if only i had a degrading name to call you... you appear to be the most mindlessly conspiratorial of them all.

are you a dollar bug?

Yes I am ...........having alot of them

The Dow closed at 11,497 on Dec. 31, 1999. It closed today at 13,912. That's a 21% gain, not 6%. And you ignore one thing that makes the Dow a real investment, dividends, which average over 2% a year. Between capital gains and dividends a Dow holder made almost 5% per year in those horrible eight years.

Nice cherry picking. If I were to do so, I could also point out that someone who bought the Dow in Sept 98 has more than doubled their investment if you include dividends.

And worse, using the Dow is another insidious type of cherry picking since an index holder usually holds a much broader index. The total stock market index is up about 6.5% per year over the last 10 years, 13% per year over the last five years.

graham understood this subject much better than buffet: http://links.jstor.org/sici?sici=000...OR-enlargePage

i highly suggest you read this too http://www.mises.org/books/tmc.pdf

Just nitpicking here but I'm pretty sure the Dow overperformed the broader US market over the time period he was looking at. I don't know what total stock market index you're using but it can't be looking too good over the past 8 years - of course that's a conveniently chosen time frame, as you point out.

well, euro, yen and dollar (with chinese yuan to come along) are the important currencies so i thought you were refering to them as i hadnt read the whole thread.
emerging countries usually have real appreciations that can be achieved by either inflation differences or nominal appreciation.

That's true. The S&P 500 and total stock market index are certainly up less (counting dividends). Of course the S&P PE ratio was over 30 at the time, so it's little wonder that anyone who's owned it the last eight years has been treading water as that PE returned to normal valuation levels.

It's like people who bought houses at the peak year and a half ago thinking they were gonna go up 50% per year. Now they'll have to hold on for a decade while the market slowly reverts to normal, before they'll start seeing "normal" appreciation again.

But the benefits of both housing and stocks as investments is they have intrinsic value based on their cash flows and it's not hard to see when they are roughly fairly valued, undervalued or overvalued. Gold's value is entirely dependent upon market whims. You can't hold it through horrible times saying, at least I'm getting a great yield from my dividends or good cash flow from my renter.

Obviously not all pages are available for Graham's paper but it reads as though he basically agrees with Buffett and wants money to be backed by a more general basket of commodities that are actually useful instead of gold? Note that there's no theoretical difference between inflation-targetting and money linked to a basket of goods. Btw, if there's anything that money should be backed by, it's energy - nothing pervasively affects and serves as a limiting factor to economic growth as energy. The problem, however, is determining whether it will continue to be the most important limiting factor.

i agree DesertCat that it is possible to cherrypick to prove almost anything.

though: didnt it close at 12,361? or are the two things different/there is another index fund total?

all im really saying i guess is that even over a period as long as 8 years the index fund can kinda suck. given 8 years is, in real life terms, a huge amount of time, i cant see why people would want to put there money into it.

gl

john

my point is he understands the aspects of monetary demand

also, on another trail, i cant really see why i'd be that bothered about trying so hard to get an average of 11% when i dont have much (about $260k). like i can blow 1% without too much trouble, whether i decided to stay at home or rent decided about 15%, whether i stumbled into online poker decided about 1000000%, whether i got kicked out of uni decided another +/- 0 to 100% etc etc.

idk, i just think for my limited savings trying to care about getting 11% rather than 5% is pretty worthless. id rather have more risk and more potential return, which gold provides (and from looking into investment options seems the best one)

13,912 is the exact same as 12,361 if you move the numbers around and turn the six upside down.

Ouch, don't know how i made that error. Well, I guess it wasn't a near 5% return, instead it's a 2.5 or 3% return with dividends. Your point remains in either case that the return has been subpar, my point is that that's one of the worst times to make the comparison.

And as I said before, during the bubble equity values got way out of whack, so it was predestined that this decades returns would be subpar until historical returns got back to normal. Warren Buffett said something to this effect at the end of the 90s. I actually think we are pretty fairly valued now, I think PE ratios are below historical averages, it's just a question of how much lower they'll get in the short run, but your long term expectations should be back up to 9% year or so if you buy indexes now.

first you get the sugar, then you get the power, then you get the women.

Do Gold+other commodities always rise when the market is suffering?

Not sure why you think I've been mindlessly buying gold? Off the top of my head, I've made 3 trades in gold during this century's bull market. One was hugely profitable, another a smallish loss, and the third I'm still holding at a decent profit and will continue to hold until the market price suggests not too.

There's no prediction, I have no idea where gold is headed, I'm not a gold bug, I'm not interested in news, opinions or talking heads, and I'm pretty mindful about where I put my money.

