A “Coffee Can” Portfolio for the Next 40 Years

CHISWICK, WEST LONDON – In the late 1970s, my grandmother made me a “coffee can”…

The idea is, you take something precious, like coins, stamps, bonds, or stock certificates, then you bury them inside a coffee can and hope that many decades later, it’s worth a fortune.

I was born in 1976. Over the next few years, my grandmother put my “coffee can” together, without my knowledge. Then she must’ve given it to my mother to look after.

(Actually, it wasn’t a coffee can. It was a plastic bag. And she didn’t bury it. The plastic bag was tucked away in the attic. I found it yesterday while tidying up. But anyway…)

So how did my coffee can do over the next 40 years?

More below…

London Adventures

Greetings from London…

We came here through chance (my mother died), and we have been (somewhat) forced to stay here through chance. (The administration of my mother’s property plus COVID-19 restrictions on travel will keep us here through the end of the year.)

While we’re here, we’re having an adventure, as we always try to do when we go somewhere.

Here in London, we are seeing as many exhibitions of art, history, sports, and architecture as we can. The kids are doing extracurricular activities. And Kate and I are making as many new friends and rekindling old friendships as we can.

This week, the kids are attending theatre camp. They are singing and dancing all day.

“Dad, I counted,” Dusty said. “There are 18 girls and only four boys in our class.”

“Some would say you’re very fortunate,” I replied.

“It’s terrible.”

“Did you make any new friends yet or even talk to any of the other kids?”

“No.”

What I Found Inside My “Coffee Can”

Back to the buried treasure I discovered yesterday…

Inside the plastic bag, I found a note from my grandmother dated 1978. It said:

“I hope that one day this complete set of the British Commonwealth stamps issued to commemorate the silver jubilee of her majesty Queen Elizabeth II will be enjoyed by you and should you need or want to sell it I hope it will prove a good investment.”

With the note, I found brown envelopes full of stamps from places like Antigua, Barbados, Granada, Tanzania, the Seychelles, and others.

I also found a dozen silver and gold coins in their original packaging. They commemorate events like the Queen’s Jubilee and the wedding between Prince Charles and Lady Diana.

I haven’t had time to appraise what this treasure is worth yet. It will take me a few days to look each item up on eBay. I’ll let you know what I find.

A Coffee Can Portfolio for the Next 40 Years

In the meantime, I wonder… What would I put in it, if I were burying a coffee can today for the next 40 years?

Easy answer. And no, it’s not gold.

There is no greater passive investment on the planet than stock in a company that can compound returns on equity over 10% a year for many years or even decades in a row. No other investment vehicle comes close to this.

($1 compounded at 10% a year turns into $45 over 40 years. Compounded at 15% a year it turns into $268. And compounded at 20% a year, $1 turns into $1,470 over 40 years.)

The trouble is finding the company that will compound returns like this over the next 40 years. I’m unable to see into the future and cannot make adjustments while the coffee can is buried.

So if I had to buy a coffee can today, I’d get around these problems by buying stock in Berkshire Hathaway, superinvestor Warren Buffett’s company.

The guys who run Berkshire Hathaway and its subsidiaries understand the power of compound returns over the long-term better than anyone.

And because Berkshire holds a portfolio of compounders, I wouldn’t have to worry about the business I pick becoming obsolete over a 40-year time horizon.

Luckily, I’m not restricted to burying coffee cans. So what’s my strategy today?

We Can Do Better With This Strategy

Right now, the stock market is the most overvalued it’s ever been.

And investing in Berkshire Hathaway’s Class A shares would set you back roughly $420,000 per share. That’s up 23% from its pre-pandemic high.

And it’s the same story for Berkshire’s cheaper Class B shares. At $278 a share, they’re up 21% from their pre-pandemic high.

That’s probably not that important if you’re going to hold for over 40 years, no matter what. (The power of compound returns is so strong over decades, it almost makes the purchase price irrelevant.)

