About
Content
Store
Forum

Rebirth of Reason
War
People
Archives
Objectivism

Post to this threadMark all messages in this thread as readMark all messages in this thread as unreadBack one pagePage 0Page 1Page 2Page 3Page 4Forward one pageLast Page


Post 20

Wednesday, May 10, 2006 - 8:06pmSanction this postReply
Bookmark
Link
Edit
Jordan, obviously, I do not know your situation.  Clearly, if you buy low and sell high, then you are ahead.  My concerns -- and why I do not sell gold -- include:

How long did it take to profit?  What else could you have been doing with the money?  Look at the price of gasoline -- that's obvious -- but ultimately the "price" (so-called) in dollars of everything must rise relative to gold   (Truly, the objective fact is that relative to gold, all prices fall because -- with some exceptions, which are exceptions -- as new values are created to compete for static gold (Gameboys, iPods, tickets to Superbowl XLV), the price of each existing good or service falls slightly.

You say that you doubled your money.  That was from March 2003 or May 2004?  That is a pretty good return.  Where is the money now?  Consumption is perfectly valid, of course, and that is the reason why we profit, ultimately, to enjoy it.  Once consumed, the gains are gone.  Now where are you?

I admit that I sell gold when I have to -- in 2002, we moved from Columbus to Albuquerque; in 2003 from 'Burque to Traverse City; in 2005 from TC to Ann Arbor; that is hard on savings -- but mostly, I buy and hold because unlike other investments, gold is the standard, the one true money.


Post 21

Wednesday, May 10, 2006 - 8:15pmSanction this postReply
Bookmark
Link
Edit
 
double-clicked.  Sorry.


(Edited by Michael E. Marotta on 5/10, 8:16pm)


Post 22

Thursday, May 11, 2006 - 12:51amSanction this postReply
Bookmark
Link
Edit
Actually, I was making a hypothetical...

My actual situation is this. I bought TGLDX (a Gold mutual fund) last December. It was at $40. I just sold it at $55 for a gain of around 35% in 5 months. I've moved the money into other things.

Post 23

Thursday, May 11, 2006 - 8:43amSanction this postReply
Bookmark
Link
Edit
Oh, ye of little faith!

Sam


Post 24

Thursday, May 11, 2006 - 2:54pmSanction this postReply
Bookmark
Link
Edit
Faith, Sam? 

Biggest one-day stock drop since January

Stocks tumbled Thursday, sending the Dow industrials down more than 140 points, as inflationary concerns were among the factors weighing on markets. Gold prices soared, oil jumped and Treasury yields rose - all classic signs investors are concerned about a possible pickup in inflation.
http://www.cnn.com/
UPDATED: 5:40 p.m. EDT, May 11, 2006


Post 25

Thursday, May 11, 2006 - 6:51pmSanction this postReply
Bookmark
Link
Edit
Michael:

Agreed. My point is that those who have little conviction of the real value of gold and an unwarranted faith in governments for self disciple won't be able to withstand the vicissitudes of the market and stay with their investments for the long term.

Sam


Post 26

Thursday, May 11, 2006 - 8:30pmSanction this postReply
Bookmark
Link
Edit
I think there's a different mentality in play. People who buy gold stocks or funds think of it as an investment, and follow the price to try to sell and make a profit. However, for people who actually buy Maple Leafs or Krugerrands, compulsively following the price and looking to make a quick buck makes no more sense for gold than it would for canned goods or .223 ammunition.


Post 27

Thursday, May 11, 2006 - 9:13pmSanction this postReply
Bookmark
Link
Edit
Hi, Aaron:
I actually buy Krugerrands and Maple Leafs and follow the market closely but I've held them for over 20 years, so there's no quick profit in it for me. In my opinion coins aren't the way to go for a quick profit — the spread is too big. Gold stocks or a gold index tracking stock such as GLD are more appropriate.


