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.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV