegel of the University of Pennsylvania?s Wharton School stated that, ?The safest long-term investment for the preservation of purchasing power has clearly been stocks, not bonds.? Since the mid nineteen twenties, company stocks have average annual returns close to 11%, while on the other hand, Treasury Bonds only return with a little over 5%.
Currently stocks are on the rise. Since 1982 the reason for this is the declining risk premium. The return, or ?risk premium,? that is required is much less. This is for several reasons. Investors have realized not to be so fearful of the great unpredictability of stocks. Instead of dropping stocks in the short run, investors are learning to hold out for the long run to see huge benefits.
Secondly, Americans are now keeping stocks in accounts that require long-term holding, such as retirement accounts. Also, businesses are becoming much more efficient and the chance of undergoing devastating turn-arounds in a recession are much less. The tax environment is more generous, foreign threats have ceased dramatically, and the government management has vastly improved.
The bottom line is that the risk of investing stocks is much less than it ever has been before. The level of the risk premium is heading towards zero, while currently holding at 3%. That 3% is much better than the historical average of 7%.
James K. Glassman and Kevin A Hassett, authors of the book, ?Dow 36,000,? claim that the prediction of the Dow reaching 36,000 is not out of the realm of possibilities. If the earnings grow in the long term at the same rate as the GDP and treasury bonds are below 6%, then it is very possible for the Dow to hit a level of 36,000. One critic of ?Dow 36,000,? Burton G. Malkiel, stated that the rise in stocks that has been occurring is the beginning to an adjustment that ?will only be complete when stocks and bonds are priced to offer equivalent returns, and that implies a level of 36,000 for the Dow today with a price earnings multiple of 100.?
So the question remains at whether the authors of ?Dow 36,000? are correct or incorrect about the arguments and predictions that they make in their book. They are correct in what they predict in their book, but they need to make sure to not lead some not-so-experienced investors down the wrong road of deception. ?Dow 36,000? correctly explains that historically the risk premiums have been too high.
At the same time critics also nag at the fact that it is hard to believe that in the long run stocks aren?t any riskier than government bonds. There are also many factors that do definitely lower the risk premium including free markets, stable economy, and the end of the Cold War, but at the same time no one can predict what will happen in the world economy at any moment.
Search for: [gods existence] [careful analysis] [last ten] [people suffer]
|
Important Note: If you'd like to save a copy of the
paper on your computer, you can COPY and PASTE it into your word
processor. Please, follow these steps to do that in Windows:
1. Select the text of the paper with the mouse and press Ctrl+C. Azete.com (the "Web Site") is produced by the "Company". The contents of this Web Site, such as text, graphics, images, audio, video and all other material ("Material"), are protected by copyright under both United States and foreign laws. The Company makes no representations about the accuracy, reliability, completeness, or timeliness of the Material or about the results to be obtained from using the Material. You expressly agree that any use of the Material is entirely at your own risk. Most of the Material on the Web Site is provided and maintained by third parties. This third party Material may not be screened by the Company prior to its inclusion on the Web Site. You expressly agree that the Company is not liable or responsible for any defamatory, offensive, or illegal conduct of other subscribers or third parties. The Materials are provided on an as-is basis without warranty express or implied. The Company and its suppliers and affiliates disclaim all warranties, including the warranty of non-infringement of proprietary or third party rights, and the warranty of fitness for a particular purpose. The Company and its suppliers make no warranties as to the accuracy, reliability, completeness, or timeliness of the material, services, text, graphics and links. For a complete statement of the Terms of Service, please see our website. By obtaining these materials you agree to abide by the terms herein, by our Terms of Service as posted on the website and any and all alterations, revisions and amendments thereto. |
that is very ordinary and real to life, it could happen to anyone. It tells the story of Alvy Singer and Annie Hall, who fall in love for awhile, but things dont work out, so they break up. What makes this movie different is that it uses an unusual method of commentary to get its point across. Dur...isit the tomb of Saint Thomas A. Beckett. He also wrote about a dishonest monk. The Monk was a man who looked as though he enjoyed the good life. He was fat, and obviously enjoyed good food as well as fine clothes. He wore a fur cloak adorned with fancy decorations, and other expens... dollars next year to help establish a nationwide computer system to rapidly track the outbreak of infectious diseases such as influenza and hepititis C and notify doctors how best to treat them. Diverticulosis vs. diverticulitis: By Doctor on call;Date of publication January 11,2000 Dive...ong enough to get past it, its going come back around and tackle you to the damn group, What are friends, friends are people that you think are you friends, but there really your enemies in secret identities, in disguises to hide there true colours, and just when you think your close enough to be b...