Post 28

Thursday, May 11, 2006 - 10:05pmSanction this postReply
Bookmark
Link
Edit
Michael:
Agreed. My point is that those who have little conviction of the real value of gold and an unwarranted faith in governments for self disciple won't be able to withstand the vicissitudes of the market and stay with their investments for the long term.
Sam
I liked it better the other way, "Oh, ye of little faith!"  I was only being wry.  I understood you, context and all. 

I agree 100% that whatever the market and its actions, those with firm philosophical foundations will weather the storm.


Post 29

Sunday, May 14, 2006 - 11:03pmSanction this postReply
Bookmark
Link
Edit
I sold my stocks last week, and I'm thinking of selling most of my gold as well, as the price is now $720 an ounce; I bought at $350, so the price has more than doubled and has run up rapidly in the past month or so; I think the current price is inflated and may soon fall. Dumping the gold may be premature; only time will tell, but I don't think selling the stocks was. The federal funds rate is now 5%, and investors aren't sure that there won't be more hikes. The big institutions had a selloff last week, which does not bode well for the broad market, although other stocks like energy may continue to do well. We've had a pretty good run these last three years. The "cyclical bull market" may be coming to an end. Nevertheless, Bob Brinker, one of the best market timers in the business, still recommends staying invested, although he's not as bullish as he was and advises caution.

Stay tuned!

- Bill

Post 30

Monday, May 15, 2006 - 7:48amSanction this postReply
Bookmark
Link
Edit
Bill:

I sold all my gold stocks at the opening this morning ... a little premature as it's now climbing a bit, currently at $691.60. I've made a good profit on GLD and KGC, 57% and 66% respectively and I'll continue to hold my Krugerrands and Maple Leafs through thick and thin. I also dumped most of my index tracking stocks, QQQ, DIA although I've still got a few SPY. INTC looks good and I took a position in it.

You're right to be a fan of Bob Brinker. If I had the personality to follow his advice slavishly over the last 20 years I'd be a millionaire today. His statements debunking the idea that high gas prices are inflationary are only common sense but even some of the most sophisticated economists think the opposite.

Exciting times.

Sam


Post 31

Monday, May 15, 2006 - 10:00amSanction this postReply
Bookmark
Link
Edit
Sam, wise move, I think. It will interesting to see how much this market falls. I see today that gold futures are down $25/ounce. Brinker, of course, is a very long-term market timer, so he probably views the current selloff as simply a correction. But I suspect that in the not too distant future, we'll see him jump ship as well. Right now, we're beyond the time period that he predicted this bull market would last (he originally forecast one to three years); it's now more than three years, and interest rates continue to rise; rising interest rates and a tightened money supply brought the bull market to a close in 2000, and can be expected to have a similar effect today, if the Fed continues to raise them.

The idea that rising oil prices cause inflation is the demand-pull theory of inflation that economics students are taught in their introductory courses. The counter to it is simply to point out that, unless the money supply increases, if the price of oil goes up, people must either buy less oil, or if they continue to buy the same amount, must spend less on other goods and services, causing these other prices to decline, with the net result being no increase in the average level of prices.

Some economists counter that the velocity of circulation could change, thereby driving up the average price level, but there is no reason to believe that this will happen simply because the price of oil rises. Typically, an increase in the rate of inflation due to an increase in the supply of money will induce an increase in the velocity of circulation (the rate at which people spend money), because they will tend to shift their future consumption towards the present - to buy goods today rather than wait until tomorrow when the prices will be higher. So a sustained rise in the average level of prices due to an increase in the money supply can cause an increase in velocity, which, in turn, can cause prices in the short run to go up faster than they otherwise would, but if the money supply does not continue to expand, this effect will be short lived, because the money people spend today will not be available tomorrow for future purchases, and prices will eventually adjust downward.

- Bill

Post 32

Monday, May 15, 2006 - 10:08amSanction this postReply
Bookmark
Link
Edit
Bill:

Your comments are pertinent.

I also bought some XLU, the Utilities Spyder, this morning. Utilities seem to move counter to the market, in general, and buying utilities is an alternative to shorting the market. In the past I've been an aggressive shorter when things look dicey but I've gotten away from that a bit although I might still do some shorting if the market looks worse.


