Okay, I've been reading this book entitled "Investments" by Sharpe, Alexander, and Bailey. I'm also starting to read on "Derivative Securities" by Jarrow and Turnbull. Really, mind boggling...I thought I am quite savvy about investments, but little did I know.
Anyway, read about all types of instruments used for investments like call/put options, short selling, etc. So buy = long and sell = short. While I understand the dynamics of short selling, it doesn't make much sense to me. How is it possible to sell something that you don't own?
Another concept is the interest rates and present values. Seems like today's money is worth more than tomorrow's money. That means that not only does our wealth decreases with time, but to make up for it, we would need to use more and more resources to maintain the same level of wealth...hmm, given we have finite resources, is that why we're having all these crisis of food shortage, poverty, and so on? No wonder, we are called the consumer society.
I do understand that the argument that if you invest now, your money will grow...but that is not the same as "today's money is worth more than tomorrow's." Because of inflation and other factors, our purchasing power decreases even as we invest the money. A return of $100 in 5 years for every $100 we invest now (nominal return) may not have the same purchasing power if we had obtained that return today.
So, something is seriously wrong with our economy if my intepretations of what I'm reading are correct.
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