investments and the Japan earthquake

Gemstones also demonstrate that. A rough crystal in Pakistan may sell from the miner to the agent, for $5 USD. It may then be eventually sold in a NYC jeweler's store for $5,000. with maximum expenses at maybe 500-750.

jim

 

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Well you are giving a very hypothetical situation that doesn't exist to make a point. I would contend that a bottle of water close enough to the desert where you could charge $100 without incurring transportation costs, doesn't exist. If transportation was essentially free in your scenario, then the $100 demand won't be there because the party who is thirsty can always make the same trip you did. Why would you assume that you would have an advantage which the buyer didn't?

(I will leave out for now that a nice single serving of clean water in a convenient plastic bottle is a manufactured item.)

On your point about natural resources, I would disagree. Water isn't something that can be shipped around the world and sold. It's relatively easy to get even in desert countries and it is extremely heavy. On the other hand it should be clear enough that oil is a resource makes a country very wealthy.

You also contradicted yourself. You said that a country with natural resources doesn't mean riches. However you then proceeded to give examples, with the presumption the country had a monopoly on the resource, i.e. Salt & Water, so they may charge monopolistic prices. It can't be both ways.

 

As everyone can see, it is more difficult to unlearn something that is wrong than to learn something new that is right.

 

Wealth that is manufactured comes from the knowledge of adding value to and exploiting wealth that is dug and grown.

 

Many stocks do not and never have paid dividends. They only produce a profit if they go up in value (i.e., can be sold for more than they cost). According to some, buying such stocks is speculation, not investment.

Truly free trade ALWAYS results in an increase in perceived wealth - as two trading partners exchange something that they value less for something they value more.

The problem with that statement is that there is seldom such a thing as a "truly free trade", because that would require trading partners with equal knowledge and who are not operating under different financial pressures as they make the trade. They also would have to be trading in government and coercion-free circumstances, as both government and force distort free trade.

Here's an example: The US Bureau of Land Management is required by law to facilitate and underwrite the costs of harvesting timber on government land. To that effect, the BLM may have to build a road through a government forest at the cost of $1000 dollars in order to give a timber company access to a tree, for which it pays the government $20 dollars and then sells for $40 dollars. This "free trade" did not create wealth, it destroyed it, as the government (you and me) paid $980 dollars so a private company could make $20.

The total cost to the environment, and to the economy because of the lost opportunity caused by spending $980 to allow a company to "make" $20, is staggering to contemplate.

 

The downside is that trade between countries with widely different standards of living can severely hurt the PEOPLE in the more advanced country even if it helps the businesses. So as a national policy in a world where most capital investment is owned by international corporations, free trade may not be desirable. Even Adam Smith didn't believe in free trade.

 

As I said, it isn't really free trade if a great disparity exists between the traders in either information or financial situation. Nor if the "trade" is conducted at gunpoint, as with the English opium trade with China, or in general between colony and colonizers.

 

My example with water was one where the person in the desert NEEDED water NOW and THEN, not 8 hour drive away in a car he did not have. He could not make the same trip as I, since I had the car.

My example with the salt was that IRAN had the salt, the Sogdians, (not Iranians), were the traders. The traders made the money trading with the Iranians for salt, (for little), then selling it to people without salt, (for a lot). The point being just because the Iranians had the salt, (your wealth), did not make them wealthy. It was the Sogdians, (with no salt), that made the wealth from the exchange. It has always been this way, I just wish I could understand how to explain it clearer. Sorry.

 

Man does not create anything new...we merely combine/use/transfer/modify/aid things that already exist into something else or better.

The ability to transfer these items to someone else is how "higher value" or wealth is created. The fact the middle-east has oil is one thing...their ability to get it out of the ground and to a place where people need it is another. The people who need it pay more for it than the people who have far too much (supply and demand). A farmer is in the same boat...he does not need all the produce he has grown (aided a seed to grow more, he created nothing)...it can either rot in the field, or be harvested and sold to someone else who needs it. There are many players in the chain that make money...each, if done right, is increasing their wealth.

Land owner gets rent from farmer. Farmer gets $$ for produce. Mill/Manufacturer/etc gets $$ for modification. Store gets $$ for delivery to consumer. Consumer gets nutrition/personal utility. All are gaining, and if done well, all other than the consumer are gaining financial wealth/profit while the consumer is transfering wealth gained elsewhere for nutrition/personal utility. Nothing is created...value is added to something that is already present (the seed)...value in the dirt and climate that provides nutrients, value in increasing yield, value in modification, value in delivery.

The key is to figure out which step in the chain is adding the most value (generating the larger profits/wealth) and trying your best to participate. Todays equity markets allow joe blow in the Sonoran desert to participate in Farmland Ownership in the midwest through REITs. He can buy any REIT.

So Sonoran Joe blindly guesses that a toxic airplane crash will happen in Kansas, so he buys a REIT focused on Indiana farmland because it will not be toxic and worth more money. This is a Speculative bet on Indiana farmland that is based on a blind guess.