Post 33

Monday, May 15, 2006 - 11:45amSanction this postReply
Bookmark
Link
Edit
Sam, funny you should mention that. I was thinking of going short on the two ETF's I own, the Nasdaq 100 (QQQQ) and the Russell 2000 (IWM), but buying utilities as an alternative sounds interesting. I'm a little antsy about going short though; if you're wrong, you could pay a stiff price. :-/ In any case, my broker may not have enough shares of the IWM available to borrow, which has happened before. Of course, I could always buy a short fund that mirrors the Russell.

Btw, have you heard of the Marketocracy fund managed by Ken Kam, who has a unique approach to investing? He works with a group of people using various investment strategies with play money, from which he then picks the best performing investors to pattern his trades after. Initially, he was selecting the top 100 performers, and did well for awhile, but then the fund turned south and did very poorly for a couple of years. He has since changed his strategy and now employs only the top 10 performers, with the result that the fund has turned around, making some pretty good gains in the last several months. Kam's approach is intended to embody the idea of dispersed knowledge a la Friedrich Hayek's view of the free market and of why it is superior to central planning.

- Bill

Post 34

Monday, May 15, 2006 - 12:22pmSanction this postReply
Bookmark
Link
Edit
Yeah, I have never been able to short any of the Ishares either. I don't have as much of a risk problem with selling a Spyder short because of the diversification within it as I do with a single stock.

I haven't heard of Kam but subscribe to a "dispersed knowledge" approach as I only pay attention to chart formations which I consider to incorporate all current knowledge.  

Without any particular detailed knowledge on the subject I think the current market activity may be associated with an impending  revaluation upwards of the Chinese currency. This would account for the strength of the $US and the decline in gold. 

btw, I think that the utilities are a haven in uncertain times because they generally pay nice dividends and investors shift into them for that reason. They move very slowly and modestly, though.

Sam

(Edited by Sam Erica on 5/15, 12:26pm)


Post 35

Monday, May 15, 2006 - 4:04pmSanction this postReply
Bookmark
Link
Edit
FYI - here's a fund that acts as a user-friendly hedge fund: http://finance.yahoo.com/q?d=t&s=SWHEX (with a substantially lower minimum than a hedge fund).

Post 36

Monday, May 15, 2006 - 9:38pmSanction this postReply
Bookmark
Link
Edit
The idea that rising oil prices cause inflation is the demand-pull theory of inflation that economics students are taught in their introductory courses. The counter to it is simply to point out that, unless the money supply increases, if the price of oil goes up, people must either buy less oil, or if they continue to buy the same amount, must spend less on other goods and services, causing these other prices to decline, with the net result being no increase in the average level of prices.
Good point Bill. But what I don't like is that the price of oil is going up because of inteferences into the market, oil should not be going up but is because of artificial reasons. Environmental regulations in North America have stifled any continued oil exploration which makes us supplement oil from awful regimes in the Middle East and that nice bloke from Venezuela. On top of that Congress has mandated ethanol as a new additive which has been blamed by the Wall Street Journal for artificially increasing the price of gasoline. Again, this is to be blamed on environmental regulations on fossil fuel emissions (ethanol is believed to produce fewer emissions) People buy into the eco-myth of human created global warming and we're all suffering the fruits of that irrational activism.

What I am worried about is businesses that sell products that have high elasticity. For example people will be foregoing that latte from Starbucks in the morning to pay for gas as gas is relatively inelastic. Also prices will go down for other goods, but businesses that sell luxury items are still dealing with increased cost of business due to higher fuel costs and decreased demand due to income elasticity. I understand there will be an equilibrium effect whereby decreased prices for luxury goods will yield an increase in demand and thereby increase price, but generally there is some lag time for this counter effect to take place. In the mean time we will see some businesses go bankrupt as a direct result of this environmental hysteria. There's no reason any businessman should suffer this.
 
