[rplnt]

> Wall Street made a mistake with Google, since now their shares now are worth 5 times as much as they were at the opening.

August 2004:

Gold $405

Google $85/share (thought it was $100/share, huh)

Now:

Gold $1735

Google $576/share

1735/405 ~= 4.27

85*4.27 ~= 364

So no, Google's shares are not worth 5 times more. They value went up some 50% in six years, which is great but nothing scary.

[CyrusL]

It's weird that you critiqued his analysis by using gold, which makes no sense for comparison. You might have strong feelings about unbacked paper money, but that doesn't make comparing with gold a sound financial model.

  August 2004:
  
  Orange Juice Concentrate Futures $61
  Google $85/share
  
  Now:
  Orange Juice Concentrate Futures $211
  Google $576/share
  
  211/61 ~= 3.45
  85*4.27 ~= 293.25

[rplnt]

You just can't compare to one currency and say it costs 5 times more. What I tried to say was that USD's value changed over the years. Apparently no one understood and everyone is trying to be funny. Sad.

[jbooth]

What you were saying was wrong, and more importantly invalid. Gold rising in price does not equate to the USD being less valuable, because there are more than 2 things in the world. Bring the Euro and the Yuan into it if you're going to make currency-valuation based arguments.

But even more than that, compare it to stock market indices. We're talking about how the market valued it, not about currency valuations. The whole argument about currency valuations is a silly sideshow.

In conclusion, if nobody understands the brilliance of your argument, it's probably stupid.

[rplnt]

> if nobody understands the brilliance of your argument

What they didn't understand (what I said they didn't understand) was that I tried to determine value of the USD, not compare price of the gold to price to the shares.

Almost everyone pulled out some stupid comparison, trying to be funny. The Ron Paul, Apple and Juice comments looked like they came here from reddit. Only few comments were actually valuable and tried to correct me in a non-condescending way.

Anyway, after some more reading around I came to conclusion that valuing USD by gold is indeed not the right idea. I was somehow convinced that gold is something stable. From what I found, the difference between 2004 and 2012 dollars is inly something above 25%.

[jbooth]

Upvoted for admitting you were wrong about the gold comparison, it's hard to do that on the internet and we could all do it more often.

[eCa]

What you really said though was that the value of gold has changed compared to the dollar. Gold is a usual "safe haven" in times of economic troubles - and you could say that we have had those in the last few years.

Since 2009 gold has tripled in dollar value [1]. That does not mean that the dollar has lost a third of its value.

What your figures show:

--- August 2004: Gold $405 Google $85/share

Now: Gold $1735 Google $576/share --- Is this: Gold: 1735/405 ~= 4.28 GOOG: 576/85 =~ 6.77

GOOG/Gold: 6.77/4.3 = 1.57

Google have given their shareholders a value worth 57% more than gold.

If you instead had kept your $85 in your pocket since 2004, how many dollars would have today?

[1] http://goldprice.org/NewCharts/gold/images/gold_5_year_o_s_u...

[rottencupcakes]

> Wall Street made a mistake with Google, since now their shares now are worth 5 times as much as they were at the opening.

August 2004:

AAPL $16

Google $85/share (thought it was $100/share, huh)

Now:

AAPL $447

Google $576/share

447/16 ~= 27.94

85*27.94 ~= 2374.90

So no, Google's shares are not worth 5 times more. Their value went down a massive amount in six years.

[rplnt]

Now, this is stupid.

[brown9-2]

The point is that comparing Google's price in 2004 and 2012 to the price of gold is just as arbitrary as comparing it to the price of AAPL.

[r00fus]

Once I can buy food directly with my 1oz of gold, I'll buy your gold-based-valuation argument.

Comparing one asset (share of GOOG) vs. another, namely, gold is silly when you contrast to assigning currency value.

Last I checked, food hasn't become 4x more expensive, so things still revolve around currency (or currencies), not the value of gold.

[sawyer]

Since when can you buy food in exchange for stocks?

[majorlazer]

That's the point. You can't buy food with gold or stocks, but you can with money (currency). So that is what you measure the value with.

[moheeb]

You should check again. While food prices haven't quadrupled they have doubled...

According to the IMF Commodity Price Index, at least. http://www.imf.org/external/np/res/commod/index.aspx

[r00fus]

How much of food commodities prices (and for that matter, gold prices) are the result of pure speculation?

http://triplecrisis.com/food-price-volatility/

[DanBC]

What's the value in Economist Burgernomics?

http://www.economist.com/blogs/dailychart/2011/07/big-mac-in...

[Steko]

He means in real people's dollars not Ron Paul bucks.

[jrockway]

It's also possible that gold is not a good indicator of value. (Go to the store and try buying something with gold.)

[gravitronic]

It may be interesting to compare growth VS gold.. but is it standard to compare against the price of gold?

I know nothing of valuation, but by that logic the price of gold would never be worth more.. than.. the price of gold?

I thought you'd value the gain in the market currency, aka dollars. No?

[wintersFright]

People price things in gold as there is a roughly known and finite quantity either in vaults or in the ground. USD's however have no upper bound and can be conjured into existence as 1's and 0's.

Remember there are three functions of money

1) Unit of account 2) Medium of exchange 3) Store of value

Currency is not a good store of value - it can be printed at will. It does store value over a short time frame but if you were given a box from 1930 that inside held somones life savings from 1930 - would you wish it to be in USDs or gold? Hint: USDs is the wrong answer! Currency is an excellent medium of exchange. You can buy food at the supermarket with it. Just don't save your surplus wealth in it.

Gold is used as a store of value instead of orange juice concentrate since it has historical value, it is fungible, divisible and inert (ie: it won't spoil). Also you are not impinging on the economy by hoarding it as a store of value since it has relatively little utility otherwise.

If you think gold is not valuable because you cannot excahnge it for food, then ask yourself why the US Government banned its ownership in 1933 for citizens and why the Euro has it as its number one asset on its consolidated financial statement - above all currencies - including USD http://www.ecb.int/press/pr/wfs/2011/html/fs110706.en.html