RANCHO SANTANA, NICARAGUA – A close friend of mine contacted me and told me he was thinking about “buying the dip” in the stock market.
We’re in Paradise
Greetings from Nicaragua!
My family and I are on the run again with our suitcase. I’m writing to you from Rancho Santana, a six-star resort on the Pacific coast.
We wouldn’t normally stay in a place like Rancho Santana because we’re very careful with our dollars and we don’t mind staying in one-star places (actually, we quite like it.) But Bill Bonner has a house here and we’re his guests for a few weeks.
Rancho Santana is paradise. It’s beautiful, relaxed, quiet, the food is incredible, and every day we find a new activity to take our children on. So far we’ve visited the farm, the community recreation center, the stables, the church, and we’ve spent lots of time on the beach and by the pool.
(The waves are huge here. The kids have been learning to swim and surf in big waves.)
Coming up in the next few days, we’re going sandboarding, bike riding, monkey tracking, and building a bonfire on the beach. Except for horseback riding, all these activities are complementary!
And, of course, we’ve spent lots of time hanging out with Bill, discussing life’s most important questions.
Today I gave the boys their first driving lesson. We found a quiet dirt track. I let the kids drive the vintage Jeep up and down. Here we are…
Dusty’s first driving lesson
Ten Steps Behind
I don’t write much about coronavirus because I’m not an expert. I have – however – been paying close attention to it since I first learned about it in January.
Investors have been 10 STEPS behind this story the WHOLE time. For example, three weeks ago, it was clear China had shut down its entire economy and American stock markets were making new all-time highs. I couldn’t believe what I was seeing.
All I’ll say about it today is that the market is still NOWHERE close to pricing in the economic damage that this story will cause.
(Clue: Think of all the junk bonds that have been issued by cruise lines, casinos, theme parks, airlines, rental car companies, shale oil drillers, movie theatre companies, and hotel companies. What happens if they default?)
In other words, short of a sudden and massive turnaround in the coronavirus narrative, the stock market still has A LONG WAY TO FALL in terms of gold just to catch up to the current situation.
A System Ripe for Collapse
I’ve been warning that the stock market had a long way to fall in terms of gold since I started writing these Postcards last summer. My warnings had nothing to do with coronavirus.
Bill Bonner has been warning that the stock market had a long way to fall in terms of gold since 1998. His warnings also had nothing to do with coronavirus.
Our warnings were based on our observations that the world is replete with bad ideas ABOUT money and bad decisions being made WITH money. Imbalances of historic proportions built up. The system became ripe for collapse…
History will show that coronavirus didn’t cause these instabilities. It REVEALED them.
(Side note: It’s also about to reveal some uncomfortable facts about America’s healthcare system. But that’s another story.)
Our position remains the same:
The stock market still has a long way to fall in terms of gold.
What to Do Now
The “in terms of gold” is very important because I can’t be sure the stock market will fall in terms of dollars.
My hunch is, in terms of dollars, the stock market will bounce around a lot and end up being dead money for the next decade.
To follow this idea, keep an eye on the Dow-to-Gold ratio (or just keep reading these emails).
When Bill began warning that stocks would fall in terms of gold, the Dow-to-Gold ratio was over 40.
When I started warning that stocks would fall in terms of gold, the Dow-to-Gold ratio was over 20.
The ratio was at 15 earlier today.
Once it goes below 10, it’ll be getting too late to take action. And once it goes below 5, I’ll begin suggesting selling gold and buying stocks (although I expect the ratio will eventually reach 2.5).
If you have a large position in the stock market – and you want to avoid the 75% or greater drawdown (in terms of gold) that’s coming – I hope you heed this warning and move some of your capital to the sidelines (in gold).
If Bill and I are right about all this, you’ll be able to buy your position back at much lower levels (relative to gold) sometime in the next five to 10 years.
And as for “buying the dip” in the stock market?
– Tom Dyson
P.S. Don’t forget: The “in terms of gold” part is very important to my stock market forecast.
P.P.S. One final thought. What would you rather own – a government bond that pays no interest and has infinite potential new supply… or gold that pays no interest and has almost no potential new supply? Trillions of dollars are betting on the government bond right now. So by buying gold, we’re also betting against bond investors!
Sharing Tom’s Postcards… financing the Dysons’ trips… Tom’s honesty… and experiences with divorce…
Reader comment: I continue to love your Postcards and have convinced my two boys to follow them as well! They have my family generating lots of conversations these days and for that I thank you! I hope you and your family continue to enjoy your time in paradise and keep the Postcards coming!
Tom’s response: I love it when I hear readers are sharing the Postcards with their families, and especially their kids. There is no greater compliment.
Reader question: I love your Postcards. One question I have is, how are you financing your life? Sure you pick cheap places, but it sounds like you and Kate aren’t bringing in any active income. Did you just decide you were going to set aside a certain amount of money to fund your life?
