Letter to the Editor

The following is in response to Michael Nairne’s article, And the Winner Is..., which appeared last week.

Dear Editor,

What was the winner during the protracted bear/sideways markets of 1966 – 1982 (or the ‘70’s, if you restrict a study to a decade)?  That period seemed to be just as tough on investors, if not the economy/public in general, as the 1930’s.

Steven A. Katcher, CFP, CFM
Merrill Lynch
Clear Lake, TX

Michael Nairne responds:

I ran the numbers for both time periods. I also added inflation adjusted numbers given the high inflation of the period. (Note: Inflation-adjusting the 1930’s did not change the findings in our article, so we didn’t comment on this aspect.)

Essentially, the longer duration of the Ibbotson Corporate Bond index puts it into second place after Intermediate Government returns. However, it continues to beat the Long-Term Government Bond index – again the payment for default risk is present.  On an equivalent-duration basis, Corporate bonds likely outperformed Intermediate Government bonds as well.

Cheers

Michael Nairne, CFP, CFA
President
Tacita Capital

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