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Talking stocks, trading, and investing in general

Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.

  1. lawyerdad

    lawyerdad Senior member

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    Maybe I've lost the semantic thread here, but that may or may not be true depending on the asset, no? Isn't that one of the reasons people buy gold, bitcoins, or real estate? Because they are assets that have an inherent value that can be measured or realized independent of a particular currency?

    If I buy baseball cards with Mexican pesos and then the peso goes to shit, I can presumably sell my card for yen or dollars at a price that hasn't crashed with the peso.
     
    Last edited: Jan 6, 2017
  2. idfnl

    idfnl Senior member

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    It's true with these alternate stores of value. With stocks, priced in dollars, you have to outpace inflation.

    But you generally have to do things like pay taxes in your local currency. And if you need a loaf of bread you're not going to be able to buy it in yen, or gold for that matter.

    I think the inherent ability to convert gold into another currency is true, but in practical terms you still have to deal with the currency of your local economy.
     
    Last edited: Jan 6, 2017
  3. Piobaire

    Piobaire Senior member

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    If you don't make your own bread you're a cuck.
     
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  4. lawyerdad

    lawyerdad Senior member

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    Practically speaking, I more or less can buy bread with yen. Maybe not over the counter for cash at my local bakery, but few people make their purchases that way anymore. I travel a lot for work. I buy food, etc. in lots of foreign countries with dollars, for all intents and purposes. That is, I use a credit card that I pay off with dollars, or I take out relatively small amounts of local cash from ATMs using my checking account debit card. I'm basically paying with dollars at whatever the current exchange rate is. If i go back to the same country next year and their currency has lost half its value, the dollar exchange rate will reflect that and the loaf of bread that costs twice as many local currency units will still cost me in dollars about the same amount it did last year. Yes, there are generally going to be somewhat higher transaction costs if we're talking gold or baseball cards rather than dollars, but I assume this discussion is more about building an overall financial portfolio than managing your daily spending account.

    Buy yeah, there obviously are downsides to investing substantial amounts in assets that aren't easily liquidated or converted.
     
    Last edited: Jan 6, 2017
  5. brokencycle

    brokencycle Senior member

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  6. idfnl

    idfnl Senior member

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    We're taking this to a bit of an extreme here. Nobody parks their currency in yen and pulls yen as dollars from an ATM for living expenses. There are people in other countries that park their money in dollars, so I suppose the same can happen to dollar holders if it devalues, which as someone else stated, would be really good for bitcoin.
     
  7. SkinnyGoomba

    SkinnyGoomba Senior member

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    The definition of inflation is the loss of purchasing power for a given currency....
     
  8. idfnl

    idfnl Senior member

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    I meant inflation, thanks for correcting. I misspoke.
     
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  9. lawyerdad

    lawyerdad Senior member

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    Well, sure. Nor do people rely on their non-currency investment assets to buy their daily bread. My point was that Goomba is right that currency inflation isn't necessarily a bad thing, depending on your situation. If, as he suggested, you're regularly converting your cash into other asset classes, it might even be a good thing.
     
    1 person likes this.
  10. MSchapiro

    MSchapiro Senior member

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    Total circulation isn't really a relevant factor in comparing the worth of currencies. Generally the idea is that interest rate are the driver behind various currency values.

    If one wants to be protected from inflation, there are many ways to do it. This doesn't inherently make something valueable.

    The gold calculation also isn't sound. It doesn't take the cost to get it out of the ground into account, a cost that tehse days exceeds $1k an ounce. Also, no one is on the verge of synthetically making gold either, but quantum computers do have the long term potential to much with current encryption. Either way, a minor risk to be aware of.

    None of these explain why bitcoin should be particularly move valueable,except your thesis that capital controlled emerging economies have an incentive to buy it.
     
  11. idfnl

    idfnl Senior member

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    I'd have to concede the point in a puritanical sense. Note that very few of us do this, so more fundamental: why is $1 worth 1/30th of what it was a little over 100 years ago?

    It seems like our currency is a vehicle for servitude of debt, and the more we pile on, the more this government devalues the currency to service it. So while it makes their books look better, it saddles us with inflated prices.

    When you let the government print more money, you effectively devalue your savings proportionally.

    If you were running a business and had an order in place for something requiring a metal bought at the time of the order's placement (for arguments sake you paid for in advance), then when the order was finished, the commodity was 10% less expensive than when you started, your trading partner would be outraged if you tried to ask you for that 10% back because the metal is worth 10% less now. Nixon said "suspend temporarily" when he pulled the gold standard.

    But in a similar fashion, we earn dollars and then turn around and have them constantly devalued, and with a system based on trust, I guess you can infer what me shifting something to bitcoin means.