My current main 5 investments are Latin stocks, Chinese stocks, sterling non-UK bonds, natural resources, and gold.

I've experienced considerable drawdown this year and recently sold Indian stocks. I lost about 30% of my profits but returned aroun 150-200% on my investment in that market. It looks like Chinese and Latin stocks might be sold for something else soon too, but when I do sell them, I would still have booked considerable profits - even if the market declines substatially more from current levels. I expect similar drawdowns in my gold holdings, but until another market proves itself to be a better investment, I'll keep my money where it is.

I follow 33 global markets daily and gold is still currently #1 by my classification, and it's not close. When it slips, I'll just follow the new leader.

lol, I forgot how condescending you were. When the dollar collapses and you lose a ton, just know that everything you're going through had "been explained to you before" as well.

You've ignored the concept of the issue here, and instead just offer the obvious -- that some value will indeed still exist (as if that was actually a doubt in anyone's mind). And you even go out of your way to suggest that you've properly explained the point when, as far as I can see, you've done little more than butt your head in to overstate the obvious. Good stuff.

The point isn't that there is "no value" in US companies/assets. If you burn your house down, some rooms might be OK. The chimney will probably be fine. Some of your possessions might be OK. But saying "If my house caught on fire, some of my stuff would probably be OK" doesn't really mean a whole lot. Only the stuff that didn't catch on fire would be OK. If everything was OK, then there'd be no fire.

Obviously there is *some* value to our assets (no one's saying we will turn into Algeria), but would you agree that a dollar collapse would have a serious impact on the value of most US companies?

How could it not?

So the point of my reply to Barron was a philosophical one. Yes, I understand that there are plenty of US companies who produce value to the world. Saying "foreigners will buy US assets" doesn't really mean anything in its own right though. Obviously people will buy things if they are of value. So the issue is what value our things will settle at.

That's effectively the point of the doom debate. What value *does* American production have to the world, and therefore what sort of adjustment needs to transpire?

So to say "American assets will stay strong, so foreigners will buy them" is to just assert yourself to be correct that the assets will be staying strong in the first place (obviously IF they are valuable assets then they will be bought). But how many assets will lose a lot of value? It's like saying "my house fire won't be that bad because my house won't catch on fire for very long." OK, care to show me why the fire won't last very long? (I'm not saying I actually want you to try to demonstrate this -- I was just pointing out that the claim itself is sort of inherently meaningless. The point comes down to an analysis of what value US production indeed has. It's an interesting way of looking at it, so I was curious if Barron felt like getting into why he thinks US assets are so valuable that the dollar doesn't have too low of a bottom.)

No. Commodities are actually poor performers during recessions.

A fool and his money were lucky to get together in the first place.

Lets say there was something in barronland that was worth 100 barrons to you and the current exchange rate is 1 barron to 1 andrew. Lets say further that this something in barronland was trading at 1/2 its value so to speak b/c it was going through a difficult time. You believe that this something in barronland is really only worth 90 barrons and at the 1:1 barron:andrew exchange rate, it is clearly not worth purchasing. but if the exchange rate drops in barrons, say by 15%, all of a sudden, that same "worthless" something becomes attractive to you in andrews b/c you can purchase it for a 15% discount.

"strength" can be a relative and an absolute term. distressed debt hedge funds pride themselves on being able to extract value from things trading cheaply, even if they are currently distressed. analogously, foreign companies find even distressed US assets worth buying as the price falls in their currency terms. they don't have to buy IBM, or Apple or some other market leader. they can buy something that they were unwilling to buy previously but is now attractive due to the currency decline.

that is what i mean by an economic floor. it is VERY SIMILAR to the japanese economic floor which is why i brought it up.

uh, japan has many many more problems than a lack of an industrial base and the economic floor still applied. when this occured (and still in part to this day), the labor market was one of the worst in terms of fluidity. companies were run in the "old school" way as a sign of pride rather than profitability. these factors are hugely inattractive, but if it got cheap enough, economic flows would increase. this is very similar to the situation you think will happen in terms of the dollar decline.


you talk like the US doesn't produce anything. what % of the US economy do you think is manufacturing vs. services? what % of the JPN economy do you think is manufacturing vs. services? i think you'd be surprised if you did the research.

but if shopping malls are worth X and they are selling for X-Y where Y >0, they are still worth buying. you don't seem to get this concept.

it won't be a panacea. it is one factor i brought up that you don't seem to understand.

there is. it is called value.

i agree. but they will still be attractive. this is a value concept that i believe given the above explanation you will understand.

that is a very glib statement. purchasing power is not what makes the US an attractive place to live. what about freedoms, historic stability of government, tax structure, the economy (Even if it tanks it will provide more dependable jobs than bolivia).

