Mike the Mad Biologist

The reason your dividends were (past tense) higher than U.S. Treasury yields is because there was risk involved in this investment, even if you pretended otherwise. That’s why you get more money back–because you’re holding more risk. Privately held companies are not back by the full faith and credit of sovereign states. Welcome to the Downside.

And you are in a risky investment: poking holes in the earth. There’s good stuff in the earth, but sometimes the earth pokes back. That confers risk.

If this prospect seems less attractive, might I suggest U.S., U.K., and Japanese securities? They are much safer–they always make good on their obligations (that’s the nice thing about printing your own money). And there’s nothing in any of these economies that suggests rampant inflation in the foreseeable future, so you’ll get your principal back, maybe even make a little money.

Someone once told me that the hardest part about running a con was knowing when to walk away–the trick is to not get greedy.

Sounds like good advice.

Comments

  1. #1 llewelly
    June 19, 2010

    Good point, except that the earth did not in any way poke back. On the contrary, the accident (which was foreseen) was entirely the result of BP’s numerous deliberate decisions to not take adequate precautions.

  2. #2 Joshua
    June 19, 2010

    Figurative language is about as difficult to understand as economics, apparently…

  3. #3 DGKnipfer
    June 21, 2010

    Good point, except that the earth did not in any way poke back. On the contrary, the accident (which was foreseen) was entirely the result of BP’s numerous deliberate decisions to not take adequate precautions.

    I guess you could say that BP was willing to accept more risk. It’s a shame that their shareholders didn’t realize that.

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