Over certain spans of time, it is inevitable that individual commodities will experience big changes in price. What I was describing above is multi-decade investment strategies.

It would be interesting to have the same trend lines as those linked running back to 1900.

Right before the Great Depression was admittedly a bad time to invest in stock. When holding stock, rather than something like Guaranteed Investment Certificates, you are betting that the risk of such catastrophic stock market declines is adequately compensated by the difference in interest rates between the assets. Over a long enough time period, this is highly likely to be true.

[B]aroque financial instruments are making it increasingly hard to tell where real assets lie, and who’s holding a bag of exploding lepers.

There is some truth to this, but I am still willing to bet that a dollar invested today will be worth the most in 20 years if it is invested in a low-fee index tracking fund of global equities.

Common stocks have returned an average of 7 percent per year, adjusted for inflation. If you are way smarter, luckier, and less risk-averse than all of the companies in the United States, you may be able to do substantially better. But a return on investment of 200 percent per year is not very exciting when you only have a few hundred dollars in capital. That’s why it is so important to pick your parents carefully.

To paraphrase someone on Metafilter, these days, baroque financial instruments are making it increasingly hard to tell where real assets lie, and who’s holding a bag of exploding lepers.