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Re: Meteorite "worth" (warning: long and opinionated!)



BE AWARE THAT THIS IS LONG... But I think that the issue must be
discussed in depth as it touches upon some very important questions
dealing on how meteorites, and other things, are valued.

Steve Schoner



>Gregory:
><< Everything's worth is determined by supply and demand.  

>Wrong-- the worth of gold, and many other things, is also determined
>by *cost of production*.  For gold that is what establishes it's 
>base value (intrinsic value).


>>The cost of
> >production/extraction is simply a key component of "supply". >>
 
It is not *simply* a key componet of "supply", Gregory,  It is the 
production/ extraction that limits the *supply*.

> Steve:
><<WRONG !  With gold, platinum, or  silver, the cost of production is
> what the intrinsic value of that commodity is.  >>

>>So assuming exactly the same production cost, the price of gold during
>>HIGH demand will be EXACTLY the same as when demand is low?
>>Don't think so.  Take a look at the price of gold over the last twenty years. 
 
>>Prices fluctuated wildly while extraction costs remained virtually 
>>unchanged.  The price of gold skyrocketed, and then came back to Earth.  
>>Are you telling me that, first, production was cheap-and-easy, then it 
>>was unbelievably difficult-and-expensive, and then it was cheap-and-easy 
>>again, and THAT'S why the price of gold was low, then soared, and then 
>>fell?     C'mon. It was changes in demand that sent the prices up, then 
>>stabilized them. Production-cost is a sometimes-important factor of 
>>supply, 

With gold the *production cost* is ALWAYS the important factor, Gregory.
History has demonstrated this time and time again.

Gold has never been *easy* to produce, or even find.  But in some
places it has, relative to other places, and mining claims filed.  But 
the fluctuations in the price have had virtually nothing to do with the
*intrinsic* value of gold (tied directly to the production cost), but
to the faith, or lack thereof, in the monitary standard of the 
government(s)that issue what is considered *legal tender*.

When that faith is down, then gold goes up.  Sometimes because of 
*simple* demand, but more often because the *legal tender* has been 
devalued relative to gold, and not because gold has suddenly become more
valuable.   

Internationally, and across all racial barriers, gold had been equated 
with money so much so that some governments, in order to bolster their
own legal tender, (dross coins, or paper notes) banned private possession
of gold even under the threat of death.

(incedentally, the US government banned private ownership of gold bullion
from 1934 to 1975 and attempted to keep the price down artificially to
$35 per/ounce.  During that time the rest of the world was moving toward 
a free floating standard, where the price was keyed to its actual 
intrinsic value based on production costs and demand.  No sooner had the 
US gov. seen the light and lifted the ban in 1975 when the price of gold 
*skyrockedt*.  Why? 

Not because it was *actually* worth *only* $35 per/ounce, but because
it was *actually* worth much, much more than that simply because of its
production costs.

The governments can theoretically kill the price of gold by dumping all
of their reserves on the market.  This could *theoretically* drive the
price way down below the production costs, maybe even at $35 per/ounce,
or less.

But if everyone bought (exchanged their government paper) an equal share 
of all the gold that the governments of the world and banks have in their 
reserves, about 35,000 metric tons, then everyone on this planet would 
be the proud owner of about 1/8th of an ounce of gold-- not even enough 
for a wedding band, let alone the gold that might be needed for dental 
work.)


>>but you don't have the complete economic waltz without the 
>>demand variable.


Right, that is the whim of the people.  But with people money is money.
And over the last 6,000 years gold, has in the subjective psyche of man
been equated with money.  Yes, supply and demand can play a part, but
with *money* much less so than a simple *commodity*  subject more to 
the demand factor than *money*, an instrument by which commodities are
paid for.


>Steve:
><<You just proved my point by using "beanie baby".  They are not worth more
>than the cloth they are made of,  you say.  >>

>No, I said precisely the opposite.  I said that they are not worth more than 
>the cloth TO ME, but that MY opinion, as a non-participant, doesn't count.
>Beanie babies ARE worth more than the cloth to the only people who matter,
>the people who BUY them.  THEY determine the price/worth. 

BUT-- the *intrinsic* value of beanie babies INCLUDING the costs of their
production is almost zero compared to what they are commanding on the 
collector market.  And when the fad fades, such as was the case with the
cabbage patch dolls, then they will return to their *intrinsic* value and
you will see them in garage sales for twenty-five cents.

>>How could I have proved your point with beanie babies?  Your point was:
>><<the cost of production is what the intrinsic value of that commodity is>>
>>There is the tiniest of production-cost for a beanie baby, certainly nothing 
>to justify a $500 price tag.  It is the demand that forces the prices where they 
>>are.

