Linked by Howard Fosdick on Thu 24th Nov 2011 00:04 UTC
Editorial My previous article described how you can use your tech knowledge to profit from the stock market -- if you combine it with financial analysis and careful research. This article analyzes several tech stocks. The goal is to start a useful discussion. What is your opinion of these companies? Even if you don't invest, this matters if you are in employed in IT. You're betting your career on the companies in whose products you specialize! You don't want to pick losers.
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RE[3]: $20 Dollars
by vaette on Sat 26th Nov 2011 02:17 UTC in reply to "RE[2]: $20 Dollars"
vaette
Member since:
2008-08-09

I was very explicit about the specific investment, buying balanced into the Dow Jones Industrial Average index, which started the year 1915 at about 53 points (http://stockcharts.com/freecharts/historical/djia19001920.html), and ended trading today at 11,231.78 points. This comes out as a gain of 211.92x the money, which at an initial investment of $20 would give you $4,238. Now you would lose some money here in rebalancing the investments to fit the index, but in the short-term movements are almost random (and the index constituents change very slowly) so not that many reinvestments would need to be made. Certainly it would take a very boneheaded strategy to not handily beat the gold price of $1681 today (the price was indeed around $20 an ounce in 1915 as you point out).

I additionally personally believe that gold is in a bubble which is about to deflate whereas the stock market is more or less fairly priced at the moment.

Reply Parent Score: 3

RE[4]: $20 Dollars
by spiderman on Sat 26th Nov 2011 08:15 in reply to "RE[3]: $20 Dollars"
spiderman Member since:
2008-10-23

Actually, the price of the dollar was fixed against gold until 1976 ("the gold standard"), so the price of an ounce of gold didn't change until 1976. Then the price of gold didn't go through the roof, it's the dollar that fell bellow the floor. Every 40 to 50 years we need to change the money system because it is not sustainable. Our financial system leads to cycles of over production and depressions, each one worse than the previous one. When things are becoming unbearable, we change the system with a new deal or a world war.

Edited 2011-11-26 08:17 UTC

Reply Parent Score: 1

RE[4]: $20 Dollars
by hackus on Sat 26th Nov 2011 19:17 in reply to "RE[3]: $20 Dollars"
hackus Member since:
2006-06-28

Good God.

You have it all backwards.

Gold never changes in value, unless of course, something happens that makes it irrelevant.
(The Apocalypse or the Second Coming or Nuclear War, Asteroid Impact.)

But then, if that happens, who cares about Gold, or anything for that matter.

The only thing that changes with respect over time, as I demonstrated in my first example of a Suit and a night on the town, is the value of _everything else_ with respect to Gold.

Gold _never_ changes in value, ever.

It has been that way since recorded history.

Gold is money, despite what Bernanke and his crony thieves on Wall Street tell you. Bernanke stood up in front of Congress in front of Ron Paul and told him Gold,..._GOLD_ is not money and that it was an asset.

Besides, if you could print paper, and give it too all your crony friends as money, OF COURSE you would say Gold is not money. You would _NEVER_ want Gold to be money because you can't print it and give it too all your friends and make your selves SULTANS while everyone else goes on food stamps!

I almost laughed myself into oblivion, after reading you think Gold is in a Bubble.

A Bubble!

I bet all those MF Global, GM Investors, MCI, Enron...(Sorry list is too long here...) investors thought Gold was in a bubble too!

Now they are sitting on a street corners with no pot too piss in!

Please, please join them!

LMIO

-Hack

Reply Parent Score: 1

RE[5]: $20 Dollars
by vaette on Sun 27th Nov 2011 10:43 in reply to "RE[4]: $20 Dollars"
vaette Member since:
2008-08-09

The only thing gold doesn't change in value against is gold. The fact that the price of gold is relatively stable when considered over vast periods of time is a bad thing when considering investing your savings, since as noted gold has lost value against the Dow Jones Industrial Average.

Also, this is a fact despite gold being at a historical advantage in this comparison at the moment. If we had instead looked at 2001 you would have gotten a mere $400 for your ounce of gold (when adjusting for inflation into 2011 dollars), a mere fourth of the current value which you claim to compare well to the 1915 value. As a comparison the Dow closed at a little bit over 10,000, a mere ~13% lower than today.

So gold is not at all stable short-term, and the long-term is more favourable towards broad stock market investment. This is a pretty direct consequence of another fact; Gold is not very inherently valuable, and the pricing comes down to human follies and investors speculating. This is something that stock investments don't suffer from to the same extent, since there is a physical company, usually with physical assets, making sometimes physical products, underlying the stock.

Reply Parent Score: 2