DELRAY BEACH, FLORIDA – Two years ago, Kate and I handed back the keys to our apartments, took our kids out of school, packed a small suitcase, and left our hometown, permanently. We’ve been traveling ever since.
These last two years have been the best years of my life…
I’ve tasted what life feels like without stress and anxiety. I’ve rediscovered my passion for writing and investing.
We’ve seen some of the best “wonders” of the world. I feel we’re giving our kids the best education money can buy.
We’ve figured out how to live on less than $20,000 a year. With the money we’ve saved up, we could survive for decades on the current size of our gold nest egg.
And above all, we’ve bonded as a family in a deep and fundamental way that has changed my worldview forever. (I will never put anything above my bond with my family again.)
So why would I invite stress and pressure into my life again by coming out of my “retirement” and launching a premium newsletter?
It’s true. Writing a newsletter is stressful for me. I take the responsibility of delivering investment ideas very seriously. It even keeps me up at night sometimes.
Also, we don’t need the money. I’m so confident in the investment strategy I’ve created based on the Dow-to-Gold ratio… and in our ability to live well, very cheaply… that I’m comfortable living off our savings.
But the truth is, I love finding investment ideas. And I feel that the time is finally coming for the inflation trade I’ve been writing about in these Postcards for months…
A Fantastic Time to Be a “Fringe” Investor
As you know, it’s my view that we’re nearing the end of the deflation trade.
Commodities – relative to other assets – are at century lows. Trillions of dollars have poured into bonds and other fixed-dollar assets. The interest rate on the 10-year Treasury bond – the most important interest rate on the planet – is now approaching zero. Plus, as I wrote yesterday, the government is broke…
Sooner or later, the markets will realize that the only way the government can continue financing itself is by debasing the dollar with the Federal Reserve’s printed money… and by using a tailwind of inflation to subtly default on its obligations.
I suspect gold, silver, and stocks are beginning to sniff out inflation… and possibly negative interest rates.
Think about it… As interest rates on the world’s reserve currency (the dollar) go negative, the world’s capital will seek shelter in real assets – especially real assets with yield.
What else would explain the stock market’s recent 32% rise, given how weak the U.S. economy is? Commodities should start moving soon, too.
The inflation trade is going to be a fantastic time to be a “fringe” investor, just as the 1970s were. Now that my family life is secure again, I don’t want to miss it. And I want to help others capture it, too.
Of course, I’ll keep chronicling my travels and covering the big investment trends in these Postcards, just as I have since the beginning. And in my premium advisory, I’ll provide the specific investments that will benefit from the inflation trade… chiefly, hard assets and commodities.
I launch my premium advisory just an hour from now. Here I am in the studio, getting ready for tonight’s Emergency Investment Summit, where I’ll be sharing all the details…
Getting ready for tonight’s Emergency Investment Summit
It’s the culmination of two years of studying the markets… and many more months of nonstop research. In fact, I feel that my whole 33-year investment career has been leading up to this.
– Tom Dyson
In today’s mailbag, readers discuss fake metals… bartering with gold… gold reaching $10,000 an ounce… and utilizing Tom’s investment guidance…
Reader comment: Multiple Chinese sellers on eBay are selling silver plated metal bars. Because these replicated bars are made from molds of the actual American minted bars, that’s a great loophole for the scammers that can title the auction item whatever the original bar mold reads… for example, Johnson Matthey 1 ounce pure silver .999. So the item on auction is titled what the molded bar says.
The prices are less than melt or spot, yet the novice isn’t putting two and two together. Many bars sold for $9 when silver was over $17. This is complete raw ignorance by the buyers being scalped. Generalist investors coming into this sector with no business sense of the real material or the sense to question how a dealer can sell a $20 bar for $9.
One seller had sold over 50 “metal bars.” Newbies must miss that, thinking, “Well, silver is metal.” No doubt, newbies entering the learning curve of buying precious metal. One girl’s feedback after buying a $9 silver plated metal bar was “… I work hard and don’t make much money. I just feel right (good) about starting to buy some silver.” Also, of course, some outfits in China, I hear, have made a good attempt at replicating Silver Eagles. Even unsuspecting dealers or sellers reselling the Silver Eagles.
Reader comment: If I buy gold and the economy collapses, how will I be able to use the gold? Will prices change to a gold amount? What would the currency be? Should I purchase the 1/10th oz. coins or bars? Or would I just have to sell the gold for whatever currency is strongest at the time? I guess this is more than one question. Any information would be helpful. I just worry I’ll have a bunch of gold but then go hungry if no one accepts it as a payment. Thank you so much!
