MISSOULA, MONTANA – Yesterday, I published a chart showing the stock market’s valuation going back 120 years.
Today, I’m publishing a second chart that shows the returns you can expect to make from the S&P 500 according to its different valuation levels.
Our Warmest “Thanks” to Postcards Readers
Greetings from Missoula, Montana…
My family and I have been on an epic road trip across America.
For the last four months, we’ve driven America’s backroads by day. By night, we’ve slept in campgrounds, fairgrounds, parking lots, barns, horse pastures, driveways, and city parks.
We started in Florida. We’ve been to 21 states so far. We’ve ridden horses, shot rifles, witnessed the birth of a calf, driven tractors, flown in a small plane, and visited hundreds of small towns.
We’ve met up with dozens of Postcards readers along the way. You write to us, inviting us over. And we shamelessly accept every invitation we can.
Sometimes people ask us, “Have you had any bad experiences when you’ve met up with readers?”
“No,” we say. “Our experience meeting Postcards readers has been 100% positive. We’ve been shown the most incredible hospitality, kindness, warmth, and generosity. There hasn’t been a single exception to this. It’s been a wonderful experience.”
Now we’re thinking that we have to do the trip all over again, retracing our exact footsteps, so we can thank everyone we met along the way!
On a Mission to Cross the Canadian Border
We’re currently in Montana, in the mountains, making our way north to British Columbia, where we had hoped to spend the winter.
Unfortunately, we probably won’t be allowed into Canada (although we’ll still try) and they’ll turn us around at the border. We’ll find somewhere in Idaho to spend the winter instead.
Meanwhile, over the weekend, we stayed with Steve and Terri on their lovely farm in the Bitterroot Valley. This area should be on colleague Dan Denning’s “Bolthole” list.
In Steve and Terri’s house in Bitterroot Valley
The valley is nestled between two mountain ranges in western Montana. (The mountain range to the west marks the state line with Idaho.)
The weather here is really nice. Somehow the mountains block the snow and the cold weather, and the valley stays pretty temperate most of the year.
Unfortunately, the secret of the Bitterroot Valley is out. We went to the farmers market and I heard one of the traders remark, “So many new people are moving here.”
A Simple, Cheap, Pleasant Lifestyle
The other day, we were staying at a campground in Salmon, Idaho. Our neighbor was a full-time RVer.
He told us he spends the winters in Arizona. He pays $180 to rent a spot in the desert for six months.
He has some solar power panels and a little gas generator that allows him to live comfortably in the desert without electricity hook ups. And when he needs water, he goes into town and fills up his jugs.
He lives with his dog, Bandit. Lots of other RVers do the same thing, and together they form a laid-back community. A very simple, cheap, pleasant lifestyle.
Prepare for Some of the Worst
S&P 500 Returns in History
Back to the stock market’s valuation, here’s the chart I showed you yesterday…
And here’s the chart I want to show you today…
First, notice how the two charts look similar, peaking and bottoming in the same years. This tells us that the stock market’s valuation and the stock market’s following 10-year returns are HIGHLY CORRELATED.
Now notice that the y-axis on the second chart above is inverted. In short, the more expensive the S&P 500 is, the lower the return it generates over the following 10 years. The cheaper the S&P 500 is, the higher the return it generates over the following 10 years.
Right now, the S&P 500 is the most expensive it’s ever been (except for a brief period in 1999). Therefore, we can expect the S&P’s returns over the next 10 years to be among the WORST 10-year returns in history… and will probably be negative.
This analysis ignores all the news and narratives of the day. It’s just a simple statistical correlation.
It shows that when the stock market has high valuations, you get low returns over the next 10 years… and when the stock market has low valuations, you get high returns over the next 10 years.
Meanwhile, if you perform this same analysis substituting “gold” for “stocks,” you find that when the stock market has high valuations, gold has high returns… and when the stock market has low valuations, gold has low returns.
Gold is like the anti-stock. And right now, with stock market valuations at record highs, gold is probably about to have one of its best 10-year returns in history.
– Tom Dyson
P.S. I just put the finishing touches on an URGENT new briefing. America is at a tipping point from which it may never recover. Saving your retirement and your family is the single best thing you can do right now. How? Watch this.
Readers ask about the gold mining stocks in Tom’s Portfolio… and want to know the sure way to buy real gold…
Reader comment: I bought a substantial position in gold, but your mining stocks in Tom’s Portfolio says not to buy mining stocks over the amount listed. Will you update the buy-up-to amounts? Or should I avoid those stocks?
