What is wealth? In essence, wealth is the ability to exchange something you have for something you want. Value is what someone else will give you for your assets. If you have a stack a 100 pieces of paper, you don't know what it is worth until you try to exchange them. That stack may be napkins, $1 bills or $100 bills. If you have food on your face, that napkin may be more of use than the $1 bill. But that $1 bill could be exchanged for 20 napkins at the right place. So the value of something depends on the utility, time and place.
Money makes it easier to define wealth. But wealth is fleeting, which is why those of great wealth diversify. That painting you bought for $5 million might not fetch a buyer for $3 million. That $5 million in the bank may be devalued by inflation. That farm you own may be wiped out be a flood. Which is why those of great wealth pool their risks together. They buy insurance and sell portions of their assets to others.
A good investment is one that can be converted quickly, a liquid asset. It must have a means of establishing its value. Currency is traded frequently to establish its value among other currencies. It is easier to determine the value of a share of stock which is trading a million shares a day than a house which has only a few perspective buyers and exchanged in the frequency of years.
Tuesday, February 24, 2009
Monday, February 23, 2009
Global Warming Update: Media Credibility, Not Ice Caps, In Meltdown
Media Credibility, Not Ice Caps, In Meltdown
"Eco-warriors and media hype aside, the fact is, as we head into 2009, that the world's ice mass has been expanding not contracting."
"No alarm, no story."
"
During October and November 2008 the extent of Arctic ice was 28.7 percent greater than during the same period in 2007. According to data published by the International Arctic Research Center (IARC/JAXA) October 2008 saw "the fastest ever growth" of Arctic Sea ice since records began. Not good news for doomsayers like Dr Mark Serreze of the National Snow and Ice Data Center. Dr Serreze had predicted an ice-free North Pole in the summer of 2008. "
"Eco-warriors and media hype aside, the fact is, as we head into 2009, that the world's ice mass has been expanding not contracting."
"No alarm, no story."
"
During October and November 2008 the extent of Arctic ice was 28.7 percent greater than during the same period in 2007. According to data published by the International Arctic Research Center (IARC/JAXA) October 2008 saw "the fastest ever growth" of Arctic Sea ice since records began. Not good news for doomsayers like Dr Mark Serreze of the National Snow and Ice Data Center. Dr Serreze had predicted an ice-free North Pole in the summer of 2008. "
Global Warming Update: Arctic Ice
Arctic Ice Extent Understated Because of "Sensor Drift"
""The National Snow and Ice Data Center (NSIDC) has been at the forefront of predicting doom in the arctic as ice melts due to global warming. In May, 2008 they went so far as to predict that the North Pole would be ice-free during the 2008 'melt season,' leading to a lively Slashdot discussion. Today, however, they say that they have been the victims of 'sensor drift' that led to an underestimation of Arctic ice extent by as much as 500,000 square kilometers."
"Thus far, sea ice extent in 2009 is tracking ahead of 2005, 2006, 2007, and 2008, so the predictions of an ice-free north pole might be premature."
""The National Snow and Ice Data Center (NSIDC) has been at the forefront of predicting doom in the arctic as ice melts due to global warming. In May, 2008 they went so far as to predict that the North Pole would be ice-free during the 2008 'melt season,' leading to a lively Slashdot discussion. Today, however, they say that they have been the victims of 'sensor drift' that led to an underestimation of Arctic ice extent by as much as 500,000 square kilometers."
"Thus far, sea ice extent in 2009 is tracking ahead of 2005, 2006, 2007, and 2008, so the predictions of an ice-free north pole might be premature."
Global Warming Update: Global warming danger threat increased
link
"The Earth won't have to warm up as much as had been thought to cause serious consequences of global warming, including more extreme weather and increasing threats to plants and animals, says an international team of climate experts."
"The Earth won't have to warm up as much as had been thought to cause serious consequences of global warming, including more extreme weather and increasing threats to plants and animals, says an international team of climate experts."
Is it time to get back in the stock market?
Depends on your time horizon. The stock market is at an eleven-year old low (7114.78 as I write). Because Obama plans to raise taxes on capital gains and dividends, this make stocks worth less. Obama will be in office for four to eight years. Right now the interest rates you get at the bank are very low. But the real question is where interest rates will go in the further. If interests rates increase significantly, the cost of capital increases, further putting pressure on stocks. Plus, people will move away from stocks to bank deposits (if there is anyone left to move). A few companies will fail, others will be created. But if the national government nationalizes companies, wiping out shareholder value, then other "crucial" companies are also at risk at being taken over.
Is the stock market undervalued? Has it already taken account of all the failed companies and future nationalizations? Will the business cycle go upwards in the near term? Will the increase in stock prices outpaced the return from banks?
In truth, I don't know. Massive spending by the government, the upcoming baby-boom retirement will put tremendous strains on borrowing. I expect interest rates to increase over the next few years. Inflation may also rise rapidly.
For myself, I do a little dollar-cost averaging in index funds. But I have a time horizon of 20 years, i.e. I do not expect to have to sell stocks until then. I expect the market to recover to its previous highs in that amount of time. Therefore, current stock values may be a bargain. Unfortunately we cannot depend on recent history to predict the future. The President and Democratic controlled Congress are changing the rules. Hopefully, the worst case scenarios wont last more than six years. People are fearful, and therefore are avoiding the stock market. Stocks are therefore a lot cheaper.