    The digital age is forcing us to start asking questions about what a dollar really means anymore. Out country is no more than the guy on the corner that owes huge credit card debts, and you shake your head when you drive by and there's a new car in the driveway. Why do we allow this idea of letting more money into circulation because of this idea that it "sparks growth"? Seems like a scam, because it forces us (except for banks) to chase it. Should governments stop getting involved in money with our technology? Doesn't it suddenly seem outdated?




    Per above, I question the premise behind inflation.

    I wasn't intending to suggest gold was overvalued, and you are correct, I was making the point that bitcoin might be way undervalued.

    I'm suggesting that Bitcoin is inherently more valuable because it's not subject to manipulation by political/strategic interests, not sure it is, but I am leaning towards yes. Lots of complex moving parts to assess, though.
     
    Last edited: Jan 6, 2017
  12. Concordia

    Concordia Senior member Dubiously Honored

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    If I were somehow to find the one and only used diaper left from my daughter's second year, the same logic would put its value at $1.48 trillion.
     
    2 people like this.
  13. Piobaire

    Piobaire Senior member

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    Yup, all my ticker green today except EWC which was red.
     
  14. idfnl

    idfnl Senior member

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    Then your daughter is a goose.
     
  15. MSchapiro

    MSchapiro Senior member

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    The monetary supply is grown to assist in growth.

    As you may notice the population is growing along with the economy. A static money supply would therefore lead to deflation, which is bad for debtors (which most Americans are).

    The value of your debt stays the same while the price of your goods continiously decreases. Its disasterous for business.

    This was a big issue for America in the 1800s and early 1900s on the gold standard. In fact a lot of farmers were against it and wanted gold and silver backing the USD so as to stop deflation. There is a reason the Fed fights so hard against deflation.

    If you are interested look into William Jennings Bryan, a populist secretary of state who built his platform off of this.

    I also find an inconsistency in your argument about disliking a fiat. Bitcoin and the USD are both fiats, but you support one and not the other? The world also has a vested interest in the USD functioning, they could care less what happens to Bitcoin.
     
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  16. idfnl

    idfnl Senior member

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    Ok so the take away is that everyone should owe tons of money?

    I'm using FIAT in the sense of government backed currencies based on faith and trust. Technically nobody is "backing" bitcoin. It relies on a distributed computer network, which could be argued is a distinction without a difference, but I see it as a different premise.
     
  17. MSchapiro

    MSchapiro Senior member

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    Not sure how you reached that conclusion.

    The average person and business has debt. That is the way the economy works now and always has, hence why delation is bad. If the economy de leverages it does not benefit anyone except the debt owners.

    And sure, but that isn't the correct use of fiat. You want a non government currency. While I can understand the ideology, I don't see why the lack of central bank control is automatically attractive as an investment compared to, say, gold?
     
  18. Master-Classter

    Master-Classter Senior member

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    That's a good point. It would have meant a lot less stress for a similar result. However I've learned a lot, I find the subject interesting and intellectually stimulating, I'm looking for big rewards early on and willing to take the risks, and I feel that I've started with negative returns, moved this year to a reasonable/average return, and expect that next year I can hit 10%+, both from what I've learned to the positions I've set up that are negative now but I believe will turn around



    I've had quite a big cash % so realistically the additions I made probably weren't even used to generate returns this year. I have generally added about two lump sums throughout the year. My average return calculation was a quick and dirty beginning versus end of year number so I have some sense of where I'm at.

    The 'return' I was told was 6% from the program I use and I know that the fees I pay account for about 1% of my portfolio so I just added that back. Those all come out of one account (non-registered).

    I suppose selling at a loss doesn't impact my total return in a sense than just having held the stock. My point was that I might rebuy some of these positions lower later or have moved the money to places to get better returns so I concede the overall return isn't great but I expect it to get better in future. Having sold some at a loss is more of a tax value than return calculation.
     
  19. idfnl

    idfnl Senior member

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    The tax system rewards carrying a mortgage. We're also taught to over consume, and to embrace planned obsolescence.

    So certain elements of debt (deflation, and tax deductions) are more attractive, but structurally it seems like a false bottom. It's not unlike the stuff Ron Paul is always railing about. I am not sure how correct he is, but he believes firmly this whole thing is a house of cards and to some degree I can see his point. Tangentially related, I am reading there is a possibility that the Fed may be audited.

    Gold is a viable alternate currency, but what are you going to do when you want that loaf of bread? Scrape a few shavings off the gold bar in your pocket?
     
  20. idfnl

    idfnl Senior member

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    Went back into TSLA. The gigafactory is open, and pre-order numbers for the new car are pretty incredible.

    I had a lot of doubts looking at other massive carmakers ability to drive TSLA off the road with price and volume, but they have that same ability to connect with customers like AAPL.

    See what happens.
     

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