PP pops up in a boglethread about risk parity

[dualstow]

Nisiprius to the rescue!
http://www.bogleheads.org/forum/viewtop ... 0&t=123563

Do a Ctrl+F* search for "sounds similar" if you don't want to slog through the whole thread.




*Excuse me: ? + F 

[Kshartle]

I've only read a couple of their threads. It seems like they don't generally understand the concept of low or negative correlation.

They discuss bonds being low-risk and stocks being high risk. The reality is a portfolio that's 50-50 SPY/TLT is less volatile than 50/50 SPY/LQD or something because of the volatility and neg correlation.

I realize you guys all know that but have you tried pointing it out to them? It's a basic concept.

[dualstow]

There are dozens and dozens of very bright members there.
You need to read more threads.

Of course, the philosophy is different but plenty of them understand that bonds on their own are not necessarily "safe".

[Kshartle]

NP.

I've only read a couple threads like I said. It seems like the investment understanding here is better.

[Libertarian666]

NP.

I've only read a couple threads like I said. It seems like the investment understanding here is better.

I've read quite a few threads there. They are generally smart and don't buy into the hype about active management.

Their main blind spot seems to be gold.

[Kshartle]

NP.

I've only read a couple threads like I said. It seems like the investment understanding here is better.

I've read quite a few threads there. They are generally smart and don't buy into the hype about active management.

Their main blind spot seems to be gold.

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

[frommi]

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

I hope you do . Gold has no intrinsic value, it is just worth what someone else will pay you.

[Kshartle]

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

Gold has no intrinsic value, it is just worth what someone else will pay you.

Wikipedia = Intrinsic value is an ethical and philosophic property. It is the ethical or philosophic value that an object has "in itself" or "for its own sake", as an intrinsic property. An object with intrinsic value may be regarded as an end or (in Kantian terminology) end-in-itself.[1]

Of course gold has intrinsic value. It's dollars that do not.

This might be a language issue.

[Gumby]

If someone doesn't understand why gold has value then they don't really understand economics and human decision making.

Sounds a bit narrow minded.

You might as well have said, "If people don't agree with me, then they don't understand economics."

[Libertarian666]

NP.

I've only read a couple threads like I said. It seems like the investment understanding here is better.

I've read quite a few threads there. They are generally smart and don't buy into the hype about active management.

Their main blind spot seems to be gold.

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

[frommi]

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

Businesses have an intrinsic value. You can calculate it by cashflow analysis or liquidation value by summing up all assets minus all liabilities a business owns. That gives you a rough value of what a business is worth. With gold that is not possible, and that is the difference.

[Libertarian666]

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

Businesses have an intrinsic value. You can calculate it by cashflow analysis or liquidation value by summing up all assets minus all liabilities a business owns. That gives you a rough value of what a business is worth. With gold that is not possible, and that is the difference.

No, that is still not an intrinsic value, because even the value of the money that you use to calculate "business value" is subjective; thus, anything calculated with it is still subjective.

To see this, consider the value of a business in Zimbabwe, calculated in Zim dollars (when they were still being used)...

[Kshartle]

If someone doesn't understand why gold has value then they don't really understand economics and human decision making.

Sounds a bit narrow minded.

Ok, maybe it just means they don't know what gold is. If they are aware of it though and they don't understand why someone would trade dollars for it they don't understand the concept of intrinsic value. This is not to suggest they should agree with the current price or shouldn't prefer to own some other peice of property.

If they are aware of gold and can't understand why it has value then they don't understand the basic concept of why humans value certain things. Even if they don't value it they should be able to recognize why others would value it. If not they are missing a fundamental understanding of economics and human decision making.

[Kshartle]

I've read quite a few threads there. They are generally smart and don't buy into the hype about active management.

Their main blind spot seems to be gold.

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

[Kshartle]

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

Businesses have an intrinsic value. You can calculate it by cashflow analysis or liquidation value by summing up all assets minus all liabilities a business owns. That gives you a rough value of what a business is worth. With gold that is not possible, and that is the difference.

No, that is still not an intrinsic value, because even the value of the money that you use to calculate "business value" is subjective; thus, anything calculated with it is still subjective.

