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Bear Beer Market

Joke:   Beer outperforms shares of publicly traded companies as an investment.


Examples:

[Collected via e-mail, October 2008]

Investment advice

I thought I would pass on some investing advice in these tough times....

If you had purchased $1,000 of AIG stock one year ago, you would have $42 left. With Lehman, you would have $6.60 left. With Fannie or Freddie, you would have less than $5 left.

But if you had purchased $1,000 worth of beer one year ago, drank all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have had $214.

Based on the above, the best current investment advice is to drink heavily and recycle.
 

[Collected via e-mail, October 2008]

If you had purchased $1,000 of shares in Delta Airlines one year ago, you will have $49.00 today.

If you had purchased $1,000 of shares in AIG one year ago, you will have $33.00 today.

If you had purchased $1,000 of shares in Lehman Brothers one year ago, you will have $0.00 today.

But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling refund, you will have received a $214.00.

Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-Keg.
 

[Collected via e-mail, April 2004]

Retirement Plan

If you had purchased $1000.00 of Nortel stock one year ago, it would now be worth $49.00.

With Enron, you would have $16.50 left of the original $1,000.00

With WorldCom, you would have less than $5.00 left.

But, if you had purchased $1,000.00 worth of Beer one year ago, drank all the beer, then turned in the cans for the aluminum recycling price, you would have $214.00.

Based on the above, current investment advice is to drink heavily and recycle.

It's called the 401-Keg Plan.
 

Variations:   Variant entries about failed investments occasionally appear in some versions of this piece:
  • "With Lucent, he would have $3.50 left of the original $1,000.00." (April 2007)
  • "If you had purchased $1,000.00 of Delta Air Line stock, you would have $49.00 left." (February 2007)
  • "If you had purchased $1,000.00 of Delta Air Line stock, you would have $36.00 left." (January 2008)
Origins:   The jape outlined in the three examples above has been in circulation in various forms since at least 2002, with the roster of investment vehicles that fell from the heights varying from version to version. However, for the last several years the supposed bounty one could reap from recycling the empty cans that once held $1,000 worth of beer ($214) has remained constant.

The math is off by a fair bit regarding the value of those empties. If we assume:
  • A recycle value of 35¢ to 75¢ per pound for aluminum beer cans
  • An empty can weight of 0.535 ounces
  • The purchase of 1,584 cans of beer for $1,000 (66 cases of 24 cans each at $15 per case)
Then:
  • .535 oz x 1,584 x 35¢ / 16 = $18.54
  • .535 oz x 1,584 x 75¢ / 16 = $39.72
More simply, those 1,584 empties would fetch approximately somewhere between $18.54 and $39.72 from a recycler, not $214. You're not going to drink your way to riches.

(One might get more than the pure aluminum recycling value for redeeming empty cans in states that add redemption value deposits onto the price of beverages sold in recyclable containers, but that money would simply be a refund of a deposit already paid at the time of purchase. And the return on 1,584 empties still wouldn't equal $214.00 unless the charge per can were about 13.5¢, which is considerably more than the 5¢ to 10¢ deposit typically charged in states that assess such deposits.)

Regarding the loss of value of the stocks quoted in the various versions, to accurately work that out, you'd have to know when the e-mail's "a year ago" was to determine the two dates to compare. However, to give an idea of the drop in value, we note that shares in AIG closed at $59.53 on 5 November 2007 and at $2.41 a year later (4 November 2008), which means a $1,000 investment in AIG on 5 November 2007 would have been worth $40.48 on 4 November 2008. Likewise, for that same period an initial investment of $1,000 of Lehman Brothers stock would have been worth only $1.03 a year later (the share price falling from $58.54 down to
$0.06).

The point is not that some stocks have fallen drastically (anyone in the market in 2008 knows that), but rather which is the better investment vehicle, suds or shares. Measured against companies that have imploded (wiping out nearly all of their share value), beer might at first blush look to be the superior choice. However, such a view misses the key point of why folks invest in the first place: They're looking to make money. If the value of the beverage that was drunk is not factored in, recycling one's beer cans for cash will always result in a loss: $1,000 "invested" in beer, after all, nets only $18.54 to $39.72, a "loss" of $960.28 to $981.46. Unlike whatever ups and downs the stock market experiences, that loss is guaranteed; in good years or bad, it's always going to be $960.28 to $981.46. Investments in publicly-traded companies, on the other hand, have the potential to make money. (Not that they always do, but at least the potential is there.)

Ergo, during certain particularly rotten years if the choice were between investing in the absolute worst-performing stock or buying beer, you'd be financially better off if you'd bought brewskis with your hard-earned cash, dumped the suds down the drain, and recycled the empty cans for whatever you could get. However, a far better investment strategy would be to stay out of the market during those times, instead stashing one's cash in FDIC-insured bank accounts or certificates of deposit, thereby guaranteeing not only retention of one's capital but the accumulation of a bit of interest as well.

Barbara "cache and carry forward" Mikkelson

Last updated:   16 November 2008

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