[meteorite-list] Effect of fall of dollar against Euro/ dirham's

From: Sterling K. Webb <sterling_k_webb_at_meteoritecentral.com>
Date: Wed, 9 Apr 2008 03:09:40 -0500
Message-ID: <0ea601c89a19$10139d80$8250e146_at_ATARIENGINE>

Hi, Marketeers!


Rob wrote:
> Wouldn't it be interesting if there was a futures market
> for meteorites? That would add some price stability...

    Like the futures market equivalents for bundled subprime
loans, the credit insurers and their "credit default slops"?
Buy them for pennies on the dollar. They helped a lot (not).


Dave wrote:
> big oil is probably a good business to invest in at the
> moment..."

    When everybody thinks a certain business is a good
business to be in, the stock price is at a recent peak. You
never buy a stock at its peak. Stocks never stay at their peaks;
they fall off. If you wait and wait, maybe you can sell it
again at the price you paid for it... someday. How can
you make money that way?

    What you want to do is look around for a perfectly good
business that is, however, NOT a good business to be in
right this moment. [This is an example, not a recommendation.]
Most of you know what flash memory is. That's the little card
that goes in your camera to record the pictures on. It's the
memory in Mp3 players and iPod Nano's and dozens of other
devices.

    But these items are all consumer goods and folks are not
buying consumer goods as fast as they used to, so the predictions
for the growth of flash memory sales for the next year has fallen
from a nearly 30% increase in sales to only a 7% increase. The
herds of "stock sheep" have all run away from companies that
make flash memory chips because they will probably have a
low-growth year. Not a loss, just less growth.

    The largest maker of NAND flash chips in the US, SanDisk,
had a stock price of nearly $60 last April. This April, a few days
ago, it slipped down to $19.54 A smart buyer would know that
after this current upset is over, consumer sales will rebound with
pent up demand ("I can finally that new Mp3 player!") and SanDisk
will be selling flash memory as fast as they can make it. I know
this about smart buyers because, sure enough, SanDisk popped
back up to nearly $30 in just one day as the smart ones swooped
in and snapped it up at $20 (and dumped it again at $30). The really
smart ones will hold it back to $60.

    I use this example because I missed it. Drat!


Michael wrote:
> I don't think anything will be available "cheaper" than it was
> at the height of the market 7 or 8 years ago...

    Markets are just accumulated psychology. Things will get
"worse" through this year. In January 2009, we will have a major
change in government that will propose a lot of changes they say
will make things "better." By spring 2009, many of them will
become law. People will feel hopeful instead discouraged. They
will feel "better," and guess what? Things will get "better."
Accumulated psychology. Sympathetic magic.

    Everything will be "worth" more, says the science of economics,
because they cost more. How do we know things will cost more?
Things always cost more, as a function of time. Just dig up anybody
over the age of 70 (with a working brain) and ask them what they
once paid for a loaf of bread? A gallon of milk? Gasoline? A new car?
(Answers to quiz: 11 cents, 50 cents, 19.9 cents, $1700.)

    The milk costs more because the cow costs more, the corn costs
more, the gasoline to haul it costs more, and so forth. That, say the
economists, is because they're "worth" more, whatever that means.
Have you noticed any major improvements in cows? Corn? Gasoline?
Me neither, but they're "worth" more now than they used to be. I'll
bet those cows feel proud...

    As Rob pointed out, gasoline is "worth" just what it was in the
1970's. It only costs more because the dollar is worth less.

    As for what the dollar is "worth," Americans love to blame the
behavior of their government's debt policy. Government debt is just
an investment: bonds are sold, interest is paid on them. Buyers of
debt do not think the dollar is worthless; afterall, they are going to
be paid that interest in the debtor nation's currency, and be repaid in
them too. The US government is just doing what its citizens are doing:
spending more money than we have. We have been spending more
than our earnings for many decades, going increasingly into personal,
not national debt.


Michael wrote:
> You can't have it both ways - they [the US government]
> have been acting like a 15 year old with a credit card...

    No, it's the 15-year-olds with credit cards (and the 20-year-olds,
and the 30-year-olds, and the 40-year-olds...) that have been
acting like 15-year-olds with credit cards!

    If we just behaved this way with each other, it wouldn't matter.
But we buy so much from overseas that trade deficits are working
their way up to a trillion dollars a year. That, not government debt,
devalues the dollar. Nations with positive savings rates (spend less
than they earn) always have trade surpluses and strong currencies.
Nations with negative savings rates (spend more than they earn)
always have trade deficits and weak currencies. And the nations
with positive savings rates, trade surpluses, and strong currencies?
They have national debts, too. Every nation does.

    You want a strong dollar and a stable economy? Stop spending
so much money! Cut your spending until you have money left
over. Put it in the bank. Pay down your credit card. Don't take
out loans. You want to buy something special? Save up the money
until you can buy it outright. (If you can't do that, did you really
want it?)

    Dead silence.

    See, NOBODY wanted to hear that! It MUST be the fault of
high-priced gasoline, government debt, worthless politicians --
not me!


Sterling K. Webb
----------------------------------------------------------------------------
----- Original Message -----
From: "Rob Matson" <mojave_meteorites at cox.net>
To: "Meteorite List" <meteorite-list at meteoritecentral.com>
Sent: Tuesday, April 08, 2008 12:16 PM
Subject: Re: [meteorite-list] Effect of fall of dollar against Euro/
dirham's


At least at the present time, the U.S. drives the meteorite
market, which is why sales are slow. From a collecting
standpoint, meteorites are and have always been a luxury
item. Despite their rarity and scientific value, they do
not have the liquidity of other commodities, so they cannot
be used as a reliable hedge against inflation. (Wouldn't
it be interesting if there was a futures market for
meteorites? That would add some price stability.)

If I was a dealer that depended on sales for my livelihood,
I might consider making advertising inroads into emerging
markets -- specifically China. Effective marketing there
is likely to be quite different from that which works for
Western consumers.

Dave and Michael both mentioned the rise in the U.S. national
debt which certainly has a negative effect on the purchasing
power of the dollar. (As a humorous aside, I'm reminded of
Saturday Night Live's Dennis Miller once asking, "Who do we
owe this debt to? I say, 'let's just not pay it.' What are
they going to do?" As for oil/gasoline, the real price is
no higher than it was in the 1970s. Frankly, I don't quite
understand how gasoline isn't over $6/gallon when you consider
the comparative cost of a barrel of oil today (over $100) vs.
say five years ago (less than $30).

Dave wrote: "I think big oil is probably a good business to
invest in at the moment...", to which I would say it's probably
better than meteorites! But the truth is, anyone who owns
mutual funds is already invested in oil. That's not to say you
wouldn't want to press your position (I have been). As for the
outcome of the fall elections having an impact on oil prices,
I'd say it will be minimal. Oil is a global commodity whose
price is fixed largely by demand, not U.S. politics.

Cheers,
Rob
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Received on Wed 09 Apr 2008 04:09:40 AM PDT