To see this, consider the value of a business in Zimbabwe, calculated in Zim dollars (when they were still being used)...

Yes a business is not owned for intrinsic value, it's owned for the expected cash flow/profit/dividends. It's not owned for it's own sake. No one owns a stock for it's unique properties. It's either a peice of paper or digital record.

[Kshartle]

All value is subjective because it requires an individual to value it. Just because the value of everything is subjective doesn't mean something can't have intrinsic value. A diamond has intrinsic value because of it's properties. It has utility, portability, beauty, many things that give it inherent value. Value do to dividends and coupon payments is different.

This is a confusing topic. I think gold is the most interesting of the assets and certainly the most difficult to value because it is so confusing.

Has a thread ever been started in the Gold section asking the question "Why do people value gold"? It might be a decent one for people, especially new people afraid to buy gold to read for years to come.

[frommi]

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

1300$ is the price where a buyer and a seller have agreed to exchange their gold. But that was 260$ in 2001 and 1900$ in 2011, so who knows if its 250$ again in 20 years? Its only the price someone else is willing to pay for it. If i can`t put a dollar tag on the intrinsic value, it has none. I have to pay my bills with money not with gold.

[Kshartle]

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

1300$ is the price where a buyer and a seller have agreed to exchange their gold. But that was 260$ in 2001 and 1900$ in 2011, so who knows if its 250$ again in 20 years? Its only the price someone else is willing to pay for it. If i can`t put a dollar tag on the intrinsic value, it has none. I have to pay my bills with money not with gold.

We are just disagreeing on the meaning of intrinsic value.

The dollar values of everything you buy is subjective. It's just that gold is more subjective because it's not based on anticipated cash flows. You are still valuing those other cash flows whether you realize it or not. As tech pointed out.....the dollars you expect to receive will not have the same value as you think they will when you get them (except in dollar terms which is meaningless, they have to be able to buy something with real value). Not to mention you might not even get them so you are subjectively valuing that likelihood.

[Kshartle]

1300$ is the price where a buyer and a seller have agreed to exchange their gold. But that was 260$ in 2001 and 1900$ in 2011, so who knows if its 250$ again in 20 years? Its only the price someone else is willing to pay for it.

If i can`t put a dollar tag on the intrinsic value, it has none.

To say that your inability to value something means it has none is a bold statement. Does the Mona Lisa have value? She doesn't pay dividends or interest either in dollars or Euros. Why is she behind a foot of glass or more and protected by guards? Quite obvious she has value.

Incindently the S&P hit 1,570 in 2007 and 666 in 2009. Who knows if it will hit 666 again in 20 years. It's value (in dollars) is only what someone is willing pay for it. How is this different from how you describe gold in the above statement?

[Libertarian666]

If someone doesn't understand why gold has value then they don't really understand economics and human decision making. They don't understand what intrinsic value is. Very few do.

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

Intrinsic properties, such as density, boiling or melting point, and so on, are properties of an object in and of itself. Value is not one of those properties, because value is relative to the one doing the valuing. That is, when someone says that something has value, it is necessary to state to whom, and for what.

[frommi]

To say that your inability to value something means it has none is a bold statement. Does the Mona Lisa have value? She doesn't pay dividends or interest either in dollars or Euros. Why is she behind a foot of glass or more and protected by guards? Quite obvious she has value.

Incindently the S&P hit 1,570 in 2007 and 666 in 2009. Who knows if it will hit 666 again in 20 years. It's value (in dollars) is only what someone is willing pay for it. How is this different from how you describe gold in the above statement?

I can`t. But you can value all 500 companies and can come up with a fair value for the index. When you only buy when its low this value and only sell when its above, you win. And its a proven fact that in the long term the price of stocks go along with the earnings dependend on the current yield of treasuries. And its proven historically that when you buy 10 year treasuries with a yield of 2% you are going to lose money in the long term. But with gold i have a very hard time to define the "fair" value of it. For me intrinsic value is the "fair" value.
Some say gold`s fair value in the long term rises only with inflation, which would make sense, but then the fair value is around 600-800$. Others say its the price the miners pay to get it out of the ground, which is for most miners between 1100$ and 1300$ all-in-costs (but currently they are going to cut costs, which means lower values in the future). But with only 2% yearly production of gold, the last method is really questionable.

When you buy something and don`t know the true value of it, you are simply speculating/gambling. That is no different than the people buying tech-stocks in 2000.

[Kshartle]

Nothing has intrinsic value, because value is inherently subjective; it presupposes answers to the question "value to whom, and for what?"

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

Intrinsic properties, such as density, boiling or melting point, and so on, are properties of an object in and of itself. Value is not one of those properties, because value is relative to the one doing the valuing. That is, when someone says that something has value, it is necessary to state to whom, and for what.

If anyone values it, it has value because you can trade something else for it. Just because it's subjective doesn't mean it doesn't exist. Saying that someone has to value it for it to have value is redundant. That would be the definition of the concept of value.

I don't think the bolded points are neccessary to state the obvious fact it has value.

Regarding gold it has utility value as well so even it didn't have intrinsic value, that is value "in itself" or "for its own sake", it would still have value.

It can be a mind-bending concept and easily misunderstood just through a dissagreement in the meaning of the words. I am probably not doing a good job of explaining my understanding of it.

I know Browne absolutely explains the intrinsic value of gold perfectly in a few of his books, particularly ones from the '70s.

[Kshartle]

To say that your inability to value something means it has none is a bold statement. Does the Mona Lisa have value? She doesn't pay dividends or interest either in dollars or Euros. Why is she behind a foot of glass or more and protected by guards? Quite obvious she has value.

Incindently the S&P hit 1,570 in 2007 and 666 in 2009. Who knows if it will hit 666 again in 20 years. It's value (in dollars) is only what someone is willing pay for it. How is this different from how you describe gold in the above statement?

And its a proven fact that in the long term the price of stocks go along with the earnings dependend on the current yield of treasuries.

And its proven historically that when you buy 10 year treasuries with a yield of 2% you are going to lose money in the long term.

The first one is a theory and the second one is a hypothesis. Neither are facts and certainly not proven. For instance what is long-term and what do you mean by money?

[frommi]

And its a proven fact that in the long term the price of stocks go along with the earnings dependend on the current yield of treasuries.

And its proven historically that when you buy 10 year treasuries with a yield of 2% you are going to lose money in the long term.

The first one is a theory and the second one is a hypothesis. Neither are facts and certainly not proven. For instance what is long-term and what do you mean by money?

long-term = >10 years. With money i meant purchasing power.

[Libertarian666]

You are arguing that nothing has intrinsic value? Intrinsic value does not exist? Gold has intrinsic value for it's unique properties. It is valued for those properties that it possess which are intrinsic to it. It is the clearest example of intrinsic value that exists.

I'm not clear if you are saying Gold does or does not have intrinsic value.

Why do you think people trade more than $1,300 an ounce for it? It's not because it has cash flows. It's for the intrinsic value.

Intrinsic properties, such as density, boiling or melting point, and so on, are properties of an object in and of itself. Value is not one of those properties, because value is relative to the one doing the valuing. That is, when someone says that something has value, it is necessary to state to whom, and for what.

If anyone values it, it has value because you can trade something else for it. Just because it's subjective doesn't mean it doesn't exist. Saying that someone has to value it for it to have value is redundant. That would be the definition of the concept of value.

I don't think the bolded points are neccessary to state the obvious fact it has value.

Regarding gold it has utility value as well so even it didn't have intrinsic value, that is value "in itself" or "for its own sake", it would still have value.

It can be a mind-bending concept and easily misunderstood just through a dissagreement in the meaning of the words. I am probably not doing a good job of explaining my understanding of it.

I know Browne absolutely explains the intrinsic value of gold perfectly in a few of his books, particularly ones from the '70s.

I'm not saying gold doesn't have value; it does. But it does not have intrinsic value, as there is no such thing as intrinsic value.

An example of an intrinsic property of objects is mass. An object has mass regardless of whether anyone is measuring that mass or has an interest in it. Therefore, mass is an intrinsic property of objects.

By contrast, an object has value only if someone has an interest in it. Therefore, value is not an intrinsic property of objects.