Chris Laird public article

If you recall, earlier this week, I posted the first part of one of his newsletters.  He does write some public articles, and he has one here.  This is pretty representative of what he writes.  As you may observe, his opinions diverge somewhat from mine.  I would say his opinions tend to be much more pessimistic than mine.  Not that my opinions have been wildly optimistic.  Generally, he is of the apocalyptic genre of writers, in my estimation.

This allows me to segue into an observation about how people determine value.  There is a difference between price and value.  For example, the price of gold is 1380 dollars an ounce, roughly.  But depending upon the situation, gold could be worthless.  If you are desperately hungry, can you eat a gold piece?  The only thing you can do in that case is to trade gold for food.  If food is scarce, your gold may not buy much food.  Yet food is relatively cheap in comparison to gold.  My point is that food is more valuable than gold.  You can't live without food, but you can live without gold.  How can you value gold more than food?  The answer is that you can't.  All the price of a thing says about that thing is a statement about its relative scarcity.  These days, gold is relatively scarce and food is relatively abundant.  Yet food is always necessary.  If you value gold more than food, you may be making a fatal mistake.

I think there's a lot of confusion about price and value.  Many people think a thing is worth its price.  But that is not necessarily so.  As a matter of fact, that confusion is how Warren Buffet got so rich.  People will undervalue a property for irrational reasons.  A rational man like Buffet can recognize the true value of a thing even though the crowd cannot.  He will buy when everybody is selling and will sell when everybody is buying.  He will do this on the correct determination of value.

Sometimes when I read something I get the impression that the writer is not making this distinction.  That's two posts today where I got this impression.  Yet these writers are intelligent, no doubt.  But I am not taking their words as gospel.