Maria’s Note: Maria Bonaventura here, Tom’s longtime managing editor on Postcards From the Fringe. Tom and Kate are rafting down the “River of No Return” in Idaho, with no internet access until Monday. So this week, we’re bringing you some essential reading for Postcards fans.
Yesterday, we shared the worrying reason why Tom and Kate put their life savings into gold. Today, Tom shows the best way to time your move into gold – and out of it when the time comes…
In the fall of 2018, the Dow-to-Gold ratio started falling… for the first time in seven years.
Once the Dow-to-Gold ratio gets in motion, it tends to stay in motion. Its drop in 2018 implied to me that gold would start outperforming the stock market… possibly for as much as the next five or 10 years.
I immediately drained my bank and retirement accounts and put everything into gold and silver. Then, I started nagging my friends and family to do the same.
Finally, I approached Bill Bonner and his publisher, Amber Mason. I asked them if I could write to warn you about this, too. They agreed…
The chart below tells the whole story. It shows the Dow-to-Gold ratio going back 120 years.
The Dow-to-Gold ratio tracks the Dow Jones index in terms of gold.
The Dow is the aggregated stock price of 30 of the largest, most iconic businesses in the world. Gold is an inert metal. It’s the investment equivalent of hiding your money under the floorboards.
By presenting the two as a ratio, I get a barometer.
The thing about this barometer is, unlike other price series in financial markets, it doesn’t bounce around much. Once it begins a trend, it tends to stay in that trend for many years.
You can see what I mean in the chart above.
Notice how the ratio trends, moving in big, clear, predictable waves. Notice how it peaked in 1999, and how it’s been falling ever since…
Notice how the primary trend got interrupted in 2011, and the Dow-to-Gold ratio rebounded…
And finally, notice how the ratio peaked in October 2018.
My hypothesis is that the Dow-to-Gold ratio is now back on its way down… to a level somewhere below 5. Bill calls this its “rendezvous with destiny.”
I will hold my gold until then, at which point I’ll sell it all and invest the proceeds into the stock market.
Specifically, I will buy what I call “corporate aristocrats.” These are companies like Coca-Cola, Johnson & Johnson, and McDonald’s. They have decades-long track records of relentlessly raising their dividends.
There are no better passive investments than stocks like these. (If you’re a paid-up Tom’s Portfolio subscriber, you can get the full list of my 17 favorite corporate aristocrats today right here.)
Anyway, that’s all in the future. For now, I’m keeping an eye on the Dow-to-Gold ratio. It stands at 14 today.
Of course, I could be wrong about all this. The waves could be just a lucky pattern, and there will be no “rendezvous with destiny” below 5. But I don’t think so.
One look at the world economy provides all the evidence I need – insane government deficits, central banks around the world competing to debase their currencies, global growth turning negative, stock markets near all-time highs, and a near-universal faith in central bank activism.
It’s a perfect recipe for a much lower Dow-to-Gold ratio. Ignore this chart at your peril.
– Tom Dyson
P.S. I created an entire model portfolio to play this trend. I even invested $1 million of my own money into this strategy. If you want to take back control of your financial future, it’s not too late to find out how to get access to all my top recommendations to play the Dow-to-Gold trade – including the best gold stocks to buy today… and my favorite corporate aristocrats to buy when the ratio dips below five…
After Tom shared about the severity of his mother’s Parkinson’s Disease and thinking of moving to London, readers weigh in…
Reader comment: Dear Tom and family, as an expat Brit living in California, I have personal experience with a sick mother living on her own in England. My advice is to forget winter in Idaho and move to London instead; don’t wait. Our caring mothers don’t want to be a burden to their sons and understate their condition to a fault. As you’ve pointed out, a serious disease can progress faster than we laymen realize. Don’t delay. Spend as much time with her as you can while you can. I will forever regret not doing more.
Reader comment: Dear Tom, I may be putting my nose where it doesn’t belong, but… Please reconsider NOT waiting until the spring to help your folks. When my Mom had a devastating stroke three years ago, we raced from Florida to New Jersey to help. The extent of my Dad’s dementia was much worse than we could have expected. We have been caring for them since back here in St. Augustine.
I know everyone’s situation is different but most parents protect their kids from the details and many parents don’t realize how badly off they are. We had one last good Christmas with all the grandkids while both parents were still sort of “with it.” Whatever your decision, I wish you all safe travels and look forward to your Postcards.
Reader comment: Tom, What is your mother doing for help until you get there next spring? Sounds like she needs you now unless you are planning to have hired help when you are there, in which case she can start the help now. She will probably prefer a woman to help her bathe, etc.
Once it reaches a critical point, you gotta deal with it fast. If she does go into a facility, the move will be hard emotionally as well as physically. She will need your help to get it done.
Meanwhile, others share more travel suggestions for the Dyson family…
Reader comment: Hi Tom and family, I hope your river rafting trip is as memorable as the one I took with my 6- and 8-year-old children on a 3-months Western tour through all the national parks. We did the trip with an Audi that I loaded up with a tent and camping equipment, fishing gear to teach them how to fish for trout, and an inflatable kayak. The many good memories turn out to be everlasting.
In this mountainous and most beautiful country, vistas are grandiose, so put it on a future world trip. All the best to your family, and stay safe!
Reader comment: We live in Bozeman and would love to treat your family to a home-cooked meal sometime this week if it works for your schedule. I did some homeschooling with my kids and might have some fun books to share as well.
Secondly, I highly recommend that you work in a visit to Wisdom, Montana, if at all possible. It’s a wonderful little town, classic Montana (not Bozeman!). There’s a great little campground right around the corner from Main Street (which has a great restaurant, wonderful coffee shop, etc.)
About 15 minutes away is the Big Hole Battlefield where the Nez Perce Indians were camped on their way to Canada when they were attacked by U.S. soldiers. There is a very nice, small museum that overlooks the battlefield and gives a detailed history of what happened. Then down at the actual battlefield, there are teepee “skeletons” set up in the approximate original locations along the river, and there is a walking trail through them.
It is a sacred cemetery for the Nez Perce and is full of history and philosophical discussions for the rest of us. Quite moving, and one of the most beautiful, largely untouched areas of Montana. I hope you enjoy your time here, whether we get to meet up or not.
And another reader is thankful for Tom’s Postcards…
Reader comment: I am in the heavy-highway construction business. I purchased another construction company three years ago. Since my kids are grown and out of the house, I “take care” of this new business, while my very competent management handles operations at our home office. During the summer construction season, I stay at a campground in northern Wisconsin.
Early this summer, a friendly family, pulling a small tent camper, moved in next to us. This friendly family was the Tom Dyson family. The next two evenings, we hosted Tom and his family for dinner. I had very revealing conversations with Tom. Since then, I have been reading Tom and Bill Bonner’s daily e-letters. My Dad (three years passed now) and I always wondered how our country could afford such a tremendous debt; but our conversations started at least 15 years ago!! There is NEVER a politician that ever makes our spending and national debt an issue. I cannot comprehend this.
This year, my company(s) received a very large amount of PPP money. Incredible. How the U.S. government could put together this program, so quickly, and with so little oversight is mind boggling. I firmly believe you are spot on with your conviction of how and why our government is leading us into fiscal ruin. I have 30% of my savings in gold. I will be buying more. Thank you for your daily essays. I am fortunate to know where we are headed, and how to best prepare for it.
As always, thanks to everyone who wrote in! Tom will be back to address questions and comments on Monday, so keep them coming at [email protected].