About four years ago I told my nephew, who was about 29 at the time, the following: open a Roth IRA; contribute $5,500 the first year; contribute $5,500 the second year; that is all the money that you will ever have to save for the rest of your life; invest precisely the way I tell you to; and, by the time you are 72, your Roth IRA will be valued at approximately $2.44 billion with probability 0.85.

I do not have $5,500 for each of two years, said he.

I will give you the $5,500, said I.

He did not take me up on the offer: seems that his interests lay elsewhere.

I said the same to my niece at about the same time. She was about 28 at the time.

I do not have the $5,500, said she.

I will give you the $5,500, said I.

How can you guarantee that it will work, said she.

No guarantee, but merely probabilities, said I.

What about the other 0.15 probability, said she.

In that case, you will have somewhat less, said I.

She did not believe anything that I said.

Actually, with a relatively simplistic hedge, the efficiency can be increased three fold. Since the efficiency is the natural logarithm of the change in the underlying yield ratio, then a three-fold increase in efficiency represents a mere 2.5 percentage points increase in the annual yield ratio of the investment strategy over a 43 year investment horizon.

No one believes that this can be done.

But I am doing it.

Nathan A. Busch