PORT ST. LUCIE, FLORIDA – For the last 18 months, I’ve been focused on gold. Kate and I have put all of our savings and retirement accounts into physical gold, silver, and mining stocks.
We’re waiting for the Dow-to-Gold ratio to hit 5. Then we’ll start transitioning into stocks that pay rising dividends, which we’ll use for long term compounding.
I call these stocks “corporate aristocrats.” They’re companies with entrenched market positions, strong brand recognition, don’t have big expansion plans, and raise their dividends relentlessly year after year.
There’s simply no better way to generate high rates of return over long periods… especially if you can buy them when they’re cheap…
We’ll stay there, most likely, for the rest of my life. In the meantime, there’s nothing left to do but wait…
Except there is one trade outside of gold that’s got my attention right now (more below).
Greetings from the campground…
It’s day one of our road trip from Florida to Alaska. We’ve traveled 68 miles. So far so good.
Our little pop up tent is cozy and comfortable. The weather is perfect (a nice breeze keeps us cool night and day) and we’re in a beautiful spot.
We’re in site #15, the best site in the house, right next to the wetlands. I’m writing to you from the picnic table at sunrise. Here’s my office today…
Our spot next to the wetlands
A seven-foot alligator named Stinky Pete lives in the water behind our tent. He’s been watching us all day.
Some neighbors came over to warn us when they saw we had children. They said we shouldn’t let the children get too close to the water.
Tomorrow we get back on the road heading north…
The Most Contrarian Idea in the Markets
Back to the trade I mentioned… What it comes down to is something I’ve been warning about in these Postcards for months: inflation.
The inflation trade is the most contrarian, most unexpected, most dismissed trading idea in the markets right now.
Bloomberg Businessweek published this magazine cover in April 2019:
The Economist published this one in October 2019:
Magazine covers show what ideas are winning in popular investing culture.
Right now, deflation owns the narrative war and it may still have legs. But eventually, the tide will turn. When it does, trillions of dollars will come charging out of the bond markets, where they’ve fled to for safety over the past two months.
Relative to other asset classes, industrial commodities are the cheapest they’ve been in 100 years. My hypothesis is that, of the capital that comes out of the bond markets, much of it will go into commodities markets.
As I said, it may take a while for the deflation narrative to die… But uh oh… What’s this?
The prices U.S. consumers paid for groceries jumped 2.6% in April, the highest monthly jump in food prices since February 1974. Could the tide be starting to turn?
My Favorite Way to Play It
My favorite industrial commodity play right now is shipping. The shipping industry is cyclical. It responds to supply and demand.
Currently, there are pockets of the shipping industry where you can buy ships at an 80% discount to their market values. You can buy modern ships trading near their scrap values.
It’s the most hated, ignored, depressed industry in the stock market.
There are three main categories of shippers: energy, containers, and dry bulk.
I’ve written about the energy segment before – namely, oil tankers. (Catch up here, here, and here.) The dry bulk segment is mainly concerned with hauling iron ore from Brazil to China. It’s getting absolutely hammered…
From the FreightWaves magazine:
After plunging 21% on Monday to $3,842/day, which was awful enough, Capesize drybulk shipping rates have just crashed down another 25% on Tuesday, to $2,893/day.
Can you imagine being able to hire a giant bulker for $3,000 a day? Kate and I should rent one for a day, get married on it, and then throw a big party on board…
If inflation returns, ships will do extremely well. But with how hated and depressed the industry is, you have to be very brave to invest in it now…
– Tom Dyson
P.S. Here’s Miles (10) watching for Stinky Pete while enjoying his milk…
P.P.S. Going back to our gold strategy… As you know, I’m “all in.” In fact, I’ve invested nearly $1 million of my own money into this idea. In these Postcards, I’ve written before about the benefits of buying bullion. But there’s much more to our strategy than that. On Wednesday, May 20, I’m sharing the details in an urgent briefing. Save your spot right here.