So, in conclusion, if you believe in the vitality of the U.S.economy and have at least a ten year time horizon, I think yes it is a good time to invest in the stock market. Buy low - sell high. But buy only if you can afford (financially and mentally) to leave it in for a long time.
Is the stock market undervalued? Has it already taken account of all the failed companies and future nationalizations? Will the business cycle go upwards in the near term? Will the increase in stock prices outpaced the return from banks?
In truth, I don't know. Massive spending by the government, the upcoming baby-boom retirement will put tremendous strains on borrowing. I expect interest rates to increase over the next few years. Inflation may also rise rapidly.
For myself, I do a little dollar-cost averaging in index funds. But I have a time horizon of 20 years, i.e. I do not expect to have to sell stocks until then. I expect the market to recover to its previous highs in that amount of time. Therefore, current stock values may be a bargain. Unfortunately we cannot depend on recent history to predict the future. The President and Democratic controlled Congress are changing the rules. Hopefully, the worst case scenarios wont last more than six years. People are fearful, and therefore are avoiding the stock market. Stocks are therefore a lot cheaper.
So, in conclusion, if you believe in the vitality of the U.S.economy and have at least a ten year time horizon, I think yes it is a good time to invest in the stock market. Buy low - sell high. But buy only if you can afford (financially and mentally) to leave it in for a long time.
Answer to Einstein Test
German Swede Brit Dane Norwegian
Green White Red Blue Yellow
Coffee Beer Milk Tea Water
Prince Blue Pall Blend Dunhill
Fish Dogs Birds Horses Cat
The German keeps the Fish, if the other animal was a fish.
Green White Red Blue Yellow
Coffee Beer Milk Tea Water
Prince Blue Pall Blend Dunhill
Fish Dogs Birds Horses Cat
The German keeps the Fish, if the other animal was a fish.
Israeli Sense of Humor at UN
From an email:
This is pretty funny – I’m not making a political statement either.
An ingenious example of speech and politics occurred recently in the United Nations assembly which made the world community smile.
A representative from Israel began: 'Before beginning my talk I want to tell you something about Moses. When he struck the rock and it brought forth water, he thought,'What a good opportunity to have a bath!' He removed his clothes, put them aside on the rock and entered the water. When he got out and wanted to dress, his clothes had vanished. A Palestinian had stolen them.'
The Palestinian representative jumped up furiously and shouted, 'What are you talking about? The Palestinians weren't there then.' The Israeli representative smiled and said, 'And now that we have made that clear, I will begin my speech.
This is pretty funny – I’m not making a political statement either.
An ingenious example of speech and politics occurred recently in the United Nations assembly which made the world community smile.
A representative from Israel began: 'Before beginning my talk I want to tell you something about Moses. When he struck the rock and it brought forth water, he thought,'What a good opportunity to have a bath!' He removed his clothes, put them aside on the rock and entered the water. When he got out and wanted to dress, his clothes had vanished. A Palestinian had stolen them.'
The Palestinian representative jumped up furiously and shouted, 'What are you talking about? The Palestinians weren't there then.' The Israeli representative smiled and said, 'And now that we have made that clear, I will begin my speech.
A Disturbing Trend.
The last couple of weeks have given me pause. There has been a lot of talk about moral hazards and unintended consequences.
On the two extremes of humanity, the criminals and the saints. The saints and the selfless will help their fellowman without any further incentives. The criminals will take advantage of the weakness of others. The rest of us life in-between. Some may give to charity more than others, some may not return extra change. As the society is set to change once again, the question is whether the government is making a bad situation worse.
Do you feel like a chump because you worked hard, maybe scrimped, so you can afford your mortgage, and then you see the government bailing out your neighbor? Do you feel cheated because you rent. Those that own a home get a mortgage interest deduction and they get a possible increase in value later. The renter gets a receipt. Should you pay because your neighbor bought too much house? Does not keeping the price of housing artificially high make it more difficult for the renter and the poor to own their own house? Should we help them because the made a bad investment, that their house is worth less than what they paid. Do not most cars lose value the minute you drive it out of the dealership? Why shouldn't a house's value gradually decrease over time, like most everything else?
Does bailing out your neighbors mistakes make it more likely that these mistakes will be repeated by others?
On the two extremes of humanity, the criminals and the saints. The saints and the selfless will help their fellowman without any further incentives. The criminals will take advantage of the weakness of others. The rest of us life in-between. Some may give to charity more than others, some may not return extra change. As the society is set to change once again, the question is whether the government is making a bad situation worse.
Do you feel like a chump because you worked hard, maybe scrimped, so you can afford your mortgage, and then you see the government bailing out your neighbor? Do you feel cheated because you rent. Those that own a home get a mortgage interest deduction and they get a possible increase in value later. The renter gets a receipt. Should you pay because your neighbor bought too much house? Does not keeping the price of housing artificially high make it more difficult for the renter and the poor to own their own house? Should we help them because the made a bad investment, that their house is worth less than what they paid. Do not most cars lose value the minute you drive it out of the dealership? Why shouldn't a house's value gradually decrease over time, like most everything else?
Does bailing out your neighbors mistakes make it more likely that these mistakes will be repeated by others?
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