rkbabang

Of course, but my point was that there is nothing "intrinsic" about the value of oil. It is valuable because we currently have a high demand use for it. When it is no longer as useful it will no longer be as valuable. There is no inherent property in anything that makes it "intrinsically" valuable. The same is for companies. What people call the "intrinsic" value of Nike is really only derived from the market value of its products and assets. If the market value of those things were ever to decline there is nothing intrinsic in the Nike corporation which would maintain its value regardless. Nothing has an intrinsic value. The same with gold. Maybe over the long term algorithm/blockchain backed currencies like bitcoin will reduce the market value of gold permanently.

I would distinguish between oil and gold. Oil is a resource that people need for the functioning of the economy; gold is, based on tradition, generally a currency hedge. Gold does have functional usages for jewelry and such, but it could be replaced by silver in a way that oil, at least as of now, can not. There's various interviews with Buffet where he puts gold on one side and productive assets (farms, exxon mobil) on the other side that I think express this point very nicely http://www.gurufocus.com/news/239678/gold-vs-farmland-vs-exxon-mobil--buffett-makes-ense-of-it-all Sure I'll be happy to trade you an ounce of oil for an ounce of gold, as many times as you wish to. The fact is, oil is in demand now because of its usefulness for energy. If we all had fusion reactors in our basement, oil would be worth much much less. We'd still use it to make plastics and other substances, but after molecular nanotech is perfected we will likely not even need it for that.

I have a different view. There is no such thing as "intrinsic value". It isn't like you can take an object, look at it under a microscope and see the value particles. There is only market value and only one way to determine it: try to sell it. For a unique item, such as a specific piece of real estate, you can try to estimate the value, but you don't really know what the value is until you find a buyer. Maybe the value to you is larger than its value to anyone else and thus it won't sell. For a commodity, such as gold or oil, it is easy to determine a value, because identical items are being traded constantly and you can see what they are trading for. The theory that oil or gold doesn't have any "intrinsic" value is true, because nothing does. They certainly have market value though.

An ereader is probably the best example of such a purchase. I can't think of anything I spent <$250 on in the last year that made an impact on my life worth mentioning,but I bought my ereader in 2013 and I still use it everyday. It is without a doubt the smallest purchase in the last 5 years that has made the largest impact on my life. I have a Kobo Aura HD with a 6.8" screen (256dpi).

I agree with that. If there is a balance between supply and demand and the price is lower it is a good thing (even if some companies/countries/people suffer). The problem with oil is that it isn't a free market. You have an industry where some of the largest players are governments, there is always all kinds of manipulation going on. I'd argue that manipulation can't overcome the market in the long run. Of course not, but in the short term manipulation can cause all kinds of havoc. The best way to think of the market is that it is analogous to a TCP/IP network like the internet and government interference is analogous to damage to the network. It might slow things down a bit, but the network is able to route around the damage.

Yes this is the way to think about it. I would think that with cars being totaled in accidents there would be a skew towards older vehicles (or at least cheaper ones), because newer vehicles (and more expensive vehicles) will tend to have better accident avoidance features. And maybe more important older/cheaper vehicles need considerably less damage to consider them totaled. For instance if a vehicle is only worth $1500 it wouldn't take much of an accident to make it not worth fixing, where if it is worth $35K it would be fixed after all but the worst accidents.

I agree with that. If there is a balance between supply and demand and the price is lower it is a good thing (even if some companies/countries/people suffer). The problem with oil is that it isn't a free market. You have an industry where some of the largest players are governments, there is always all kinds of manipulation going on.

Interesting chart. Average price since 1946 is $41.70, since 1980 is $53.24, and since 2000 is $64.52. If you are expecting reversion to the mean, regardless of when your starting point is the price should go up from here...eventually. If you were waiting for a reversion to the mean in 1986 you would have waited a long time. Seems like a decent margin of safety. @rkbabang did you buy or are you thinking of buying any of those ETFs you pointed me to above? No. I've never invested in oil directly and am afraid it is way out of my circle of competence. Commodity trading in general is something I've never done, but with oil you also have international politics factored in there as well effecting things in ways that are difficult to predict. If it continues to drop I might change my mind though, it does seem like it is getting crazy cheap and the ETF route seems to me the best way to invest.