Tom’s response: I will remove those buy-up-to price limits. Those are good long-term stocks to play the bull market in gold with. And as a Tom’s Portfolio subscriber, keep an eye out for my first quarterly video update, coming out this month. I’ll be addressing our Dow-to-Gold trade, our gold portfolio, and the oil tanker stocks. Stay tuned…
Reader comment: Tom, when buying gold how do you really know that what you are getting is what it is supposed to be and not a doctored-up, phony blend? There are many people dealing gold these days and it is a hot issue, and that tends to bring the scammers out also. How do you determine who you can trust and what they deliver is .99 gold? Thanks.
Tom’s response: I buy from good companies who stand behind their products and will buy them back from me whenever I want to sell. I recommend three companies here…
Meanwhile, others are curious about affordable places to live in the U.S… the dangers Tom has faced on his travels… and finally, two readers suggest destinations for the Dyson family…
Reader comment: I would love to know if there is an extremely affordable place you found in all of America, where you can stay a while and feel like you are on this “endless vacation”? That would mean the place is a fraction of the cost of living you are used to, the pace is such that there is stress reduction (instead of stress inducement), and most of all, it is not freezing all the time. Have you found such a place?
P.S. I love the Postcards From the Fringe. I look forward to reading them.
Tom’s response: The most affordable way to live in America is to buy an RV and live in campgrounds. In the winter, live in Arizona – off-the-grid – for $30 a month. In the summer, live in one of the hundreds of primitive campgrounds around America for less than $5 a day (and it’s free if you have solar power or a generator).
Reader comment: I’m following your journey with keen interest. I have a young family with kids aged 3 and 1. My wife and I are both experienced travelers. But now that we have young cubs, we have been hamstrung not being able to do so internationally like we used to. Your adventures have stoked our desire to do a similar U.S.-based roadtrip before our eldest starts school. I was wondering what – if anything – you do or have for physical protection when you’re out in the middle of “nowhere,” in case something went sideways and you were accosted, threatened, or worse by someone. From your shared experiences that I’ve read, it appears to have been no issue to-date.
I’m originally from South Africa, have traveled that continent, and had the gamut of dangerous face-to-face experiences with predatory animals and tribal people. But in Africa, I never carried a weapon to protect myself because (wild animals aside) they’re interpreted as inflammatory, which can create serious problems with locals. Just curious as to your experiences thus far and what you do to safeguard the family (if anything). All the best to you guys. I’m reserving the first copy of your travel guide.
Tom’s response: In 2018, I was mugged in South Africa at the end of a knife by six teenagers. Otherwise, in all our travels around the world, we’ve never had any trouble or even felt the slightest bit insecure. Same story here in America. We feel perfectly safe and secure. The only weapon we carry is wasp and hornet spray, which a reader of these Postcards recommended to us. It can shoot up to 30 feet if necessary.
Reader comment: Dear Tom, Kate, Miles, Dusty, and Penny: Wow, what a trip you are taking! I’m a new subscriber to your newsletter, and I am loving the stories. I applaud your courage and spirit to travel around the U.S., especially during this crazy pandemic! You are all amazing. My wife and I recently (as of August 1) moved us and our three young girls from Edmonton, Alberta, to Kelowna, BC. If the Canadian border opens again, I would highly recommend you travel this way. It is absolutely amazing here in the late summer and early fall, and the winters are very mild. There is so much to see and do here!
We’ve been here for only six weeks or so, but we keep asking ourselves, “Why didn’t we move here sooner?!” Thanks again for sharing your amazing adventures!
P.S. Thank you also for your recommendations regarding gold. I have liquidated almost all my positions in mutual funds and the stock market, and have moved a good portion over to gold. The rest is sitting in cash waiting for the downturn to hit the bottom. I will watch the Dow-to-Gold ratio and wait for the right time to buy.
Reader comment: Are you familiar with Red Lodge, Montana? I was seriously considering Bozeman but soured on it when I found myself in the middle of a Black Lives Matter protest. Red Lodge is really a pretty cool little town. I think it meets all your criteria. It has fishing, skiing, golf, etc. It is roughly an hour from Billings, and is situated at the base of the Beartooth Highway, which might be one of the most scenic roads you will ever travel. You should check it out. Keep up the good work.
Tom’s note: As always, please keep writing in at [email protected]! We read every note you send us, and I’ll do my best to address your questions or concerns.