Absolutely right. 

>Now, those of us outside of the beanie-baby-world may think that the demand 
>is foolish, that the prices are foolish, but the fact remains, the demand 
>EXISTS
>among enough people, and the prices reflect it.  The price of anything is 
>determined by what
>people actually buy and sell it for, not by what a non-buyer
>thinks the prices OUGHT to be.

Right, and you won't see me *investing* in beanie babies, or even
*over-priced* meteorites.  These things are not investments.  And 
the are not *money*.


><<Gold has intrinsic value....meteorites do not.
>>Put a piece of gold next to a piece of Zagami and leave them on a sidewalk.
>>Which one do you think will stay there untouched>>

>The Zagami will stay there untouched, until a meteorite collector/dealer 
>walks by.
>And THEY are the ones who determine the Zagami's worth, not the 1,000 people
>who pick up the gold and keep walking.   

And put a beanie baby next to all three and see which one is left.  The
Zagami may not even get the chance to be found by that meteorite collector
who knows its value simply because one of the persons who passed it by 
might have kicked it aside, into the gutter, and down the drain.


>Gold has value because people demand it.  

Not exactly true.  Gold has value because most people view it as *money*.
It also has *value* because it is useful.  Gold in dentistry has saved
quite a number of teeth. (Hipocrates said, "a tooth is worth a diamond",
I for one can say that for that reason many of my teeth are worth as 
least their weight in gold. :-> )

>Another metal with PRECISELY the 
>same production cost that gold has, could very well be 1/100th the price, 
>because
>there is not the same demand.

Gregory, show me such a metal that is being sold for 1/100th of its
production price and I would be glad to buy it.  In fact I would trade 
meteorites for it!  If such a metal exists it might be produced only
as a byproduct of some other extraction where the cost of its production 
is made up by the that other metal, and therefore it is devalued.

But as of today, I know of no metal that is being sold for 1/100th of its
production, (intrinsic value) costs.

But I can tell you this, Mr. Soros, considered to be one of if not the
weathist men in the world *invests* heavily in gold, especially now when
the spot price is at its base *intrinsic* value.  When the paper currencies
of the world collapse, such men will stand high above the deep financial
waters that will swamp us all.


>I think part of the reason we differ is rooted in semantics.  
>To me, "worth" or "price" are objective
>market terms.  The "worth" of a share of General Motors is a definite price 
>at any
>given moment.  Some people think it's too high, some think it's too low, 
>that's why 
>people constantly buy/sell, and that defines a "market".    You keep 
>referring to
>"intrinsic" value  -  less objective, and intrinsic value rarely parallels 
>market value.  

George, you fail to understand what *intrinsic value* means.  That is 
the base value, as far down as it can go.  And yes there is some 
relativity in it.  The *intrinsic value* of some things depends on first 
how much it costs to get it, and then how much it is in demand after it 
is gotten.  Gold, I think will always be in demand, and at times very 
strongly in demand.  And that demand may be for a myriad of reasons.  
Jewelry, dental, computers (ever feel how heavy an early Pentium 90
computer chip feels?  they cost over $1,000 new, but I'll bet there is
a quarter ounce of gold in those things), and many, many other uses.  
But the primary use for gold is money and jewelry.  Even though the 
governments of the world have tried through G-7 and beyond to de-monitize 
gold, and make it a commodity just like pork bellies, they have failed.

Gold is not a "commodity" in the strict sense, the value of which is
solely dependent on the dynamics of "supply and demand", there are
other more involved factors in determinging its value.


>Antiques are *worth* more than old wood.  Theater tickets are *worth* more 
>than
>cardboard.  

Subjectively yes.  Intrinsically-- no.

>Autographed baseballs are *worth* more than a baseball and a 
>little
>ink.  

Subjectively yes.  Intrinsically-- no.

>And meteorites are *worth* more than stone/scrap iron.   

Subjectively yes.  Intrinsically-- no.  Intrinsically, meteorites are 
no more valuable than the rocks and dirt that they fall on.


>Intrinsic
>value and market value usually don't have much to do with each other

Right, and that is why money is money, and commodities are payed for by
money.

, or all
>beanie babies and meteorites would cost 50 cents.  Which they don't.    

When, governments fall, and their currency issues fail, then what will
beanie babies and our meteorites be worth-- intrinsically? 

You won't be able to give away a basket of either for a single loaf of 
bread.

But if history is any lesson to us, a pot of gold will buy you quite
a few meals.


