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True value

  • 05-02-2010 7:40pm
    #1
    digme
    Closed Accounts Posts: 4,584 ✭✭✭


    Hi I'm reading a book by an American author and in it he explains how to find the true value of something,finding the value for example of your house,not the price.

    Find the price of your house,then divide the price of the house by the current points of the DOW and you'll know how many shares of the DOW your house is worth.Now take the price of the house and divide it by the price of gold and you'll know how many ounces of gold your house is woth.Then take the price of your house and divide it by the price of a barbell of crude oil and you'll know many barrels of oil your house is worth.
    He explains that the true value of things over time doesn't really go up

    My question is,if I'm to apply this to Ireland, what is our equivalent to the DOW?


Comments

  • #2
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    ISEQ or one of the sub-indices. I'm not sure how why indexing the market price of your home to another index of stock prices is a measure of "true value."


  • #3
    silverharp
    Registered Users, Registered Users 2 Posts: 18,854 ✭✭✭✭silverharp


    http://www.sharelynx.com/chartsfixed/115yeardowgoldratio.gif

    there is an example of what you mentioned. It really depends on what your objective is. All asset classes have a ratio against other asset classes so there is no one answer to what the "true" value is. For instance if the Dow is going up and the $ is going down you'd want to point out that its not going up as much in real purchasing power terms. Or as in the chart above in 1980 you'd hopefully come to the conclusion that gold v Dow is at extreme levels and a switch is due. In 2000 it went to 46ish so possibly a change in trend was due. It's around 8 or 9 at the moment and could speculate that if the ratio goes below 5 it might be time to go from hard assets to "paper" assets

    In Irish terms any Irish stock index would be so small that it wouldnt tell you much. Maybe house prices to a commodity index or Irish house prices versus average UK prices might give alternative ways at looking at the value of an Irish house. I'm guessing they would tell a similar story.

    A belief in gender identity involves a level of faith as there is nothing tangible to prove its existence which, as something divorced from the physical body, is similar to the idea of a soul. - Colette Colfer



  • #4
    digme
    Closed Accounts Posts: 4,584 ✭✭✭digme


    Thanks for that.How many ounces of gold did it take to buy 1 share in the ISEQ in say 1990?And how many does it take today?


  • #5
    silverharp
    Registered Users, Registered Users 2 Posts: 18,854 ✭✭✭✭silverharp


    digme wrote: »
    Thanks for that.How many ounces of gold did it take to buy 1 share in the ISEQ in say 1990?And how many does it take today?

    you can do searches of Irish stock prices here and its easy enough to find gold charts on the net

    http://www.finfacts.com/Private/curency/iseqirishindexhistory.htm

    A belief in gender identity involves a level of faith as there is nothing tangible to prove its existence which, as something divorced from the physical body, is similar to the idea of a soul. - Colette Colfer



  • #6
    digme
    Closed Accounts Posts: 4,584 ✭✭✭digme


    That's brilliant and exactly what I was looking for.


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