Buying High and Hoping Higher: A Strategy as Solid as Jello

During their recent episode, Taylor, Carlisle, and Dan Rasmussen discussed Buying High and Hoping Higher: A Strategy as Solid as Jello. Here’s an excerpt from the episode:

Tobias: There was a question in our comment stream about gold. I don’t know if you’ve said something about gold or– They wanted your opinion on gold. And so, you raised it. Do you tease them out individually? Do you have a view?

Dan: Obviously, gold’s been a huge winner of late. Our models have liked gold quite a bit, because its lack of correlation, especially when stocks and bonds get very highly correlated and you need a safe asset. Gold is the natural choice. And so, I think what you’ve seen over the last few years as stock and bond correlations have risen as more money is flowing into gold and that’s pushed gold prices up, gold volatility has been relatively muted. So, on all from a quantitative perspective, gold looks like a very attractive asset. But gold is also, again– We have no ability to predict returns. I can only tell you about its value to a portfolio which right now is meaningfully higher than normal.

Tobias: Yeah. So, it’s not valuation. It’s anti correlation properties to the rest of the portfolio.

Jake: Valuation? How do you get to any valuation for gold?

Tobias: How do you value bitcoin?

Dan: Well, actually, what you don’t realize, Jake, is that denominated in bitcoin, gold is approaching its cheapest levels ever.

Jake: Total loser. Yeah.

Tobias: [laughs]

Jake: Every asset is, right?

Dan: [laughs]

Jake: Did you try putting bitcoin into your models and just smoke starts coming out of your computer or what–

Dan: Yeah, exactly. Well, actually, what’s interesting about bitcoin, is that it’s very correlated with highly shorted stocks. So, the highest correlation you see with bitcoin is with a certain segment of very small, very growthy stocks.

Jake: Shitco. Is that the term you were looking for?

Dan: Yeah, the polite term for them. So, it actually is not as diversifying as you might think. People are buying it for the same reason they buy a quantum computing stock.

Jake: Because it goes up into the right? [crosstalk]

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts