An Important New Low

We’re now living in a two-bedroom cottage on a tropical fruit orchard in the Kerala backcountry. It’s brand new. The WiFi is fast, the water is hot, and it is cool inside.

And the best part: Three times a day, our hosts lay out an incredible spread of local cuisine (all veg, all cooked from scratch).

Yesterday, before lunch, I went into the orchard and picked a handful of little red chili peppers off a bush to eat with our curry.

We’ve never eaten so well. And it’s so nice to see the kids, normally fussy eaters, eating so much healthy food.

We’re paying $35 a night to stay here. Plus another $15 a day for the food. We’ll stay here for 10 nights.

As parents, one thing we really care about is that our kids are humans who other humans like being around. Which is why we find it so ironic when the first question most people ask us – when they find out we homeschool – is “How do you socialize them?”

“Not all classrooms have four walls,” we say.

Nothing makes me more proud than watching the kids hanging out in the common area of some youth hostel, swapping travel stories with the other backpackers. Or watching them play soccer with local kids in the exotic countries we visit.

Here’s Penny (6)…

Meanwhile, I’ve been keeping a close eye on the markets. The chart below caught my eye.

This chart shows the amount of money invested in bonds with negative yields, worldwide. Overlaid with gold, it shows the important relationship between gold and interest rates. (The further the interest rates banks and governments are offering fall, the more attractive gold becomes.)

This chart tells me that a) if/when inflation returns, there’s going to be a megalanche of money coming from the bond market. Rising inflation is bad for the value of bonds. It also cuts down your real returns from the yield. When this happens, money will flood into gold. I intend to capitalize on this.

And b) this isn’t going to happen for a while. (I have a reliable early indicator. I’ll keep you posted.)

When I met with Bill Bonner and Dan Denning in London a month ago, the Dow-to-Gold ratio was at 20.25. Yesterday, it broke below 19 and is now at 18.91. The wheels are turning…

If you want to participate in this trade (betting on a fall in the Dow-to-Gold ratio), you need to act now. Once the ratio falls below 18.5, the train will have left the station. I won’t be recommending this trade anymore (unless it rises back above 18.5).

After meeting with Bill and Dan, I set up a model million-dollar portfolio to observe this trading idea in the real world.

This portfolio is now worth $1,124,465. Later today, I’m sharing the details of this portfolio with readers of The Bonner-Denning Letter. And I’m showing them two ways to express it in the market, one of which uses leverage to amplify returns.

If you’re already a Bonner-Denning Letter subscriber, then simply watch for your issue later today. If you’re not, you can join up right here.

– Tom Dyson