 

(Edited by John Armaos on 5/15, 9:40pm)


Post 37

Tuesday, May 16, 2006 - 12:42amSanction this postReply
Bookmark
Link
Edit
John, a couple of points: I agree with you about the injustice of environmental regulations which serve as impediments to an increase in the supply of petroleum products. But you refer to the "eco-myth of human created global warming." I'm no expert on this, and you may be right that it is a myth, but even if it isn't (and there does seem to be some evidence that human beings are contributing to it), these environmental regulations are not going to make much of a difference. My understanding is that even if we brought all industrial production to a halt and thereby created untold misery and death among most of the world's population, we wouldn't put a dent in global warming for another century. So, even if it is caused by human beings, human beings can't fix it in the foreseeable future, and even if they could, it wouldn't be worth the price, which is a point that gets lost on most people when they discuss this issue.

Regarding inflation, you write,
What I am worried about is businesses that sell products that have high elasticity. For example people will be foregoing that latte from Starbucks in the morning to pay for gas as gas is relatively inelastic. Also prices will go down for other goods, but businesses that sell luxury items are still dealing with increased cost of business due to higher fuel costs and decreased demand due to income elasticity. I understand there will be an equilibrium effect whereby decreased prices for luxury goods will yield an increase in demand and thereby increase price, but generally there is some lag time for this counter effect to take place.
John, I don't follow your reasoning here. You say, "I understand there will be an equilibrium effect whereby decreased prices for luxury goods will yield an increase in demand and thereby increase price..." Here you appear to be confusing demand with what economists refer to as "quantity demanded." Decreased prices for luxury goods will yield an increase in quantity demanded, not an increase in demand. An increase in demand occurs when consumers are willing to purchase more of a good at the same price, not at a lower price. The willingness to purchase more at a lower price is referred to as an increase in quantity demanded. But an increase in quantity demanded will not yield an increase in price; only an increase in demand will.

It is important to make a distinction between demand and quantity demanded in order to avoid precisely this kind of confusion; otherwise, one can wind up arguing, as you have, that a decrease in price causes an increase in price through the intermediary of an increase in demand, which of course is nonsense. A decrease in price does not cause an increase in price. An increase in price can only occur due to an increase in demand or to a decrease in supply.

It is important to bear in mind that inflation refers to a rise in the average price level for all goods and services in the economy. Given a fixed aggregate monetary expenditure, only a decrease in aggregate supply can raise the average level of prices, and normally (short of a wholesale disaster), only by a small amount. The only significant inflationary threat that we need to worry about is an increase in the money supply.
In the mean time we will see some businesses go bankrupt as a direct result of this environmental hysteria. There's no reason any businessman should suffer this.
I agree, but you know that worship of the environment - Mother Earth, Gaia and all that - has become another religion like the worship of the sacred cow in India. It has literally taken over the minds and hearts of our educated citizenry. Objectivism has its work cut out for it.

- Bill

Sanction: 4, No Sanction: 0
Sanction: 4, No Sanction: 0
Post 38

Tuesday, May 16, 2006 - 10:25amSanction this postReply
Bookmark
Link
Edit
But you refer to the "eco-myth of human created global warming." I'm no expert on this, and you may be right that it is a myth, but even if it isn't (and there does seem to be some evidence that human beings are contributing to it)


The evidence on it is not conclusive. I'm currently reading a book by Ron Bailey, science contributor to Reason magazine titled "Global Warming and other Eco-Myths". Although Humans are causing an increase in carbon dioxide and other greenhouse gases, it is estimated to be less than 1% of all greenhouse gases. Water Vapor is the largest greenhouse gas. It would be stretching it to say the least that rise in global temperature, which that in itself is in doubt, is a result of human produced greenhouse gases. If we accept current measurements of mean global temperature (which there are some problems with that data as well), we see depending on who's data we're interpreting, between 0.5 to 1 degree farenheit increase in global mean temperature over a century. Since the burden of proof is on environmentalists to prove humans are causing global warming, they must prove both that global warming is occurring, and that humans are causing it. The burden has not been met. And with numbers that are less than one percent as their proof, it's certainly not conclusive.


these environmental regulations are not going to make much of a difference. My understanding is that even if we brought all industrial production to a halt and thereby created untold misery and death among most of the world's population, we wouldn't put a dent in global warming for another century. So, even if it is caused by human beings, human beings can't fix it in the foreseeable future, and even if they could, it wouldn't be worth the price, which is a point that gets lost on most people when they discuss this issue.


