This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Gold's Intrinsic Value

By Kevin McElroy

NEW YORK ( TheStreet) - The past two days I've discussed some ways you can protect yourself from the effects of a currency crisis, as well as higher food and energy prices.

But let's face it, the whole subject is a major drag.

I compounded the problem on Wednesday night when my wife and I watched The Road, a very good, but uber-depressing movie about a father and son's struggle to travel through a post-apocalyptic wasteland.

If you haven't read the two pieces, I urge you to do so. (See Wednesday's article on food riots and Thursday's article on the oncoming scarcity .) For now, I'm going to focus today's issue on a slightly more entertaining, and possibly just as informative topic.

There's an important theory of valuing assets, including investments known as "intrinsic value."

Now, before I go on, we should come to a mutual understanding that all value is subjective. That is, the small differences in preference among people will always mean that a given asset will be valued differently according to whom you ask.

For instance, my wife is crazy about fresh, perfectly ripened peaches. She'll gladly pay top dollar at a roadside stand to buy more peaches than we could possibly eat.

On the other hand, my father grew up with a peach tree in his backyard. By the time he was 10 years old he had consumed a lifetime's worth of peaches, so he'd probably rather go hungry than to eat another peach.

But I think we can all agree that a peach has an intrinsic value, in that it can be eaten, it has a certain amount of calories, vitamins, fiber, sugar, and protein. It has a shelf-life, as well as pretty specific storage requirements.

So while my wife and my father may have very different ideas about what they'd pay for a peach, they can both agree on the intrinsic value of the peach. A peach is worth something -- regardless of any external factors. Even my father would agree that peaches have a value -- in that he realizes that lots of other people do enjoy eating them.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
FB $117.44 -0.95%
GOOG $692.33 -0.84%
TSLA $232.32 -3.92%
YHOO $36.02 -1.40%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs