Skjellifetti

3 ETFs for a Bubble-Troubled Public

Alan Greenspan had trouble recognizing bubbles, too.

On Dec 04 11:21 AM Analyste de Boston wrote:

> Gold is still MONEY (according to Alan Greenspan, who knows alot more than you or I.)

The Intrinsic Value of Nothing, Part 1

On Oct 27 12:50 PM jeffgroove wrote:

> The problem with other schools of economic thought is that they assume good intentions on behalf of the people in charge ...

Bzzzt. No school of economics assumes anything of the sort.

The Intrinsic Value of Nothing, Part 1

The Labor Theory of Value was actually first espoused by none other than Adam Smith and is associated with a whole host of early classical economists (Smith, Malthus, and Ricardo) as well as Marx.

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people."

-- Wealth of Nations Book 1, chapter V

"The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities."

-- Wealth of Nations Book 1, chapter V

Most economists today start with utility theory which basically says that individuals have a set of preferences where a larger quantity of a good is preferred to lesser quantities of the same good and preferences are transitive so that if a bundle of goods (A) is preferred to another bundle (B) and B is preferred to still another bundle (C), then A will be preferred to C.

Because people have preferences, goods have value to them even in the absence of exchange because a person can always state whether they prefer one bundle of goods over another (i.e. they value one set of goods over another). In fact, it is downright inane to argue that something has value to you only because someone else finds it valuable as well. This is one of the traps that caused the labor theory of value to be abandoned because they could never quite reconcile the concepts of value in use and value in exchange. Today we do that via supply and demand curves derived from costs of production on the one side and utility theory on the other.

"The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use ;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."

-- Wealth of Nations Book 1, chapter IV

Stocks Will Fall 37% or Gold Will Rally 60%

Buying gold is not investing. Investing involves buying new capital goods that can create new products. Buying gold is equivalent to putting your wealth under your mattress.


On Jun 05 12:24 AM Danny Furman wrote:

> Does anyone here realize that Asians don't "waste" their money on
> stocks? Gold is how they invest, save, measure wealth.... I don't
> like shiny things but I appreciate the value of something as rare
> and treasured as gold.

Stocks Will Fall 37% or Gold Will Rally 60%

I would go further and say that any data before August 15, 1971 is meaningless when attempting to draw conclusions about the long-term value of the gold/stock price ratio.

en.wikipedia.org/wiki/...

On Jun 02 10:24 AM TonyCinTX wrote:

> Why use the MEDIAN stock to gold ratio, especially the median over
> 106 years?
>
> How about telling us when was the last time the gold to stock ratio
> actually WAS 5.4, or less than that?
>
> World finances changed fundamentally after WW II, and there is no
> reason on EARTH to include any financial data from before 1945 in
> any analysis of any kind, at least not without more justification
> than just because you say so, or just because it gives you the number
> you want. Essentially you are telling people that data from 1903,
> before World War One, is an essential part of this analysis; because
> it certainly contributes to which ratio will be the median.
>
> Let's take a look at the last 64 years, since 1945, and see what
> the median ratio is there. Or perhaps we will look at the linear
> trend, or robust regression. I see no reason to believe the median
> ratio is the best predictor (or even a good predictor) of where we
> should be, when the world is changing.
>
> For example, would anybody believe us if we used IBM's median revenue
> since inception to predict its revenue next year? I think not. Why
> then should we believe the ratio of DJIA to Gold should be a constant?

Is the U.S. Dollar Headed for a Mighty Crash? Part I

Hey Pete:

Surveys only reveal the prejudices of the surveyed.

My family is from Detroit and includes both UAW workers (my parents gen, long ago retired) and engineers (my gen, now being forced into retirement). I've heard the horror stories from both points of view my whole life. GM and Chrysler are two incredibly mismanaged companies. And having heard both sides for years, I know that there is plenty of blame to be shared by all of the parties involved.

Oh, BTW, while we are talking about old folks, maybe you should ask people who are in their 80s and 90s why there are unions in the first place.