Interesting chart. Average price since 1946 is $41.70, since 1980 is $53.24, and since 2000 is $64.52. If you are expecting reversion to the mean, regardless of when your starting point is the price should go up from here...eventually. If you were waiting for a reversion to the mean in 1986 you would have waited a long time. http://inflationdata.com/articles/wp-content/uploads/2014/05/Inflation_Adj_Oil_Prices_Chart2.jpg

+1. If you ask most people why deflation is bad they give you the same look as if you asked them why they believe in dinosaurs. I do agree with Cardboard that low oil prices are beginning to be have deeper negative effects. While there's a fair argument that $65 oil is better for the economy than $100 dollar, $33 oil presents a lot of difficulties around the world. At the least, it seems like a good time to cap off the strategic petroleum reserves. I would love to hear the argument that $65 oil is better for the economy than $33 oil. Personally, I would prefer $2 oil and so would every other consumer out there, particularly those in the third world. Would our standard of living increase or decrease with $2 oil? Implementing price controls?.... hmmm beside not having the faintest clue as to how a central bank would do this, I wonder if that would make the problem better or worse. Do we have any other Soviet/Chinese methods to prop up falling oil prices? Humanity would clearly be better off with $2 oil over the long term. Although it would be a huge problem for many existing companies and a few entire countries. It is the same argument that says robots are bad because they cause unemployment. They are bad for you if you are a factory worker who loses his job, but they make everyone richer long term. $2 oil would mean either the abiotic oil theory was true and we found a way to easily tap into almost unlimited renewable oil within the Earth, we found a way to turn something else into oil cheaply, or we've transitioned away to another energy supply which is so cheap that there is no demand for oil costing more than $2/barrel. Deflation of prices = progress. It means a greater number of people can afford a greater number of things with less work. It means human beings accelerate our climb up Maslow's hierarchy of needs en masse. Any other view is the result of short term thinking.

:) True, but it would have to be a damn good book to make it comfortable if I was reading on the hard wood floor.

Just added some more AAPL.

Scott that is a great quote for this topic. I'm sure the number of people in the developed world who would agree with that is quite small. I enjoy owning a couch, a good reading chair, a computer desk&chair, and a bed. I really can't imagine living without any/all of those things.

50 gallon drums and some self storage space? If that proves impractical I found this: http://etfdb.com/type/commodity/energy/crude-oil/

There is nothing wrong with that. I don't think anyone on this thread has said there was. There is nothing wrong with buying a private jet either. The problem is that both of those things are quite expensive. Remember the statement that started this discussion wasn't "college is worthless" it was: I think with the price rising at the rate it has been, the truth of that statement is almost indisputable.

I graduated with almost $60K worth of debt in the mid 90s. It took me 10 years to pay it off, but that of course is during my 20s to early 30s when I was just getting started in my profession, just getting married, buying my first house, having kids, buying a car... that monthly bill takes a toll on you. I didn't even realize how much it bothered me until it was paid off and it felt like there was this huge weight off my shoulders. Now that is with an engineering degree, a good job, with a good salary. If I was going through that for 10 years while working a job I hated, having nothing to do with what I had studied, thinking my degree was useless, I think those payments would have driven me crazy. I probably would have stopped paying them too. Many people find themselves in exactly that situation today. Only it isn't $60K it is $160K+.

I'm not sure if they will, but they should. Government policy allowed banks to lend absurd amounts to anyone, because borrowers can't default on it. So the banks lent. And schools raised their prices in turn. Allowing more of a free market would have created a totally different landscape than what we have now. Everyone wanting to study 19th century poetry could still do it, just without 150K of debt. The government failed. I'm glad someone said it before me. When you subsidize something the demand increases and the costs go up. EDIT: The next step is to fix the cost with price controls, but then the supply shrinks. After that the only way out is to have the government take it over completely. What you then have is the public school system only for higher education and the price really goes through the roof (and the quality through the floor).

That's possibly true. I was not writing about costs. OTOH, IMHO the costs are often unoptimized by kids (and parents) the same way majors are unoptimized. Like you said "don't study art history", I can say "go to instate public school, live with parents, get part time jobs" to optimize the costs. A lot of people don't do that. Edit: clarified sentence above. Ah, that's where the disconnect is. I should have said that cost is the reason that more and more people will look to alternatives and that you will see enrollments drop in the future. Education is always valuable, but there are multiple ways to achieve the same goals. You make some good points about cutting the costs. Certainly the cost/value ratio is better at less expensive schools these days, and living at home would reduce the costs tremendously.