><< I do determine the price of meteorites-- That is I decide what I will or 
>will
>not buy>>

>Well, fine, more power TO you.  I make the same decisions.  Everybody does. 
>But where we all choose to set our own individual buying limits is hardly the 
>same thing as the overall, prevailing rate for meteorites, the "big picture". 
>  I might decide that, FOR ME, $35-a-share is too much to pay for Disney 
>stock, but that doesn't make it true for the every stock market investor.     
> You can determine YOUR price, but you can't determine THE price.   Only the 
>broad, overall market can do that. 

Right, that is the "heard" menatality.  But the smart person is one who 
knows when to leave the heard and put his *money* in a safe place.

I don't see, (contrary to some in the heard) meteorites as an investment.  
Accordingly, I look upon them as a collectable. And as I stated before, 
my reasons for collecting them over the last 35 years has been spiritual, 
philosopical, scientific and asthetic.

And, might I add, very nominally monetary, as I must confess have over the 
last 20 years sold some to maintain my hobby.

For me-- meteorites are NOT AN INVESTMENT.


>><<Meteorites ....will then be a rich man's hobby-->>

>You say you've been collecting/dealing for 20 years.  

Selling for 20 years, collecting and trading for over 35 (most of that
time they were not *worth* much)


>(I confess, I'm only at about 15)

>So at the beginning of your involvement, you could no doubt buy lots of 
stuff for way- less-than-a-dollar-a-gram, right?   

Sometimes less, sometimes more, Gregory,-- 
All depending on my finances at the time.


>How about the guy who was around 30 years 
>before YOU?  HE'S thinking, "Man, this stuff's only worth a dollar-a-POUND, 
>and here comes this guy Steve who's paying way more than I EVER did".   
>Should he have looked at you and said, "YOU are turning this into a rich 
>man's hobby"?
>After all, YOU paid waaaaaay more than HE thought meteorites were "worth".
>Interested in your response.
Gregory
 
Well, Gregory, lets look at this last part of your statement.  There was 
a time in Europe in the 1880's when meteorite prices skyrocketed.  In
fact comparitively, the prices the meteorite dealers were asking then 
would put to shame most of the prices that we being asked to pay now.  
I read an account in one publication where a eucrite was going for the 
equivalent of $50 US dollars per/gram in 1880.  That was an astronomical 
price amount of money per/gram when most people in Europe, and America 
were making an average wage of something like $1 per/day!

And why were meteorite prices in Europe during the 1880's so high? 

Because meteorite collecting was for a short time in the vogue in
Victorian society.  

It was a "rich man's hobby" and when the rich lost interest, the prices
fell.  And they remained low until this current wave of interest.  

But the *intrinsic* value, the real value of meteorites is the same--

virtually zero.  

The only thing that determines what they command on the open market is 
as you say-- 

what people pay.

Pay what you like.  

Pay a $2 per/gram.  

Pay $10 per/gram.  

Pay $10,000 per/gram, or whatever your pocketbook allows.

But to believe that meteorites are as intrinsically valuabe in the same 
way as as gold is is fooling yourself, and maybe others.  In the Feb. 2nd 
issue of US News and World Report that seems to be the impression that is 
coming across from us as collectors.

To make such an assertion is just as absurd as saying that beanie
babies are a "commodity" to be traded and sold just as gold is.

Such notions will be to our discredit. 

As for the investment of my money into meteorites-- I think I would
be better inclined to leave a more philosophical legacy to my descendants. 

And for this reason, after 20 years of doing it, I am entertaining the 
thought of chucking the "dealer" aspect of my interest altogether.

Our descendants will someday mine asteroids for their "intrinsic" value, 
that I might just add will be considerably less than what we are paying 
for these virtually worthless pieces of rock that we have sitting on our
collection shelves now.  And their vision of the universe will be much
broader than ours for sure.

I obtained a beautiful piece of Abee, 111 grams in weight, in a trade the
other day.

What's it worth?  

Some have said, many, many times its weight in gold--

But I don't see it that way.  I see a petrologic enigma, wraped in an
enigma.  A piece of the early planet Mercury they say?  A combination
of minerals such as is unknown in any other meteorite or rock found on
earth?  An eons old relic from an environment so alien that it boggles
the mind to even imagine it.

Ten times its weight in gold in my hand would not come even close to
inspiring even one degree of inspiriation or awe that this one meteorite
brings to my mind.

In this instant, time, and space contract.  I see in my mind visions that
words fall far short of...

In the here and now, the true *worth* of this meteorite is what 
it inspires, not the hole that it may or may not put in my pocketbook,
or anyone else's for that matter.

Steve Schoner
American Meteorite Survey.

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