Maria’s Note: Maria Bonaventura here, Tom’s longtime managing editor on Postcards From the Fringe. While the Dysons raft down Idaho’s “River of No Return” – where they have no internet access – we’re bringing you some essential reading for Postcards fans.
On Wednesday, we shared the worrying reason why Tom and Kate put their life savings into gold. Yesterday, we showed you how to time your move into gold… and, eventually, out of it. And today, Tom explains why he chose a specific type of gold to keep his wealth safe while the investment markets correct.
I’ve been warning that the stock market had a long way to fall in terms of gold since I started writing these Postcards in the summer of 2019.
Bill Bonner has been warning that the stock market had a long way to fall in terms of gold since 1998.
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… And this year, the coronavirus revealed the system’s instabilities.
Today, our position remains the same: The stock market still has a long way to fall in terms of gold.
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).
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 below, which shows the Dow-to-Gold ratio going back 120 years…
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 is at 14 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.
If you have a large position in the stock market – and you want to avoid the 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.
Now, keep in mind that I’m not buying gold as an investment.
I’m simply lightening up on passive stock market investments like robo-index funds, mutual funds, stock ETFs, and buy-and-hold stock market strategies…
…and I’m staying on the sidelines (in gold) until stocks get cheap enough to buy them again.
In other words, I’m 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.
– Tom Dyson
P.S. I invested nearly $1 million of my own money into this strategy. Am I crazy? Watch this and decide for yourself…
One reader encourages Tom and Kate on their homeschool journey… while another passes along a book suggestion…
Reader comment: Hello, Dyson clan. Some of your readers have written about their homeschooled children passing the SAT. Do not be unduly impressed. Since your children homeschooled, there may come a time when standardized tests are required of them; you and Kate should not become critical of yourselves should undesirable scores result.
Your children are learning things that cannot be taught in schools, nor necessarily scored. I was an evaluator for the company that administers the standardized tests for schools. All is not as it seems. Should we ever speak, I shall disclose some of the inner workings of the “system.” Continued happy wanderings.
Reader comment: Tom – If you’re unfamiliar with it, I’m pretty certain you’d enjoy Desert Solitaire by Edward Abbey. I think you’d find the two of you have much in common, from his rebellious spirit, independent thinking, and deep appreciation of nature and the great outdoors. Maybe it’s available on audio.
And a reader with experience caring for elderly patients gives Tom advice…
Reader comment: Hola Tom, I’m sorry to hear about the progress of your mother. As a Gerontology Clinical Nurse Specialist, I’m truly surprised that you Mom has been able to be safe and alone at home. From my many years of working with the elder population, I can tell you the issues of those with Parkinson’s Disease.
They are generally intelligent and have very stubborn personalities And most elders don’t want to leave their own homes.
My consulting advice – which, by the way, I used on my 100-year-old paternal aunt and my mother – is to say, “You still have the capacity to choose for yourself. You are no longer safe to live on your own. When a crisis such as a fall with a broken bone occurs, you will no longer get the option to choose. The medical profession and Adult Protective Services will take over and *tell* you what you must do.” And yes, there is such a thing as abusing yourself by neglect.
While you have the opportunity now, choose an assisted living facility that suits you and get moved ASAP. It’s really hard to be faced with being the “strong arm” to a close family member that you care about.
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].