If you’ve been reading my Postcards, you know I promote 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 robo-index funds, mutual funds, stock ETFs, and buy-and-hold stock market strategies…
…and we’re moving to the sidelines (in gold) until stocks get cheap enough for us to buy them again.
In other words, we’re 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 Jones Industrial Average) priced in gold.
As you can see, the primary trend in the stock market has been DOWN since October 2018, when it peaked at 22.36. It’s currently around 14. And it’s on its way back down to 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 at 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.
This trend still has a long way to go. But when it runs its course, I’ll sell my gold and buy what I call “corporate aristocrats.”
These are companies with decades-long track records of relentlessly raising their dividends.
There are no better passive investments than stocks like these. You get rich twice this way. Once from the rising dividends and then, from the compounding effect of reinvesting dividends.
There is no better way to grow wealth.
But until it’s time to buy these corporate aristocrats, I’m sitting on the sidelines in gold, where I will remain until stocks are ready to beat gold again.
I’ll know the time is right by keeping an eye on the Dow-to-Gold ratio.
When the Dow-to-Gold ratio reaches 5 – what Bill Bonner calls its “rendezvous with destiny” – I will resume my long-term corporate aristocrat compounding strategy.
If I’m right about this – and if I time my zigzag correctly – my family will never have to worry about money again.
– Tom Dyson
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Readers have followed Tom’s lead with both the Dow-to-Gold ratio and oil tanker investments. They share their personal experiences here…
Reader comment: Tom, I just finished reading your Tom’s Portfolio report. Thanks for the insights. I bought some gold some years back (have made more than 50% gains so far), but didn’t exactly know how to play it, except just as a hedge against inflation. Now, your Dow-to-Gold strategy really gives the complete picture, and I will most likely use this as my go-to for long-term investing as well.
Reader comment: I have been reading Tom’s postcards from the beginning. I am an 87-year-old widow whose hobby is the stock market. My husband and I did a lot of traveling. I have been in 48 states, and since his death, I have traveled all over Canada and South America. My big wish was to get to Alaska, but something always kept that from happening. I admire Tom and Kate very much. I think he should remarry her as soon as possible.
Reader comment: Like you, I’ve lived a rogue existence. Finance was never my thing. I joined the Marine Corp after being drafted in 1968 because I would only serve two years if I volunteered to go to Vietnam. Now that may seem dumb, but I celebrated my 72nd birthday in April. It hasn’t always been pure luck, but much has.
I entered the market in 2018 with $1,000 I was prepared to lose, but would not risk any more because I couldn’t afford it. I’ve followed your lead on tankers, with funds sitting on the sidelines while I researched the next buy. I have not purchased gold as of this writing because I’d have to break my rule not to put more hard-earned money into play.
Timing is everything in life and the markets. Gold will be my next purchase when I sell again. Thanks for sharing your life experiences and keep your stories coming.
Reader comment: I tuned into the Emergency Investment Summit. Tom is very literate about his subject. It’s my belief the stock market will collapse shortly. There will be another GREAT buying opportunity, like 2008. Keep some reserves ready. By the way, I’m 91, and still in the game.
Tom’s note: Thanks for the kind words! As always, please keep writing us at [email protected]. Kate and I read every note you send us.