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Asset value comparisons VS Perceived values

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October 25, 2012 in Business


Asset value comparisons VS Perceived values

This morning  Tuesday 10/16/2012 ” Breaking news: Vikram Pandit CEO of CitiGroup suddenly resigns”.

Most everyone  yawned, asked who? or more probable  “who cares”.  Well in the grand scheme of things you are probably right, but things financial do affect everything about your life. I wanted to illustrate some views and comparisons to hopefully motivate you to become for knowledgeable so you are aware of how these types of stories and events can effect you.

On March 21,2011 Citi Group announced it was doing a 1-10 reverse stock split. On the close it was trading at $4.50/ share. Which turns every 10 shares at $4.50 into 1 share at$45.00 . By definition Investopedia states:

Definition of ‘Reverse Stock Split’

A reduction in the number of a corporation’s shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same.

Investopedia Says

Investopedia explains ‘Reverse Stock Split’

For example, a 1-for-2 reverse split means you get half as many shares, but at twice the price. It’s usually a bad sign if a company is forced to reverse split – firms do it to make their stock look more valuable when, in fact, nothing has changed. A company may also do a reverse split to avoid being delisted.

Read more: http://www.investopedia.com/terms/r/reversesplit.asp#ixzz29TD6fa00

Sounds like a magic trick! This is the perceived value game being played here, and it affects the stock market,and  the other financials in the market. Another perceived value game  is occurring in the Dow Jones Industrial average. The TV reporters are chirping “the Dow is at an all time high” ,  Sounds prosperous doesn’t it. Until you realize its in devalued currency ( US Dollars), “But how does it affect me?” If you have a 401k or an IRA, ANY negative vibrations in the “paper” markets will affect your investments.
In my previous and archived blogs we have discussed value of money and currencies, and this is another example, But I also want to share some “Value” comparisons in” tangible” assets versus “paper” assets.

Let’s start with Constitutional money. A “Dollar” is 371.25 grains of Silver , and 1/15th of Gold
480 grains = 1 troy oz
371.25/480 = 0.7734 troy oz ( which is the EXACT amount of silver in a silver dollar )

If you hold $100.00 paper dollars, by constitution it should be equal(in value) to 77.34 troy oz of Silver.
The current spot price of Silver is 33.02/ ozt,
33.02 x 77.34 ozt = $2,553.76 US dollars???? WOW

If you hold $100.00 paper dollars , by constitution it should be equal (in value) to 5.15 troy oz of Gold
The current spot price of Gold is $1746.00/ozt
1746.00 x 5.15ozt = $8,991.9 US dollars????   WOW

Has your salary or wages increased that much to keep up with this disconnect? I doubt it. This is why citizens can’t get ahead.

This is a small but powerful example of how your money/currency can and IS being devalued. And in real terms decreases your purchasing power because it takes more paper dollars to buy things.With tangible assets the supply demand curve dynamics  are obvious, But with non collateralized “fiat “or paper money the money supply can be created indefinitely therefore creating a puzzling effect on you and your wealth.  In my next blog I will give you several more comparisons , $/vs S&P, vs Nat gas,vs Oil, vs Refined gasoline, vs Agricultural commodities etc.

So I am hoping you will continue read and share these articles with others, and that it will prompt you to do your own research. An remember all this stuff that you hear DOES affect you!!!

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