Did you just have enough saved up to be able to live off the interest, or royalties from your last company? If it’s too personal, I understand if you don’t answer. I’m just fascinated by the Dyson family life.
Tom’s response: We began this trip by burning through our savings. That lasted about a year. Then last summer, I started studying the markets, and digging through the economic data and subscribing to newsletters. I realised the stock market was beginning a big decline against gold.
So I contacted Bill and his Bonner-Denning Letter coauthor Dan Denning. Their work had been very helpful to me in formulating my ideas, and I began writing these Postcards to explain my position.
Last Fall, Legacy Research asked me if it could publish them in return for a little money… and now as long as we stay mostly in cheap countries, we can support ourselves financially.
Reader comment: Thank you for all the information you provide in your Postcards. I read each one sent to me. After reading your Postcards… I will start traveling soon with my 29-year-old son to some of the places I have learned about from you. But first I must “bury” my gold. From a happy subscriber!
Reader comment: Wow!! I am sitting here feeling all kinds of emotions after reading about Tom’s divorce story! The headline grabbed my attention. I read each line and was captivated.
Thank you for sharing such a personal and painful area of your life and that of your family. I am hopeful that all of you are healing from this upheaval and will find happiness in the near future. Thank you, once again, for your honesty and candor. I am wishing all of you the very best in love, peace, and prosperity.
Reader comment: Bravo for the honesty! It sounds like the real honestly came much later than the Radical Honesty. But what benefit it brought. And what grace you have experienced. I’ve been greatly enjoying the personal narrative, the insights into cultures and countries, and into economics and investing. Keep it up.
Reader comment: I can relate to your story, Tom. My wife just threw me out in a similar situation as yours. After 20 years, I still can’t keep a relationship together! So, like you, I am contemplating sailing around the world by myself. Or, to try and fix this, to just run away. I am really good at running.
Anyway Tom, really happy that your relationship turned out for the better, especially for your kids, who now have two great parents! All the best, my brother!
Reader comment: I have to tell you, I really enjoy your tales of adventure and mixing in how you came to be the family man you have become. I, too, had to make a decision many years ago. Marry the company or stay married to my wife and family. I made the right choice.
I’m extremely happy today. All of our children are so far ahead due to the unified commitment my wife and I made to raising them. I made much less money, but how much do you need to make to be truly happy? My salary was comfortable, I got to enjoy my wife, and participate in my children growing up. ABSOLUTELY PRICELESS!
I listened to the managers above me and most of them were either divorced, alcoholic, miserable, or unwilling to make the choice of freedom for happiness. Their salary ruled their lives. One retiring top manager stated at his retirement party, “I wish I had given more time to my family, and in all my years, I’ve never heard of one retiree stating that he wished he gave more to the company.”
Truly wise words. Anyway, your comments about the market are fantastic, make a lot of sense, and are what I consider to be “knowledge nuggets.” Keep it up and God bless you and your family.
Reader comment: Having followed you for a long time (when you were with the Palm Beach Letter), I truly admire your vulnerability in sharing your divorce story. It’s not easy for some to admit that they weren’t the nicest people before some sort of transition occurred. From a woman’s perspective, you do totally sound like you were a s**ty husband and father before you gave it all up to heal and travel the world… and now I think you have grown emotionally and spiritually into a wonderful human being.
Lots of people will say that people don’t change. They are wrong. I know this because I married a wonderful man who turned into a total asshat and ended up with chronic depression, pain, and committed suicide. You did the opposite transition… from asshat to great husband (to-be-again) and father. How wonderful for you, Kate, and the kids!
I think your Postcards are such a natural hit with people because of your honest writing. Your honesty and your vulnerability are what is needed in this world right now, and it is very refreshing. I think there are many of us who live “normal” lives so your lifestyle with Kate and the kids gives us all a great amount of hope and “escape.” We live vicariously through your “adventure of living.” Thank you and keep the Postcards coming! (Side note: I’m now happily cohabitating with a new man in my life for the last six plus years and life is great!) Lots of love to you and your family.
Reader comment: Thanks for all the good advice. I’ve been following since just before China. Have fun in South America!
Reader comment: My heart was touched when I read your postcard about your divorce and reconciliation. I am very happy for you and Kate, and especially for your children. I commend you for your honesty and bravery in publicly talking about your divorce. I am glad you and family are greatly enjoying your travels and your kids are getting a great education firsthand. I first noticed your Postcards when you began your journey in China and it caught my interest.
I have been praying for you and family ever since reading about your divorce and will continue to pray for you. I know you are an intelligent man and a man of action. Have a wonderful time in South America. May God be with you.
Tom’s response: Thank you all for the kind messages. Kate and I find them very encouraging. Please keep writing us at [email protected].