But in our situation, I think we can do far better by holding gold, silver, and some high-yield shipping stocks while we wait for the great compounders to go on sale. They always do sooner or later when valuations are this high.

To this end, as regular readers know, I am watching the Dow-to-Gold ratio closely. It tracks the Dow Jones stock index in terms of gold.

I’ve also started watching the Berkshire Hathaway-to-Gold ratio closely, which tracks Berkshire Hathaway shares relative to gold.

When the ratio is high, it means Berkshire Hathaway shares are expensive relative to gold. When the ratio is low, it means Berkshire Hathaway shares are cheap relative to gold.

Here’s what the Berkshire Hathaway-to-Gold ratio looks like over the last 20 years, using Berkshire’s Class A shares…

It’s at 235 now. If it were to get down to 120, I’d probably start converting some of our gold into compounders.

And if it ever got to 60, I’d go all-in and start burying coffee cans all over the place for my kids and grandkids.

– Tom Dyson

Readers discuss the merits of homeschooling, after one reader cautioned Tom against it…

Reader comment: Congrats for your homeschooling and spending time with your children! They grow up fast and the time you have with them is precious. You are doing a great job.

I find it interesting and sad when I read comments like the ones lately, warning you of the danger of influencing your children (even though they acknowledge the school system doing the same). Especially the comment, “Religion is, and always has been, a cultural/social phenomenon that is considered by adherents to be immune from critical thinking.”

I have found most of the school systems now practice brainwashing rather than critical thinking. It is obvious this person has not taken the time to read C.S. Lewis.

I find critical thinking skills sharpen my reasoning for believing what I believe. I also see more critical-thinking skills honed through the homeschooling system rather than the public school system. I recommend a book by Pete Bocchino and Norm Geisler titled Unshakeable Foundations for your children when they reach high-school age.

Reader comment: I was homeschooled through grade school and attended public school through high school. I had reached competency with Algebra II in eighth grade, when they didn’t teach this class to most students until 11th grade in public school. Only a handful of classes in four years of high school were helpful to me. Shop classes are at the top, with one English class.

I value my experience playing basketball in public school more than anything else there. I learned where I fit in with a team of guys who worked hard. I have two boys of my own now, and I’ll likely keep them out of public school altogether unless they specifically want to go.

I moved 11 hours away from home when I got married, but I’d love to be close to my mom and dad. I’m certainly glad we’re close to her family anyways, despite our many differences.

I spent my first 12 years where mom, dad, and three siblings were the majority of my interaction. We enjoyed social events and other people, of course. But daily life was mostly exclusive of others. That ended 14 years ago, and we’ll always be a tightly knit unit, no matter how far the physical distances become.

I’m confident that spending time together brought out sharing in love and respect, and is the basis for the strength of our family relationship. Keep it up!

Meanwhile, others weigh in on the Dyson’s decision to settle down in London (for now)… and offer a suggestion to keep Tom’s mother’s valuables…

Reader comment: I so enjoy reading your Postcards and am very happy you’ve given the children a place to be for whatever length of time. And you look very happy and healthy, too.

I hope you stay there for a while or find some way to keep the house, perhaps rent, while you take other trips of discovery. But honestly, for the children to have a base would be ideal – the opportunities for in-depth learning are tremendous there!

I also hope you get a chance to venture to Scotland, where I am now, for the archaeology and incredible beauty as well as the cultural difference.

Reader comment: I’m an old regular to your emails and see all sorts of advice coming your way. I’m going to give you what I believe is some good advice. You will be settling down somewhere when silver and gold go up, i.e., the Dow-to-Gold ratio hits 5.

You will have a place to bring all of your mother’s gems to, and they will be invaluable to you then, so please don’t dispose of them unless they are of no consequence to you. Find a cheapish storage place and bingo.

Tom’s note: As always, thanks for sharing your insights and suggestions. I read every note you send us, even if I don’t respond right away. Please keep writing to me at [email protected], and I’ll do my best to address your messages in a future Friday mailbag edition.