Ha! Like, all of them! ;)

I think the generalized-university-education vs. focused-needed-for-profession-knowledge is neverending discussion. :) There are arguments on both sides (and usually neither side changes their minds). :) Where I have worked ( in CS ), we had zero people who never graduated. IMHO, a lot of self educated CS people have giant holes in their knowledge (e.g. algorithm complexity) that bite them and their projects. Good ones figure out the issues and self educate, bad ones... well. Regarding writing - actually I was going to post that this is something that "worthless" humanities degrees teach, which is actually valuable: reading, analyzing, writing, communicating with others. Even in investing you may get people with humanities degrees that do well because they know how to read, how to analyze, how to write. My advisor has said that writing proficiency may affect your career more than your thesis topic. I don't agree with him totally, but there is some truth in what he said. I'm not saying it has zero value, but I'm not sure the value matches the current tuition costs. If those writing and humanities courses add $50K to your debt load upon graduation, that is a hell of a lot to pay for skills which could have been acquired in other, cheaper, ways.

WEBs opinions about politics are not outside his circle of competence. Considering that he is wrong everytime he opens his mouth to talk about such things I would disagree with you. Oh, yes, I know that you would disagree with me. I did not expect anything less. And actually WEB was not wrong about anything in politics so far. :) Hey Jurgis, you have to admit..., well anyway, I will admit that if the situation was reversed my opinion of his circle of competence on the matter would be reversed. If WEB was an anarchist and always said everything I agree with when speaking of politics, I would be saying that he was some kind of genius and that we should all listen to him. I suspect you would be questioning his competence on the matter and saying that he should just stick to investing.

Even in the STEM fields. I know people personally who work as computer scientists at Adobe and Google who never went to school past high school. In my own field (Electrical Engineering) I know people who have PhDs who make less than I do (I only have a BSEE). You could easily do my job with 2 years of schooling and 3+ years of on the job training. Take some basic electricity, math, and physics courses, maybe a statistics and computer science course or two then jump in and find a good mentor. The college I went to (WPI) required me to do a humanities project, take writing courses, history courses, economics courses, etc, much of which was just a continuation of high school, none of which contributes much to the work I do, and all of which I could easily have learned on my own with a few good books and/or the internet if I had wanted to. You could skip much of the first 2 years of college and be just fine. Even the last 2 years there is a lot of unneeded stuff. Take electrical engineering for example (since I'm familiar with it), I wanted to focus exclusively on digital design and computer engineering, yet I had to take all kinds of analog type courses learning about op amps and the like which had nothing to do with what I wanted to learn (and I don't remember any of what I learned today). I could easily have fit all the relevant math, science, and engineering courses that I wanted to take and are relevant to what I wanted to do in a 2 year program. It wouldn't have made me any less effective at my profession, but you can't do that in a University today, to get X degree you need to take this specific list of courses with an occasional elective that you can choose. There are better ways. And the price you pay in both time and money...there are cheaper ways.

WEBs opinions about politics are not outside his circle of competence. Considering that he is wrong everytime he opens his mouth to talk about such things I would disagree with you. Oh, yes, I know that you would disagree with me. I did not expect anything less. And actually WEB was not wrong about anything in politics so far. :) Good to know that I am living up to your expectations. :)

WEBs opinions about politics are not outside his circle of competence. Considering that he is wrong everytime he opens his mouth to talk about such things I would disagree with you.

Bull...crap. College is still the best salary enhancing option available for majority of people. Of course, a lot of people select crappy majors, but that's not college's fault. And BTW few exceptional cases of people who never finished college does not mean that college is a bad deal for 90%+ others. College is a great deal for Math, Engineering, Medicine, or other Tech majors. It isn't a great deal for almost everyone else. Certainly not for 90% of people who go. To be loaded down with debt and end up doing a job you could have done without college is not a good deal. As more and more realize this, you are going to see a shift away from traditional colleges and more toward on the job training and/or other non-degree training. That is just my opinion. If my kids wanted to go to school for women's studies or art history, etc, I'd tell them that they were nuts.