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Jeffrey Dow Jones

 
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  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    This is an intelligent comment and a good criticism of G20 inflation. Still, I wouldn't say there's a better metric out there than what we've got. And it also ignores the point that inflation really, truly has been a good trend line for gold in the past. It's a legitimate way to push back, though.

    Also good points on AISC, but don't forget that number can go down. And will go down if it has to (it has before). If gold miners can't sell gold profitably at $1,100/oz, they won't do it and their reported cost will drop. There's a lot of gold supply already out there; it isn't like crude oil where we burn it up after pulling it out of the ground.
    Apr 17 05:38 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    In practice, that's basically the way I do it too. 10 years ago, I was comfortable with a bigger gold position relative to my investment net worth. These days, I roll with a very small position.
    Apr 17 05:33 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    I don't know if you're being flip or not, but this is actually a really interesting question.

    It's like asking Greenspan how we know when we're in a bubble. It's a tougher question to answer than you'd think.

    Obviously, we can do a trend based study like this. We can see how far above or below the asset is from its historical trend. I think we can also look at psychological or sentiment factors as well. I think one of the better anecdotes that should have tipped us off that gold was approaching extreme was when there was a "We Buy Gold!" sign on virtually every street corner in 2010/2011. That was when the feedback loop started bending back the other way. It was when the public collective felt that gold was too expensive and wasn't going to stay there for long and that it would be smarter to melt the gold down for cash instead.
    Apr 17 05:32 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Buuut, that cost can go down. It's happened plenty of times before in gold bear markets and can happen again.

    Just ten short years ago, miners were happily (and profitably) mining gold with a market price of $400/oz. I think the miners deserve more credit.
    Apr 17 05:29 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    "It is impossible this day and age for a currency to become worthless when they are priced in each other."

    Thank goodness we're using the CPI in this study, right??
    Apr 17 05:27 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    I'm more convinced gold chops around for a decade and never sees $800 while inflation slowly catches up. I think the bulk of the crash has already happened in gold and the gold market is better thought of as a total lack of long-term upside than a high probability that it'll quickly find fair value. I obviously can't say for sure, but it'd be my guess that fair value catches up to price rather than price finding fair value.

    But another 40% drop in the price of gold would definitely be bad for the miners. The big ones didn't go out of business after the 1980 bubble and they didn't go out of business just a short decade ago when gold was $1000 cheaper. It's certainly possible that equity holders would get wiped out in that scenario.

    Don't forget, though, that the AISC will drop if it has to. It's happened before plenty of times with the miners. So don't get too married to the cost data they publish.
    Apr 17 05:25 PM | 1 Like Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Intriguing, but too many traders have tried and died at shorting the Yen for me to get behind that. I know it doesn't matter, but the Yen is almost as bad as gold when it comes to doing the exact opposite of what we think it will.

    Kyle Bass is 10x smarter than me, though. So I'd probably listen to him instead.
    Apr 17 05:20 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Right. So back to my point from the article: if double-zero is the worry, why not trend follow instead?

    Participate in the significant up moves and avoid the significant down moves. Why would you rather simply buy and hold?
    Apr 17 05:17 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Well if you're talking about equity risk premium in the sense that how much more are we willing to pay for equities relative to risk free treasuries, in that sense, over the long-run, it's pretty close to earnings + dividends. That's the long-term equity risk premium i.e. how much more we're willing to pay for something that grows substantially beyond the rate of inflation.
    Apr 17 05:16 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    I'll check that paper out. They claim to be the "first estimate" of just how accurate the CPI is, which is a good reminder of how few data sets really compete with it in terms of accuracy.

    Also take a look at the Billion Prices Project from MIT. That's a really interesting way to look at inflation in real-time, and as it happens, it tracks CPI pretty closely.
    Apr 17 05:14 PM | 1 Like Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    Why would those $3m prices for the Mastiff be sustainable or justifiable over the long run if the good underpinning those derivatives didn't support it?
    Apr 17 05:11 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Yeah, everybody talks about the ShadowStats guy. For starters, I completely disagree with his premise. He also doesn't free publish his actual data (just his charts), so I don't have access to the numbers. But what he's doing is really simple, basically just adding a constant to the CPI.

    I could certainly do this, though, if I made my own estimate about the constant he was actually using.
    Apr 17 03:48 PM | 1 Like Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    I had a gold bug father too. It's why I think gold always has value as an investment and why investors should always own a little bit; it's crazy and it's different and those sorts of things can be useful tools in one's portfolio.

    If pressed, I'd agree that CPI understates inflation. But the reason I think that is because there are so many incentives for understating it. Not because we have any actual evidence that supports that it's being overstated. Literally no one in the world has a better, more accurate method for calculation aggregate U.S. inflation than the BLS.
    Apr 17 03:46 PM | Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    Well, Dollar, Euro, Yen, Pound, Swiss Franc are 5 major global currencies that have been around for a while and show no sign of becoming worthless. So yeah, those are fiat currencies that have not ultimately become worthless.

    Neither you nor I can say whether they will in the future.

    Though I can tell you: I'm certainly investing my actual money in a manner that expects that they won't become worthless rather than investing as though they will.
    Apr 17 03:37 PM | 2 Likes Like |Link to Comment
  • How Far The Gold Sell-Off Could Go, And Strategies That'll Save You [View article]
    "When was the last time you went to a grocery store? Or purchased a new shirt?"

    ...or bought a new smartphone, or hired a new web developer, or a new computer or flat screen TV?

    Not everything in this economy is food or clothing. And I'm not even sure clothing has increased at a rate greater than 2%/year over the last couple decades. Or at least not at the stores that I shop at :-)
    Apr 17 03:34 PM | 1 Like Like |Link to Comment
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