That is absolutely true. Which is why the Kyoto treaty was a terrible idea and I'm glad Bush didn't sign it.


John, I don't follow your reasoning here. You say, "I understand there will be an equilibrium effect whereby decreased prices for luxury goods will yield an increase in demand and thereby increase price..." Here you appear to be confusing demand with what economists refer to as "quantity demanded." Decreased prices for luxury goods will yield an increase in quantity demanded, not an increase in demand. An increase in demand occurs when consumers are willing to purchase more of a good at the same price, not at a lower price. The willingness to purchase more at a lower price is referred to as an increase in quantity demanded. But an increase in quantity demanded will not yield an increase in price; only an increase in demand will.


Yes Bill, you are absolutely right. I misspoke when I said increase in demand. I should have said increase in quantity demanded as you pointed out. I should've also said instead of increase in price, increase in revenue as a result of increase in quantity demanded. (I work in hotels, so I deal with fixed inventories, so an increase in quantity demanded does in fact yield an increase in price) Would I was trying to convey was that an increase in fuel cost yields a shift in the supply curve, so a new equilibrium between supply and demand occurs. Because it takes time for this new equilibrium to happen, in the mean time while some people benefit others suffer. Oil companies benefit, companies that sell luxury items suffer until we reach this new equilibrium. Which is what I referred to as lag.

In the mean time we will see some businesses go bankrupt as a direct result of this environmental hysteria. There's no reason any businessman should suffer this.

I agree, but you know that worship of the environment - Mother Earth, Gaia and all that - has become another religion like the worship of the sacred cow in India. It has literally taken over the minds and hearts of our educated citizenry. Objectivism has its work cut out for it.


Bill you speak the truth. My current obsession is the fallacy of the environmental movement. The fruits of which has already caused immense pain and misery, mostly in the third world. The environmental movement is credited for banning DDT, a pesticide spray used to kill mosquitos and inhibit the spread of malaria. Since its banning, according to the WHO 1 million to 3 million people die every year from malaria. The current death toll is estimated to be anywhere from 30 million to 90 million dead since DDT was banned here in the US. Because of the banning of DDT in the US, third world countries that received aid and or did trade with the US was urged to place a ban on DDT as well as it was erroneously thought to be a carcinogen and harmful to the environment.

To put this into better perspective, Sri Lanka reported 2.8 million malaria deaths in 1948. After a robust program of DDT spraying that number fell to only 17 by 1963. After DDT was banned in Sri Lanka the number quickly rose to 500,000 after almost wiping out the disease in 1963.

I don't know what else to call that other than mass murder. Environmental activists have blood on their hands.

Sanction: 3, No Sanction: 0
Sanction: 3, No Sanction: 0
Post 39

Tuesday, May 16, 2006 - 1:29pmSanction this postReply
Bookmark
Link
Edit
John, you and I are on the same page. The only point I would make concerns your statement,
I work in hotels, so I deal with fixed inventories, so an increase in quantity demanded does in fact yield an increase in price.
Again, the way economists use the term "quantity demanded" is apparently not the way you're using it. What you're referring to is what economists would call "demand." Of course, with an increase in demand you will get an increase in the quantity that people are willing and able to purchase, but the term "quantity demanded" refers exclusively to an increase in the willingness to purchase more of a good in response to a fall in its price. If your room rates have stayed the same, and you find more people willing to stay at your hotel, then we would say that the demand for your rooms has increased (not the quantity demanded). And when the demand for your rooms exceeds their supply, creating a temporary shortage, because people want to rent more of your rooms than are currently available, then you would of course raise your prices to take advantage of the increased demand, which would, in turn, reduce the "quantity demanded" and eliminate the shortage. Does this make sense?

- Bill

Post to this threadBack one pagePage 0Page 1Page 2Page 3Page 4Forward one pageLast Page


User ID Password or create a free account.