i explained iti above. i hope you get it now.

again, it is a value concept.

it isn't propping up the dollar so to speak (i.e. they are not buying more dollars. in the 80s, that was what banks did to prop up the dollar). they are choosing not to create a more dire situation and losses that they wouldn't have to have.

that is correct.

no. their solution is to not SPARK a FURTHER freefall type scenario and instead hold the dollars and buy new other non-dollar assets with the flows (which is EXACTLY what they are doing now in the face of the same situation they would face in the future).

again, you don't understand "value" so to speak. if they didn't sell, and just bought new assets, they could have X in value. if they did sold, they could spark a situation where the market prevents them from getting rid of their assets without insane slippage since others will be able to get out far more quickly due to smaller transaction size (selling $8billion is easier than $800billion).

you're missing this point. they aren't "propping up the dollar"

i'm too tired at this point to pick through this analogy so if you have a good point here, sorry.

maybe you will now, but you didn't at the time of your writing your post.

just read this post and see if you still think this point is correct (hint: it is not). giving someone something at X*(1-d) when they see it as worth X and d is some positive number discount is attractive. the "quality" of the asset is not the issue at bar relatively speaking...the VALUE is.

they are stopping the future rock purchasing. they are not selling the past rock purchases into a falling market.

lol.

Barron

PS- due to the length of this post, i'm not rereading it.

PPS- tone is a bit condescending here so for that i apologize. i am very shocked though that you claim the knowledge you do about economics and didn't understand what i was talking about. that is like econ 101. and this is just a statement of fact about my surprise, napoleonic or not lol.

PPS - i just thought of your most likely counterpoint. to the above you'd say that the dollar falling is a further indication of the reduction in purchasing power for the US consumer and thus a 15% correction means that things are even worse. however, this point fails to take into account that a fall in the dollar is not equivalent to a fall in purchasing power. in fact, studies have shown that a 1% fall in the dollar is really only .01%-.15% or so fall in purchasing power in terms of actual living depending on where the living is ocurring and what is being purchased. i'm trying to find the studies for you to read.

The dollar collapse wouldn't be such a bad thing for me (actually it'd be positively awesome) - it's just not likely.

No, I've refuted your entire body of evidence. Your assertion that America doesn't produce much and consumes what the rest of the world produces is patently false.


Nominally speaking, positive impact on a lot of companies, negative impact on some companies - it'd be similar to any national economy, except the US economy is far more diversified, far more self-reliant, more flexible and is likely to have a lot more assets of value under any scenario. There's nothing special about the US here in this regard and there's no reason at this point for one to expect the dollar to collapse as opposed to any other major currency. British pound (anything you can say about the US in terms of debt, trade deficit, budget deficit, you can say about the UK and their currency is more overvalued) is probably a better bet.

When you understand neither economics, nor currency markets nor modern business and accounting practies and aren't even aware of basic relevant facts, let alone the implications thereof, you should refrain from having strong opinions on what's going to happen. You may find what I'm saying condescending, but what you're doing is far more arrogant - spouting nonsense about things you have not yet developed capacity to analyze and coming up with snappy replies to those who have.

haven't you guys seen that episode of the twilight zone where some crooks steal a bunch of gold and then go into some hibernation chamber for 100 years? when they come out gold is worthless.

i LOOOOOOOOVE the twilight zone but haven't seen that one.

however, 100yrs != 3-5yrs...

Barron

Why are you positioned in a way where something that isn't likely would have an awesome result for you?

You don't think we consume more than we produce?

The trade deficit is patently false?

Do I not understand these things or do you desperately wish I didn't understand them, so that you can maintain your comfortable assertions?

"Economics" is not complicated. It isn't. It's simply rational human interaction, and if you're honest with yourself and free of biases, it takes only a smidge of abstract reasoning capacity to understand. You can make it as complicated as you'd like if it comforts you and gives your mind an excuse to dodge reality. But that doesn't make you correct.

Why is it that I've posted in a total of maybe 5 threads here, and every time I post you get involved (usually insulting me, distorting my point, and then offering nothing constructive to the conversation)?

This forum (like any forum) is littered with its smattering of noobs and trolls. I admit I am far from an expert and have a lot to learn (to my credit I can admit this, and don't feel a need to assert myself to be divinely knowledgeable or unequivocally correct). However, I don't think anyone here would say I'm close to a troll. I think I ask good questions, and I think I make some good points, even if my overall knowledge of finance is way less than most. I think I do my best to contribute to the conversation, and I don't think you represent yourself all that well to just smear me and insult me every time I post.

