Tuesday, October 25, 2011

Value Questioning

Today, I am pointing you to an article written by the President of Anglo Far-East Company, Philip Judge. In these days of volatile markets, it's good to get some sense of how to measure value. Governments are distorting value with too much interference in markets. There appears to be no way through this debt cycle without a major restructuring of the worldwide monetary system. Europe appears doomed as a single currency and the US needing radical changes to it's fiscal and monetary policy.

Here is the article:

"But what really is true value?" asked my caller.

As a 'tangible asset' company, this is a question that we are used to hearing and being asked.

Questions about 'value' will mean different things to different people at different times.

Just a few short years ago, a big share portfolio of popular dot com companies sitting in a retirement account would have held a high 'value' in many people's minds and given them the expectation of an early, comfortable and long retirement. Today that same portfolio could be lucky to buy that person a modest meal in a nice restaurant.

A high-rise beachfront condo might be valued at some highly treasured amount today, but tomorrow the same owner may question that value as a category 5 hurricane beats ashore, while the electricity and phones are out, and the local petrol stations and the shelves of supermarkets are empty.

Going to the Oxford dictionary doesn't necessarily help those seeking the true meaning of value; "Value / 'valju' : the equivalent of a thing; what represents or is represented by or may be substituted for a thing, or, the utility of a thing".

"We are entering a period of 'value questioning'," writes my friend Franklin Sanders.

It seems that in the past few decades, in the developed western-world at least, few people have had the need to question value. Why would they? They have had their financial 'education' provided free of charge and free of risk. Conventional wisdom dictated they borrow money, buy a house and invest in a highly recommended, 'pre-approved' investment portfolio. Property and share prices have gone up as the cost of borrowed money has come down.

"Life is all about seasons," writes my colleague Simon Heapes, "and the Economic Season is changing."

The Oxford reads on; "Value / 'valju' :, the ability of a thing to serve a purpose or cause an effect." Maybe this description helps more? May be 'true value' can be found in something that "serves a purpose" or "causes and effect"?

"Ultimately value is relative to survival," continues Simon, "the value is not in the land, it's what comes from the land. True 'value' comes from the production of the essential. People can always throw off their wants but they can't get rid of their needs!"

Gold in New Zealand dollars: $2056.27 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $39.31 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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