CAMP OUTLAW, COUNTY ROAD 646, FLORIDA – A lot of smart people have bought gold.
Sam Zell, Ray Dalio, Stanley Druckenmiller, Paul Tudor Jones, Jeffrey Gundlach, Paul Elliott Singer, Seth Klarman, Mark Mobius – these guys are all billionaire hedge fund managers. And they’re all long gold.
Now, gold is up 65% from its lows in 2015. If you haven’t bought gold yet (and you’re a cheapskate like me), you may be worried you’ve missed the boat. But it’s not too late. This is what you have to do… (More below.)
Boondocking in Rural Florida
Greetings from the trailer park…
Two days ago, we left Kate’s parents’ house with our kids, our suitcase, an old battered pop-up camper designed to sleep three, and a plan to drive to Alaska.
First, we stopped in Port St. Lucie. We spent two nights in a state campground on the edge of a beautiful swamp. Kate and the kids did their schoolwork in the morning while I did my writing work. In the afternoon, the kids threw rocks into the swamp and played hide-and-seek among the live oaks with a local boy, Brock. We saw two alligators.
Today, we drove 200 miles northwest. I found a new camp on an app that’s similar to Airbnb, except it’s for connecting campers with landowners. (The app’s called Hipcamp.)
I chose another place next to a swamp called Camp Outlaw, in rural Florida somewhere west of Orlando. We paid $20 a night to boondock.
(Boondocking means foregoing electric and water hookups. It’s the most primitive style of RV camping.)
The description said Camp Outlaw was a campground. But I imagine most of the campers here are long-term residents, so I’d describe it more as a trailer park.
I’m writing this message to you from my bed in our pop-up. Kate and the kids are sleeping next to me and we’re being serenaded by frogs and crickets, and all sorts of other swamp noisemakers…
We found the roads in central Florida today to be full of traffic. The economy appears to be functioning normally (from what we could tell).
Camp Outlaw is busy, too. There are RVs and trailers parked all over the property. Big pickup trucks with throaty engines come and go every few minutes.
Tomorrow, we will continue north again…
Here’s our bathroom…
Our latest bathroom
And here we are having dinner at the community picnic table with some other campers we met a few minutes earlier. The little girl is Shilo and her mom is Sage…
Hanging out with Shilo and Sage
A Simple Exchange
Back to gold… I’ve been promoting a simple exchange. Sell stocks, buy gold.
Now, keep in mind that we’re not buying gold as an investment. We’re simply lightening up on passive stock market investments like ETFs, robo-index funds, mutual funds, stock ETFs, and buy-and-hold stock market strategies… and moving to the sidelines (in gold) until stocks get cheap enough for us to buy them again.
In other words, we are using gold primarily as money – a safe haven – and not as a speculation on higher gold prices.
This is why I’ve put the bulk of my money into physical gold. It’s a way to keep us safe while the investment markets correct.
This chart shows what I’m talking about. It shows stocks (specifically the Dow) priced in gold.
As you can see, the primary trend in the stock market has been DOWN since October 2018, when it peaked at around 22. It’s currently around 13. And it’s on its way below 5.
By owning gold, we set ourselves up to buy stocks at some point in the next five to 10 years at much lower valuations than they are today. And as such, the only thing that matters is how gold performs relative to stocks. Its nominal price of $1,700 – or whatever it is today – is irrelevant.
So if you’re worried that you’ve missed the boat, keep in mind this trend still has a long way to go. And if the daily moves in the markets are keeping you up at night, remember what I’ve said before: Focus on the process, not the results.
P.S. Like I mentioned above, I have the bulk of my portfolio in physical gold. But my strategy does involve other plays, in smaller amounts. All in all, I’ve invested nearly $1 million in this strategy. And it’s not too late for you to get on the right side of the trend, too.
On Wednesday, May 20, I’ll show you why this could be the most important decision you make with your money over the next 10 to 20 years. If you’re interested in learning more, save your spot for my special briefing right here.
– Tom Dyson
A reader believes Tom acted dishonestly in the way he wrote about oil tankers stocks here. Tom’s answer is below…
Reader comment: The subject line of a recent postcard from Tom Dyson was, “A Compelling New Investment Idea (It’s Not Gold).” He went on, “I found a very compelling idea.” and “I think we are about to see the greatest oil glut in history… by several orders of magnitude.” He then added, “It’s probably going to take 12-24 months for us to process the surplus that’s about to form. In the meantime, oil tankers will earn fortunes.” His postcard contained no caveats, no negatives… only superlatives.
A subsequent postcard stated, “If you’re crazy enough to invest in the oil shipping industry, this is the time to buy.” If he had said that, or anything else suggesting doubt, in that first glowing recommendation, my portfolio would look quite different. Instead, the oil tanker stocks I bought are down about 25%. So much for someone who calls himself honest.
Tom’s response: I’m sorry to hear this. I have several thoughts to share after reading your email. But first, remember that what I write in these Postcards is just a free journal of my personal struggle to find freedom… financially, mentally, romantically.
That said, everything I wrote about oil tankers is still accurate. In fact the case has only gotten stronger. They reported earnings last week, and I can tell you they are earning fortunes. It seems they’ll continue earning fortunes, and the stocks have gotten even cheaper. This is the first time in my life I’ve ever seen high quality businesses, making record profits, with great forward fundamentals, trading at P/E ratios less than 3. This is definitely a case of the stock market being irrational. I remain unequivocally bullish on tanker stocks.
Tankers are a “feast or famine” business. The last 12 years have been “famine.” My hypothesis is, we’re now entering a two-to-three year period of “feast.” The last three quarters have been excellent. I think there’s two or three more years of this to come.
Tanker stock investors have been so traumatized by 12 years of losses and red ink, they can’t see it. But those in the know are calling this the beginning of a tanker “super cycle.”
I think the tanker companies are going to earn more than enough money in these super cycle years to make up for all their sins over that past 12. (And I should note that the super cycle idea has nothing to do with coronavirus and everything to do with industry fundamentals.)
I’m not surprised by the irrationality. Share prices often behave like this (volatile, choppy trading) at important turning points. The bulls and bears are duking it out…
What I failed to anticipate was quite how volatile their stock prices would be. They trade like options, bouncing around 10% or more on a daily basis. I didn’t foresee that. Had I known they’d be this volatile, I’d have added a warning early on to my bullish opinion. That said, despite the volatility, tanker stocks do have two benefits that options don’t have: They pay you enormous dividends to hold them, and there’s no time decay.
If it’s any consolation, a 25% drop is par for the course in tanker land. And I, too, am down about 25% in my personal tanker stock positions. But I’m not selling. I’ve done my research and I’m comfortable with my position size. I know it’s just a matter of time until the share prices turn around.
Meanwhile, other readers say they are happy to follow along on Tom, Kate, and the kids’ journey…
Reader comment: Been following your happy trails since they started and enjoy every moment of your experiences, living vicariously through you.
Reader comment: I would ponder that if you are proud to be happy in your own skin, you might be a narcissistic dude… like many of us! You have your priorities in order, focusing on friends, family, and fun. We live vicariously through the journey you are allowing us all to ride along… on with you and your family! Keep up the great adventures!
Tom’s note: As always, thank you for your messages! Kate and I do read every one you send in. Please keep writing us at [email protected].