
Funeral director had $250 million stash of IBM stock - ckinnan
http://www.portfolio.com/views/blogs/the-tech-observer/2008/12/10/the-ibm-fortune-and-the-funeral-home-director
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patio11
Although it is tempting to think "Wowza, this is a story about the enduring
power of stock options to make big fortunes", it is more about the enduring
power of compound interest to make fortunes. Although his benefactors are
lucky he held IBM stock rather than something that went bankrupt in the
interim, really, if you hold just about any diversified equity portfolio for
100 years when you're done, boom, you're worth really huge amounts of money.

Heck, my meager Roth IRA savings plus 100 years of 8% compounding would be
worth about $25 million, give or take. That is below the actual performance of
the American stock market these last 100 years, to boot.

(Granted, most of us can't directly benefit from 100 years of appreciation,
but most of us could directly benefit from well more than 40, and if you have
kids or causes that will survive you, hey, the sky is the limit.)

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gojomo
With the 40+% drop in 2008, I'm not sure that the 100-year average for
American stock market/broad-indexes is still over 8%-per-year.

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Retric
Over that time scale a 40% drop is not that big a deal.

1.08^100 = 2200 so 1$ = 2200$

(2200 * .6)^(1/100) = 1.0745, and 1$ = 1320$

PS: A 40% drop might seem like a huge deal but over time it's just not that
important. ~8% vs ~7.5%

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gojomo
Your math is of course correct, but I would turn the interpretation around:

On a 100-year scale, a 'tiny' 0.5% drop in compound return is massively
'important' in effect. It's no consolation to the person with 40% less money
that his annualized performance was only 0.5% worse; you own the $1320, not
the 7.45%.

"8%" is often thrown around as a long- _long_ -term guesstimate of stock
returns; if in fact that's slipped to 'merely' 7.5% based on the last year,
that's remarkable.

The hit against the annualized rate within timeframes more like the earning
careers (or even lifespans) of News.YC readers is also big. Here's an
interesting graph for S&P total return over the last 20 years:

<http://mahalanobis.twoday.net/stories/5279642/>

A dollar from 1988 was giving near (or far over) 8% annualized return until
mid-2007; now it's more like 5%.

~~~
Retric
My point is there are plenty of large swings in the history of the S&P 500.
It's up 15.38% from 10/9/2002, and down 41.33% from 3/24/2000. The BMW World
for Iceland is down 99.44% over the last year which drastically changes their
long term returns. But picking a peak or valley is not the best way to
calculate returns.

[http://www2.standardandpoors.com/spf/pdf/index/112808_Worldb...](http://www2.standardandpoors.com/spf/pdf/index/112808_WorldbyNumbers-
Report.pdf)

IMO picking a peak or valley is less informative than what happens when you
invest one inflation adjusted dollar every month over the history of a stock
exchange. Add in selling off 1-4% a year and you can see what the stock market
does for normal peoples investments.

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jmtame
This mans sounds pretty cool, although I'm not about to defend IBM either.
Lots of money, yet lived frugal. Reminds me of Buffett (although I recently
keep wondering why Steve Jobs, who is very frugal, bought an SL 55). Anyone
know why people buy stuff like that when they typically lead pretty frugal
lives relative to their monetary wealth? Same thing with Larry and Sergey
buying a jet. Any ideas?

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reitzensteinm
An SL 55 is about $120k. Plenty of non millionaires drive cars that cost half
that (and I bet there are non millionaires that drive SL 55s) - for a
billionaire, where it's a rounding error on his net worth (though probably not
on his liquid cash), it basically is frugal.

~~~
gaius
Quite. He could afford to have a custom iBentley made if he wanted to. Also I
don't know how the SL55 stacks up in this respect but if it's more reliable
than average, then that's a frugal choice too. Remember it doesn't mean
_cheap_ it means best possible value for money.

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halo
And donated it all to good causes on his death.