Tom’s response: I plan to exchange my gold for dollars, and then immediately buy stocks with it. I do not imagine we’re heading for a barter economy or any circumstance that requires trading gold for anything other than dollars.
I imagine, when the Dow-to-Gold ratio hits 5, gold will be one of the most sought-after, popular, talked about assets in the investment universe. But as you well know if you’ve been reading these Postcards, it’ll be too late to buy gold by then. It’ll be what the real estate agents call a “sellers’ market.”
I am not preparing for the end of the modern economy… trade… or even the dollar. I am preparing for a loss in the dollar’s purchasing power and a reset – or “reckoning” – for stock market investors. Otherwise, life will go on pretty much normally…
Reader comment: I like reading your messages. They provide good guidance in a difficult environment. Thank you very much! Recently I read that you are recommending to buy gold, expecting it to go to 10,000 USD per ounce, based on the Dow-to-Gold ratio’s historic up and down.
Here I have a question: How do you reach this conclusion? If the Dow Jones Index were to drop to 15,000, a price of gold at $3,000 would bring the ratio to the target value of 5. If the Dow stays at around 25,000, a price of gold of $5,000 would lead to the target value of 5. Only if both stocks and gold go up strongly in parallel is it likely that gold will reach $10,000 with a Dow-to-Gold ratio of 5. But that does not seem likely, as a strong stock market would lead to weakness in gold – a hedge for uncertainty in the economy and markets. What am I missing here?
Tom’s response: I, too, am very curious about what level gold and the Dow will be at when the ratio hits 5. But based on the Federal Reserve’s aggressive actions recently, and the vast sums of money that have flowed into bonds over the last decade, and especially over the last year, I’m more convinced than ever that the Dow-to-Gold ratio will hit 5 at far higher levels for both stocks and gold than they are currently.
All that money that flowed into bonds will begin to flow out of bonds at some point… and when it does… it’ll go into hard assets like stocks and commodities. Also, I’m expecting the ratio to fall below 5… possibly even as far as 2 – or even 1. I’m just using 5 as the first level at which we’ll begin to sell gold and start buying stocks.
Reader comment: I am retired and live on Social Security, a small pension, some savings (all in gold and silver), and an IRA in gold and silver. I have believed in gold since 1998, and that has been most of my investing since then. I believe I made the right decision. At least I don’t worry much about losing my savings.
Your newsletter keeps me appreciating what is really important in life and is right about this virus and the economy. We forgot that this is a virus and will, therefore, infect most of the population no matter what is done to stop it…. and the majority may not even know they have had it. Next year will be another virus.
Reader comment: In the month since the catastrophe in the stock market, my portfolio has gone up 25%. I am now pretty much back to where I was before the catastrophe struck. Had I not been following your Postcards, I may not have had the conviction to go as big as I did into gold and silver. As each day passes, I feel more strongly convinced that you are correct in your assessment of the state of things. For this, I thank you deeply.
Reader comment: I love the postcards. If you can get to Canada that would be great. Private tour of the famous Thousand Islands almost guaranteed. By the way, if you ever want to upgrade that camper, visit me at my dealership.
Reader comment: Hi Tom, I read your article on how you became more emotionally attached to your children on your trip. Congratulations. My children are grown and one lives 3,500 miles away, but we still keep in touch. I am glad I took the time to be with my children. Your article shows what I would have lost if I hadn’t.
While another reader defends Tom’s oil trade…
Reader comment: To the person blaming Tom for tanker stocks being down: First, if you want to invest successfully, you need to take responsibility for your own trades. It’s not Tom’s fault you’re down 25%. It’s yours. But the good news about it being your fault is that you can learn from any mistakes while learning the nature of markets. If it’s Tom’s fault, you only learn that you think Tom is a dunce. Second, take ownership by doing your own research. The charts of tanker stocks shows they are very volatile, but are near 10-year lows. Fundamentals shows day rates picking up strongly so earnings should follow, and these stocks pay very high dividends when times are good, and tend to go a lot higher in price.
Third, figure out a plan to invest in pieces – 33% now, 33% after each of two further declines, for example. Personally, I bought 50% of my tanker allocation a few weeks ago, and added 12.5% on this latest 25% decline. I’ll add more on further declines ’til I hit my 100% position size. You won’t always hit 100%, and you’ll have to be happy making gains on just part of your money. Lastly, I wouldn’t sell those tankers. I agree with Tom they’re going a lot higher. Sell half when they’re up 100% to get your original money off the table, and exit the rest by following a plan – say, a month-end close below the 200-day moving average or some such.
Tom’s note: Thank you for your messages! Please keep writing us at [email protected].