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Posted By: warshawlaw

Except in the wilderness, things have value only relative to other things that may be acquired for them. These relative values shift over time and with perceptions. Over the last 30 years baseball cards have appreciated more than nearly any other category of tradeable thing, hence their relative value has increased proportional to other valued classifications of items, or as we commonly term them, "investments". If you want to argue intrinsic values, the only "intrinsically valuable" things are food, shelter, fuel and a loaded weapon, and one can argue that the latter is the most intrinsically valuable thing of all because properly employed, a loaded weapon enables me to acquire virtually anything else I want (food, shelter, fuel, money, goods) at little or no cost. For that reason analyzing the merits of an investment by reliance on a concept of intrinsic value is facile and fruitless as it will inevitably boil down to elevating consumables and weapons above all other things on the value scale.

As far as streams of income go, obviously, you've been reading some of the best selling investment books. Limiting "investment" to include only income-producing assets similarly is both simplistic and inaccurate. It works great for real estate (which values property solely as a function of capitalization rates), not so well for most intangible investments, and not at all for any other hard asset investment. The ultimate proof of this is the fluctuating value of pure income producing assets like T Bills. If it was income production uber alles, there would be no revaluations of guaranteed income producing assets. The fact is that trade exists in these securities because of relative value analysis.

It also bears noting that for the vast majority of human history there was no such thing as an income producing asset. Things were invested in by being stockpiled for their usefulness in daily life (food, weapons, etc.) and bartered as need be. On occasion, a centralized government obtained sufficient power to designate an instrument of some sort as legal tender, usually a precious metal, although seashells and beads were used at times. The same governments granted certain citizens (lords, boyars, cossacks, etc.) the right to extract income from the land and other people in return for allegiance and delivery of instruments of force (knights). The only pure income producing investments of the time were the loans made by outsiders (mostly Jews in Europe owing to the Church's outlawing of interest income), but these investments were extremely risky in that the borrowers often defaulted or compelled loan forgiveness. The concept of income-production as an investment arose only with the creation of legal tender as a medium of exchange and the creation of an enforceable legal structure that could enable ordinary people, commoners, to commit money to endeavors with the reasonable hope that they would receive something back when the time came to collect. The income production you tout as the only true form of investment was virtually unavailable until a very short time ago in human history.

Even today, the concept of income streams is not an accurate means of analyzing an investment. The myth that a share of stock entitles one to share in the company's income stream is just that; a myth. Stock ownership does not entitle one to share in the income absent a dividend, which can be taken away at the whim of management. Many companies do not even have streams of income. The basis for valuing stocks is a set of assumptions as to what the market of buyers for a stock will do to it in the future, not a logical connection to income streams. You need look no further than the daily news for proof. A whole host of stories come out every day that have zero effect on the actual incomes of companies but which nevertheless lead investors to downgrade their views of the companies and reduce the values of their stocks. 9/11 was a great example; the stock market dropped precipitously the day after the markets reopened. Those of us who went in and bought blue chips on the dip made 20-40% in a few months on the rebound, even in what was an overall downward trending market.

I'd suggest you take your reading a bit further...