Sonoran Joe decides, after hearing about a great summer climate and the fact that 80% of landowners contracts will be renegotiated in fall, decides a REIT in this space will create upside in the next few months when landowners use the current summer climate to demand higher rents from farmers in their new contracts. This is a Trading bet based on the new contract season (time/place guess)

Sonoroan Joe decides that the move to grain ethanol based fuels, to transition away from Oil based fuels, will result in some great technological changes that impact the price of farmland in a positive fashion, so he decides a REIT is a good bet. This is an investment in farmland that will produce changes over years of transition (educated guess)

All are guesses...all are trying to participate in value add activities that will increase Sonoran Joe's wealth...all have risk and may or may not payoff. Sonoran Joe, through his portfolio makes many diversified guesses (not all eggs in one basket). If he is doing things right, he is balancing his guesses between Speculation, Trading, and Investment based on his specific risk tolerance. If he is doing things wrong, he is placing far too many Speculative/Trading guesses, and reacting to the fact that no toxic plain crash, no contract upside, or the change in news that any of these will/won't happen.

 

What about language, music, poetry, stories... They come from a dimension of mind with no physical counterpart, and once forgotten, go back to whence they came with no trace in the physical world.

 

Man has language...we can debate origin....music, poetry, stories...not created, just transitioned/modified from strings/wood/metal/skins/language, etc. But yes, there is value in music, poetry, stories...as I stated in an earlier post, thought leadership is of great value.

 

Value can certainly have different meanings and different perspectives. I personally feel "wealth" though is what can be held in your hand. A house on fire you flee from has no value to you. A shotgun without shells is only a club. Currency nobody will accept has no value. Money on deposit in a closed uninsured bank might not be worth very much. The list is endless. But what creates your "wealth" is that which can be used by you at a given point in time.

Most of us have watched the "survivor man" type shows. That exlemplifies my point nicely. A bottle for carrying water in the desert might be worth 2c, but it's value to you priceless. IMHO

gary

 

Creative thought is certainly more than strings/wood/metal/skins or even language; and leads to great increases in wealth that is not dug, grown or manufactured.

 

Am I the only one who saw this in the news today? The article of course contains more than I have pasted here, but does anyone care about this? Is this a "non-event" to everyone? Seems big to me. I just KNEW they manipulate (they...not sure exactly who "they" are). YIKES!!

"..WASHINGTON (AP) -- The New York Federal Reserve Bank confirmed that it intervened in currency markets on Friday for the first time in more than a decade.

The disclosure came a day after the Group of Seven major industrialized nations pledged in a statement to join in a coordinated effort to weaken the Japanese yen. The yen has surged in the last week to post-war record levels following the Japanese earthquake and tsunami..."



This on the Drudge report this morning; by now, tonight, it's made it's way to the bottom of the listings, and probably will be gone by tomorrow.

Sigh...
Lucy

 

Most of us are so cynical that we ignore it, accepting as fact that the currency and stock exchanges are manipulated. During the "Arab oil Embargo" Major US banks were found to be driving down the dollar in violation of several laws. But nothing was done.

Wall Street owns the US government. Since Wall St. is just another arm of the banking system that stretches well beyond our shores, rules and regulations are meaningless. Conspiracy ? In a manner of speaking. Corruption ? Sure, but if you get some of it, who cares ?

Generally small investors are the ones who get wiped out when the manipulation takes place. But that's the whole point of the manipulation. "Market Adjustment" lol

Knowing this, and keeping it in mind, can help you turn a profit. Think of what the Big Boys are trying to do and follow the trend. Just get out early. Be satisfied with making a little, so you don't lose a lot. IMHO

gary

 

I believe the reason that the G-7 and the financial branches of those countries entered the forex marketplace was to give 1ndebted, and to be more indebted, Japan a chance to financially deal with their disasters and rebuilding. A strong Yen will decrease their export trade and and impede their abilities.

Some may argue that the G-7 ( including the US) should go for the throat, but Japan has long memories, and a little help here from the US could mean much more help such as buying Treasuries in the future.

jim

 

Very well put. I do imagine that the damage caused by the earthquake and Tsunami is considered an Act of God letting most insurers off the hook. This leaves the bulk of rebuilding costs on the governments shoulders. And as we are well aware with the recent advances Japan has made in wave generated electricity and robotics, they are on the verge of having the most automated, lowest cost factories in the world. No labor force can compete with robots powered by ocean waves and currents.

It's far better to help them now not only for future financial gains, but because it is the right thing to do. IMHO Even if the banks are only looking at the money. lol

 

I have no issue with that, and I wish we could/would do more. My only issue was I guess I didn't really realize that "tweaking", or manipulating, is done. That, even though I have heard it so many times. So any kind of predictability (if there is such a thing) is really NOT possible, because there is always a chance of some manipulation going on for some reason or other. That is scary to me. While I understand the need at this time, what happens when the need is maybe not something so pure?

I lose sleep over Japan, so please don't think me harsh on this regarding tweaking. Tweak away!!

Lucy (and yes, it IS the right thing to do)

 

The tweaking is not without forethought by the member countries. When you think that most of the major financial countries, including the US, Japan, China, live or die financially by their import/export ratios, all want a fair ratio, which implies restrictions and a lot of minor tweaking. The major tweaking in this case is unusual, but was needed to maintain longer term stability. No country can be on their own in this modern world, no matter how bad some want to go back to the "good old days". AIMO.

Actually, I think their action thwarts some actions banks and hedge funds might have wanted to do to profit on what would have been deteriorating financial reserves in Japan. Only what I consider fools would get on a trade opposite such resources. Of course there are many fools.

jim

 

The depravity of man.. profit off of trajedy... yikes!

Thanks for your explanation(s)
L