Why do you really respond to me the way you do?

Why is it that asking some questions and pointing out where I think I see a logical hole is a "strong opinion" that you interpret so abrasively? You'd think I had said something like "Barron, you're totally wrong, moron. Here's the right answer." When really all I did was probe him for a deeper explanation, and explain why I thought it was necessary.

I'm sorry that you (foolishly) see a dollar collapse as a far fetched scenario that must therefore require a strong claim. You're caught up in the deceptive mechanism of the state, and you cloud how precarious the US dollar actually is. Yet, you dismiss my point of view, and accuse me of being arrogant for daring to defend what makes sense to me. Maybe rather than rantingly insult me in every thread, you can offer your first good insight, and learn to defend your points rather than assert them? Then, if the belief in a dollar collapse is actually so unreasonable, you will have done your part to demonstrate why.

But all you can do is attack the messenger.

You're still welcome (like I've been saying since the first time I responded to you) to show me things I've said that demonstrate my economic comprehension to be so lacking. Then I can know specifically what you're referring, and I'll have the opportunity to defend myself and learn. You never do this, and continue to just assert.

It would be nice to just be able to learn and exchange ideas in this forum, but people like you make it awfully tough. Every thread is a struggle against your insecurities.

(I realize I maybe add fuel to the fire, since ignoring your attitude rather than dissecting it would be easy enough. The psychology of this stuff is just really fascinating to me, and I can't help it. No offense, and I am just saying this so you don't waste time responding to me, but I will probably ignore your posts in the future, as I think our correspondence is about the furthest thing from productive. Take care and enjoy the depression.)


Barron,

Yes, mildly Napoleonic. Yet charming. I appreciate your taking the time to explain yourself, and will respond later tonight when I have more time.

Andrew,

i don't want to defend PB's attitude but i can conjecture one reason for its existance.

you claim above to want to learn and that PB is asserting things w/o explanation. but you have constantly asserted that econ is relatively easy etc. but then go on to make very strong, huge bold claims regarding this easily analyzed thing, yet make simple logical errors like the one i just recently pointed out (the difference between attractiveness and quality in terms of buying US companies).

that can be frustrating a fear to a great degree to a wide audience.

so i can see why PB states things in some ways that way...but i can't outright defend it and say "yes that is what we want in this forum" as it is not really productive int he spirit of the word.

Barron

Thanks for posting this because I can see where that comes across weird, and I hope I can clear myself up.

When I say "economics is easy" (or something of the sort) I don't mean that every minutia of the field is perfectly intuitive at first glance. I don't mean I understand all of it or even close to all of it. There is plenty of nuance. What I mean is that it's strictly logical in its nature. You might be right in that I made a logical error. So then, I will read what you say, consider it, and refine my understanding.

It's not like advanced calculus or theoretical physics where you need an enormous knowledge base to have any idea what's going on. My point is that anyone with a curiosity can think about the subject, talk about the subject, and begin to pick it up.

That's why I'm interested in learning more. That's why I want people to stay on topic and help teach me if I make mistakes. Because honing economics on here is so plausible. If this was an astrophysics message board, I wouldn't feel like I had that much to learn. The topic would be too complex. I don't think the same applies to economics. I think it is far more intuitive.

Why is it "frustrating"? That's what I don't understand. I only talk about economics being fairly uncomplicated when other people accuse me of not knowing enough to have a right to my opinion! (What I'm trying to say is that economics is more or less intuitive, no huge knowledge base is necessary to explain a concept. So, it would probably be more productive if one were to just defend his position and explain how he sees things rather than make things personal.)

I'm not trying to say I understand everything. I'm just saying if you disagree, OK, please explain why. It seems to me there is little reason to ever be "frustrated" or annoyed by other people's economic thoughts. (Unless of course, those thoughts call comforting biases into question.)


I mean, if I was discussing poker with a new player, the same would apply. He should admit that he doesn't know as much and has a lot to learn from me. But still, poker is not astrophysics. If this person disagreed with me about a concept and defended the way he saw things, I wouldn't accuse him of having no right to his interpretation merely because he doesn't understand poker on the level that I understand it. You see?

I'd want to help him. I'd want to demonstrate where his thinking was erred (either for his benefit, or for the exercise for myself). And if I did insult him for daring to defend the way he interpreted things, I'd expect him to (correctly) point out that poker (similar to economics) is an intuitive beast, and that he could learn much more effectively if I just humbled myself to explain why. I wouldn't tell him "You know nothing, you can't claim opinions like that with your level of knowledge." I'd merely want to demonstrate where I thought he was wrong. You see?


Also Barron, if I keep posting here I might give you a run for your money on being the most wordy.