 
Message-ID: 
Date: Tue,  1 Jun 1993 14:12:04 -0400 (EDT)
From: "Jon C. Slenk" 
To:	+dist+/afs/andrew/usr/js9b/Public/camc.dl@andrew.cmu.edu
Subject: Fwd: Space Investing (2 of 2)
References: <1879.2C0A7C80@ofa123.fidonet.org>
Fred: is Not

I've edited this down somewhat. The basic info I wanted to pass along was
the idea of putting money together in some way to leverage our plans.

---------- Forwarded message begins here ----------

From: Wales Larrison 
To: space-investors@cs.cmu.edu
Subject: Space Investing (2 of 2)
Message-Id: <1879.2C0A7C80@ofa123.fidonet.org>
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>4. Is the long term goal, item 'D', too way-out for credibility, or
>does it add to the appeal of this fund and make it distinctive?
>(one descendant to move to space.)
  No, not too way out. Rather tame in my view.  Run the numbers
out...
  Let's look at the case of a long-term investment program to "buy
our way into space", using a 50,000 person "pro-space" population
investing on a 20 year time horizon.
 50,000 persons  $1000 investment  annually  growth=8% yields $2.47B
 If we assume a 10:1 leverage potential (10% down...), that same
50,000 persons can invest $25 Billion - which should be enough to
start a real permanent Lunar base, with a resonable expection of
participating.
 If we assume they invest $2000 annually for 20 years,
 50,000 persons  $2000 investment  annually  growth=8% yields $4.94B
which can be leveraged up to almost $50 B.  Even better.
   This tells me the space enthusiast community can BUY the future
they want - if they are willing to invest in it.  Now 20 years may
seem long to some people, but I've bought a house with a 30 year
mortgage, and I've set up a college fund for my kid over a 18 year
horizon, so I don't think a 20 year investment planning horizon is
unreasonable to think about.
  Is 8% per year a reasonable return to expect for 20 years?  I
believe this is reasonable, since it is actually slightly lower than
the historical 50-year return from stocks in general (based upon
Ibbotsen's and Sincfeld's study of stock market returns from 1920-
1990). That return should be achievable with diversified mutual fund
investing in the S&P 500 (there are several of these around).  A
diversified portfolio of small stocks should do 1-2% per year
better, but with a higher variability (risk).
   Is $1000-2000 per year per person beyond reason?  This is a much
more personal question, but I don't think so.  That amount is only
about $20-40 per week, and is LESS than the amount an individual is
allowed to put away in an IRA to accumulate tax free (depending on
income...). Furthermore, the money is not necessarily dedicated to
"space investments", nor is it out of reach, necessarily, for real
financial emergencies.  I'm putting substantially more than that
away each year through a 401(k) program from my employer.  On the
_average_ $1000-2000 should be available for savings in general, and
this is only a slightly differing form of savings.
   Is 50,000 persons an unreasonable population?  This is about 1/4
the combined membership of the Planetary Society and NSS, alone.
Plus you can include interested parties from the technical societies
and elsewhere. In my opinion 50 K people is not unreasonable - since
this program is basically only a self-directed savings program, and
not focused on any specific investment, but just on a reasonable
savings effort.  As a nation, the US needs to increase its savings
rate.  This is one way - with potential significant benefits in the
future for the space community.   If it can be shown that more
focused space investments are good finanical strategy, then the
50,000 is probably on the low side, since anyone who is saving and
investing might be interested in a good finanical strategy.
  
>5. How should it be structured: a club, mutual fund, company, co-
>op,  _____?
  I would highly encourage concentration upon the investment club
approach.  Investment clubs are a well-established method of
allowing individuals to invest in stocks and other securities.  They
are basically small, group-directed mutual funds, which take
advantage of the participation of several individuals.  Their
diversification is dependent upon the resources the members place in
the club, but the risk is spread over several individuals, and the
larger pool of resources from several individuals allows a larger
diversification.
  Setting up something like an investment club is simple - the legal
regulations are low and there are plenty of pre-planned
organizational structures available from the National Association of
Investment Clubs.  From my involvement with investment clubs in the
past, it is pretty simple - if you are serious about going about it,
and willing to consider good investments in related fields (the
number 1 objective of your investment club has to be to make GOOD
long-term investments, and sometimes good space-oriented investments
are not immediately apparent.  However, other good investments will
make money - which in turn, can be invested in good space
investments when they are identified.  Don't invest just to invest.)
  If you are interested, I would recommend the following readings:
  "Wall Street on $20 a Month", by Phyllis Humphrey (Wiley & Sons,
1986).  A good introduction to investment clubs.
  "The Wall Street Gurus", by Peter Brimelow (Random House, 1986).
A very good introduction to investment newsletters and their
investment strategies.
  "Pay Yourself First", by Michael Hayes (Anacom Books, 1979).  A
very good introduction to mutual fund investment strategies.
   And you might contact the National Association of Investment
Clubs at 1515 E. Eleven Mile Road, Royal Oak, Michigan 48067 for
their startup kit - they provide information, standard forms and
organizational paperwork, a monthly newsletter, stock and financial
advice, and even theft/embezzlement insurance. (IF you decide to
pursue this through them, it is about $30/year per club, and $6 per
member.)
   The up-side opportunity is huge - and the down side seems pretty
small (over 20 years, how bad can you get hurt by setting up an IRA
and investing in a diversified stock market mutual fund?). I have in
a low-key way, been encouraging this over the past several years and
am putting my money where my mouth is.
    Thus, I have been encouraging people to approach space
activities with an investor's perspective.  It's part of the
reasons why I write "Space Technology Investor/Commercial Space
News" and post it on sci.space (which Vince reposts here)-- trying
to provide information about the business side of space, and trying
to provide data tracking developments in the commercial space
industry.
 --------------------------------------------------------------------
 Wales Larrison                               Space Technology Investor
--  

Wales Larrison
Internet: Wales.Larrison@ofa123.fidonet.org
Compuserve: >internet:Wales.Larrison@ofa123.fidonet.org

----------------------------------------------------
Jon Slenk          Carnegie Mellon    EVERYTHING is
angst+@cmu.edu     Pittsburgh PA      Disclaimed

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