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mannfm11

I would like to have some of the stuff I posted on this subject back in 2003. One of the most absurd rallies in a stock in history was when GM issued those bonds, the 30 year series at 9 3/8 or thereabouts when 10 year treasuries were running below 4%. Though they still had a investment grade rating, this was clearly a junk bond price.

Also, 9% is an absurd return to consider on something as conservative as pension funds. This voodoo finance was merely one more tool used by management and Wall Street to loot the operation.

The fraud known as the stock market will go down in history as one of the greatest scams all time. There isn't a period of time ever that the stock market was a prosperous place to have money going forward with dividends a 3% or less. For example, the SPX closed at 336.77 in August 1987. The dividend at that point bottomed at or near 3%. Today the dividend yield on the SPX could be as low as 2.6%, taking the first quarter and multiplying it by 4 and dividing by the closing price of 921. In any case, 934 would be a compound 4.75% gain for 22 years from the 336.77, giving a 22 year return of 7.75%. But, we have likely lowered the yield, meaning the price is actually higher than it should be. Proje ting from June 2003, when the dividend yield was 1.66% was insane, as the price on the SPX is now lower than it was on 6/30/03. Thus we are now looking at 6 years where the return on the SPX was under 3% compound and most likely inflated by a credit bubble as well.

So we are a long ways from a 9% return, an 8% return or even a 7% return. In any case, I believe both of us would have agreed in 2003 that those buying in basically booked a ride on the Titanic and have spent the past 6 years re-arranging the deck chairs.

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