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Jeffrey Dow Jones

 
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  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    "Jeffrey, why don't you ask Janet Yellen why the Fed holds Gold Stock"

    The Fed doesn't hold gold: http://1.usa.gov/1fL0McF

    "It really doesn't matter what your opinion of gold is."

    Most certainly not!

    "It is an official store of value in every country in the world"

    Totally agree.

    "You obviously think everybody else on this message board is an idiot."

    One of the most dangerous and destructive things we do on the internet is mistakenly assume that criticism of ideas equates to criticism of who we are as individuals. Just because I disagree with some of the theses that others propose and am comfortable with or successful at pushing back against them doesn't mean I think the people behind the theses are idiots. I haven't a clue what sort of value judgments are appropriate to make about the real people behind the faceless comments in places like this.
    Jun 6 01:41 PM | 1 Like Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Doug -- all those events occurred during some form of a gold standard where the public couldn't really hold gold to hedge against it in the first place. I also don't understand how gold was uniquely beneficial in those scenarios or why people even needed a hedge for those in the first place.

    I totally don't dispute the notion that gold will preserve its purchasing power. In fact, to the contrary, all the charts and data suggest it's really good at doing this over super long windows of time. The problem -- and you'd certainly agree with this -- is that at some points the price of gold gets too far above or below where it ought to be and then becomes a better or worse store of value than it otherwise would.
    Jun 6 01:36 PM | 2 Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Right, like what's a catastrophe-style event that happened in U.S. history that gold served as a unique and effective hedge against?

    Or really, what exactly is it that investors who own gold are trying to hedge against? And why is gold the best (or only) hedge for that.
    Jun 6 10:47 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    I'm advocating both approaches. They're not mutually exclusive. The fair value model can help you buy when expensive and sell when cheap while the trend following model can help you trade it from year to year.

    In fact, I even have one model that incorporates the two Eg. leverage up when the trend is bullish and gold is also significantly undervalued. It's averaged 12.2% per year since 1974 vs. 4.8%/year for gold. Annualized volatility is identical to gold at 19.9%/year.

    I appreciate the idea of holding gold as a hedge. I'm just not sure what it is precisely people are trying to hedge out and whether or not gold will actually do it. There haven't really been any good examples in history.
    Jun 6 08:25 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    1) It's different and a good diversification tool.

    2) I didn't have a public platform back then, nor did I have these models. My bullishness was pure luck though. 2000 was when I started in the industry and back then gold was universally (read: UNIVERSALLY!!) hated. Because I'm an oddball, that made me interested in it.
    Jun 5 08:10 AM | 2 Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    "Do you believe the large variances in gold prices from the CPI figures over this time period is robust enough"

    Honestly, I'm not totally convinced. There's enough correlation over hugely long windows to suggest that the two should be related. Plus, there's the concept underpinning it all, and that's that virtually everything denominated in Dollars will have a long-term correlation with the CPI once you make the required idiosyncratic adjustments (eg. supply & demand shifts, changes from increases productivity or technology).

    But there are some really big swings here. You can get some counter-trend moves that last a long time and run very far in one direction.

    I haven't a clue if there are any other variables that explain the short- or medium-term price action in gold. I don't think anyone has any good models for it, really. At least I've never seen any. This could be another reason why there are so many misconceptions about it and why financial media continually goes back to narratives that are not correct to explain gold's action. Eg. "it's a safe haven" or "it's an inflation hedge"
    Jun 5 08:06 AM | 1 Like Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    I know we've discussed this before, but inflation creates an incentive to invest and spend today rather than tomorrow. Theoretically, this is a good thing for economies. I think that's why every major economy on the planet tries to do it.
    Jun 4 01:26 PM | 2 Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Under what conditions would you be bearish on gold?
    Jun 4 11:41 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    "Think there is more to 2008 than meets the eye Jeffrey. Many had to sell what was profitable and since gold was doing so well, those positions were sold to raise cash."

    That's exactly the point I'm trying to make. I have zero confidence relying on fear, or any other factor, really, as a driver for the gold price. Over the short run, I haven't a clue what makes gold do what it does. It might be the most insanely random market in the world.

    Over very long windows of time I have much, much more confidence about what drives the gold price.
    Jun 4 10:40 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Totally agree.

    My point is that if you value this "optionality" of gold, why not trend follow instead? The returns are sooo much higher and you still, most likely, will be able to reap the benefit of that catastrophe-hedge should it ever materialize. As risk of catastrophe rises -- the type where gold would benefit -- that would almost certainly put gold into an uptrend.
    Jun 4 10:32 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Gold nearly tripled between 2003 and 2008. That was a big move. Was that because fear was rising? Then it fell 20% between July and October 2008. Was that because fear disappeared?

    I know I'm selecting very specific windows here, but the point I'm trying to make is that I'm super uncomfortable saying that fear is the primary driver of the gold price.
    Jun 4 10:28 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    It's a semantic discussion. I guess that's why the concept is so misleading for so many people?

    "Money" has a very precise definition in today's world. In this sense, something either is or is not money. Gold is not. It doesn't not satisfy the generally, universally accepted definition of money.

    When we think about it abstractly, we can say all sorts of things about gold.
    Jun 4 10:24 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    "What's wrong with that?"

    The numbers you used were wrong. The 1974 date is fine, but the price isn't $35. Nobody could have bought gold for $35 in 1974. The best they could have done was $130. That's the starting point.
    Jun 4 10:16 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Because of unique supply & demand factors, no commodity should be constant relative to the CPI or any other commodity.

    Gold's a little different though given the strange nature of its market and its lack of industrial utility. The supply doesn't ever really go away.

    And when we say "constant" that only means in a very broad, general sense. You'll notice that the gold price only intersects with its inflationary trendline a handful of times in history. There are many large sub-cycles with gold.
    Jun 4 10:14 AM | Likes Like |Link to Comment
  • Maybe I'm Wrong - Justifying $2,000+ Gold [View article]
    Every investment decision is, by definition, a bet on a future outcome. We are all technically soothsayers. I think the best we can do is try to at least come up with logical reasons for our decisions.

    "In my biased observation, they tend to be not very smart and/or not very logical."

    When emotion gets involved, all that stuff goes out the window. I've seen really smart people completely undone in the markets because they couldn't properly manage their emotions.

    Gold is an emotional thing. It's linked to other emotional things too, like politics or religion, and it has a deeper tie to our sense of self-worth than do other investments.

    I really think this explains a lot of the dialog surrounding it.
    Jun 3 05:22 PM | Likes Like |Link to Comment
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