My family is competitive. We play poker after Thanksgiving dinner and smack-talk our way through the football season each year as we each try to win the family football pool. A win at Scrabble earns you bragging rights, especially against my brother-in-law who took to reading the dictionary after a few crushing losses to his wife (my sister) in the early years of their marriage.
In this competitive spirit, our family decided a few years ago on New Year’s Eve to have a weight loss competition. The winner would be chosen based on who lost the greatest percentage of their body weight in one month's time. Not wanting to be left out of any chance at a victory, I stuffed myself with all-you-can-eat Italian and gamely stepped onto the scale to record my starting weight, despite the fact that I didn’t need to lose more than five pounds off my one hundred and forty pound frame. Some of my family members weighed two hundred pounds and had twenty pounds to lose.
Mathematically, I was beaten before the contest even started. Even if I lost my entire five pound goal, 3.5% of my body weight, I just couldn’t win against family members who only had to partially meet their goals to win on a percentage basis. If you weigh two hundred pounds and need to lose twenty pounds, even if you only lose ten, you’ve still lost 5% of your body weight. The point of my tale is not to brag about my slim physique, but rather that to point out that when working with percentages, the starting point matters…a lot.
The current bond market is a lot like my entry into the family weight loss competition…a skinny market with the percentage odds working against it.
The five slides that follow make the case for a cautious approach to bond investing in this low interest rate environment.
Reposted from: The Money Crush
No comments:
Post a Comment