On May 23 11:15 AM PeteK wrote:

> Skjellifetti;
> A group did a survey months ago asking people 60-years old or older
>
> concerning the fall of the automakers. The result was that over
> 80% blamed the unions ( sorry for uions, old age, you know) and the
> rest
> blamed the management/gov. etc etc. The reason to ask older folks
> because young people may not heard of all the "STRIKES" carried out
> by the workers against the employers all the time until they got
> what they wanted. In fact, the workers are the BOSS .
> A business can only give so much.
> Try to ask some older folks yourself, and see how they response.
>

Is the U.S. Dollar Headed for a Mighty Crash? Part I

It wasn't the Uions (whatever they are) that designed the cars at GM that no one wanted. It wasn't the Uions that stymied health care reform at every turn and which led Toyota to build its latest factory in Canada rather than the U.S. It wasn't the Uions that 30 or 40 years ago prevented the U.S. from doing something about its dependence on foreign oil until it was too late because the American public wanted cheap oil to drive Hummers and GM could make more profit on gas guzzling SUVs than on subcompacts. It wasn't the Uions that caused the huge gains in productivity which in turn led to fewer workers required to build each car and left GM with an aging workforce and fewer workers to support the pensions of that older workforce (Toyota and Honda factories in the U.S. will face this problem in 30 years).

Yes, union work rules are notoriously inefficient in UAW plants and were a contributing cause just like the others listed above. But there are so many, many factors that led to the demise of the Big Three that it is silly to try and claim that it was the Uions that killed the American auto industry.

BTW, FACT: the U.S. actually manufactures more goods today (measured in real dollar value of manufactured goods produced) than we did 30 years ago.

On May 22 03:21 AM PeteK wrote:

> Gold Barron;
> You are right in a way.
> Did you ever try to find out why there are less and less "Made in
> USA"
> products at many stores ?
> Just like GM, the Uions killed most of the Big American industries.
>
> They are slowly killing Boeing now, can you see that ?
> 20 years from now Boeing maybe history. And you will have to fly
> in a jet made in China or France. Too bad, isn't it ?

Has Gold Been Manipulated?

I confess. Its me. I manipulate the gold market. Today, like yesterday and the day before, I decided not to buy gold. I bought a nice bottle of wine instead. The result was that the price of '05 Bordeaux rose a little and gold fell a little. I would buy some gold tomorrow to atone for the damage I've done to the gold market except that, well, wine tastes better than gold.

Investing in Currency ETFs: Irony of the 'Bail-Out' Mentality

No need to jump to conspiracy theory explanations. The congres... looks like a simple bug in the Seeking Alpha codebase. I suspect that it is trying to treat any set of characters that contains a "/" as part of a URL and simply chopping off the display of the extra characters which would not matter if the the string really was the text displayed in an html anchor tag. Look at morgan77's post where the link text becomes /ec... for an example.

Two Moves to Make as the Fed Inflates the Commodities Bubble

"It’s fairly clear to me that concerted speculation by hedge funds and pension funds is what’s been pushing up oil prices."

Then perhaps you would be kind enough to explain the mechanism that is making this happen. If there is a bubble, this implies that current supply is greater than current demand at the current spot price and therefore someone must be buying and storing the excess supply. Show me who is buying the excess supply and where they are storing it.

On the other side of the coin, there are a number of factors that have reduced the supplies of many commodities (problems in the Nigerian oilfields, lack of investment in Venezuelan and Mexican fields, power shortages in Chile and South Africa, etc.). At the same time, demand is not falling.

Commodity prices are not being driven by speculators. Simple supply and demand is fully capable of explaining the current high prices. Claims that speculators are driving the prices is a classic example of a wishful thinking logical fallacy. Gosh, if we could just make those evil speculators go away, we could be back in 25 cents per gallon heaven just like in my youth. Better learn to deal with reality, because high prices are going to be around until we can develop alternatives.

Commodity Conundrum Solved: The Hidden Parameter in Interest Rates

This just looks like a restatement of the classical economic theory used to explain finite resource extraction rates. If you are the owner of a finite amount of a resource sitting in the ground, at what rate should you mine the resource in order to maximize your long-run discounted profits? If you sell a marginal unit today, you can put the proceeds in a bank and earn an interest rate r. If you hold the unit in the ground, and sell it tomorrow, you have lost r unless the price of the unit increases by the same amount. All that the author is saying is that interest rates have a powerful effect on the owner's decision to sell the marginal unit today or tomorrow. Polaris and Georealist are quite correct in that the demand curve is the other half of the equation and is necessary for understanding why tomorrow's price may not be the same as today's. Shalom is correct, too, in that extraction costs change through time as does demand since higher prices are a powerful incentive for developing substitutes for any product.