The Investment U E-Letter: Issue # 362
Tuesday, August 17, 2004

Investing Pop Quiz
By Dr. Steve Sjugerrud, President, Investment U

For most of this year we have seen the markets stay in a boring trading range of about 8%, low to high When that happens, it’s extremely difficult to make money in stocks, as folks who are heavily invested in stocks can tell you.

But one way to keep your competitive edge in such markets is by reading the Investment U E-Letter, including the Archives

To see how much investing knowledge you’ve retained from past e-letters, try taking the pop quiz below. (It’s also a fun way into the Archives.) Good luck, and good trading Dr. Steve Sjuggerud

1. Which of the following is not true of the current timber market?

A. Lumber prices are experiencing a strong uptrend.
B. Pessimism in the industry is high.
C. The timber market is currently stagnant.
D. The annual compound gain over the last few decades in timber has been about 16%.

2. The Big Mac Index serves as a good gauge of:

A. Places worldwide to get fast food
B. Purchasing power parity, or, a way to compare the dollar’s value worldwide
C. Whether or not you should invest in other currencies
D. B and C

3. Scotia-McLeod broker and commodity trader Chris Foster knows the oil market. Which of the following is not a concern of Foster’s, regarding the current market?

A. Demand is outweighing supply.
B. The Saudis are using output-enhancing techniques to increase production.
C. There is not enough oil exploration going on.
D. Oil is so plentiful, there seems to be a glut in the market.

4. What’s the best way to determine the ballpark value of a coin?

A. By checking the price of a similar coin on eBay
B. By asking a teller at the bank
C. By buying a Greysheet
D. By checking retail prices in coin magazines

5. Which is not true of investing in gold?

A. Buying a rare coin or an “investment grade” coin is not like buying stock.
B. The transaction process may take weeks.
C. There is no easy price quote.
D. Common coins are generally more profitable than rare ones.

Answers:

Okay, then Let’s see how you did. On to the answers!

Answer #1: C - The timber market is NOT stagnant. But while timberland values fell in 2002, 2001 and 2002, history shows that timber investors have never had a losing year, and have in fact often had double-digit returns. Check out IU E-Letter #316 – Money That Grows on Trees for more information.

Answer #2: D (B and C) - The Big Mac Index is a great way to gauge the value of the dollar worldwide. By comparing prices of Big Macs in every country, and converting those prices to U.S. funds, we’re able to tell how our currency stacks up, thanks to the famous burger (and The Economist). As a U.S. investor, it’ll also gives you an idea of which foreign currencies are currently strong against the dollar. For more information, check out IU E-Letter #344 – What a Famous Hamburger’s Now Saying About the Dollar.

Answer #3: D - Oil isn’t exactly growing on trees. Between prices at the gas pump, and prices for oil heat, consumers have felt the crunch, and that’s a direct result of more demand than supply. For more information, read IU E-Letter #325 – Are We Headed Toward a Commodity Bubble, Too?

Answer #4: C - Buy a Greysheet. It’s often difficult to gauge the wholesale price of gold coins, but the Greysheet gives a more accurate view than collectors and investors might get from magazines. A Greysheet will set you back about $4, but it’ll give you a ballpark price so you can better gauge your dealer’s markup, and have a leg up when you buy. Change is good. For more information, check out IU E-Letter #285 – How to Turn a $4 Investment Into Serious Coin.

Answer #5: D - Common coins are not more profitable than rare ones. This one’s a gimme it stands to reason that the rarer the coin, the more prized it will be. For more on making money in coins, visit IU E-Letter #308 – How Stocks Could Double – Without a Move in Gold.

Scoring, number of answers correct:

5: Investment Senior – You’re the big man (or woman) on campus
4: Investment Junior – You’re nearly ready for the real world
3: Investment Sophomore – You’re a lot of fun to talk to at parties
2: Investment Freshman – Let the hazing begin!
0-1: Dear Applicant: We thank you for your interest, but we regret to inform you

This was meant to challenge you, and to send you through our back issues. We hope you enjoyed it. We’ll be back with a regular letter on Thursday! Until then

Today’s IU Cribsheet

• I always encourage you to poke around through our Investment U Archives… It’s a good way to see how trends have progressed through the months, and to give yourself some background for understanding where we are now To jump to the archives, visit http://www.investmentu.com/IUEL/2004/2004Archives.html

Good investing,

Steve

Investment U Archives