One Decision Can Make You Rich

CHISWICK, WEST LONDON – Greetings from West London…

My family and I have come to London to liquidate my late mother’s estate. We just completed our 10-day quarantine and we can now go outside.

For my first foray into the outside world, I took the train to Hampton Wick and dropped my mother’s will off at the lawyer’s office. I also gave them the final figure for the value of my mother’s estate so we can pay the inheritance tax on it.

My mother arrived in London in 1982 with nothing, not even a high school education. (She came from America after getting divorced from my father.)

She died a rich woman, mainly because of one decision… The decision to buy her house. It appreciated by 13x over 35 years.

We must now share 40% of this good fortune with the government. But there’ll still be plenty left over for my brother Jo and me…

“All-In” On Gold

Meanwhile, turning to the markets, Kate and I made a different investment decision.

We’re not banking our retirement on a house. We like the nomadic lifestyle too much, drifting from town to town, country to country, like seeds in the wind…

Instead, in 2018, we went nearly “all-in” on a different asset class: gold.

As regular readers know, I first discovered gold in 2002… and left hundreds of thousands of dollars in profits on the table.

But I’m not making that same amateur mistake again.

This time, I’m following the Dow-to-Gold ratio, which tracks the Dow Jones index in terms of gold.

And I’m not selling my gold until the ratio gives us our sell signal.

Rendezvous With Destiny

If you’ve been reading these Postcards, you’ll know what that signal is…

When the Dow-to-Gold ratio falls below 5 – what my mentor Bill Bonner calls its “rendezvous with destiny” – that’ll be the time to get out of gold and back into stocks.

This chart tells the whole story…

It shows the Dow-to-Gold ratio going back 120 years.

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 these 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 above.

Notice how the Dow-to-Gold ratio moves in big, clear, predictable waves. Notice how it peaked in 1999.

Notice how the primary trend got interrupted in 2011, and the Dow-to-Gold ratio rebounded. And finally, notice how the ratio started falling again in late 2018.

That’s when I drained my bank and retirement accounts and put everything into gold and silver. I’ll stay there – on the sidelines – until the ratio falls below 5 again.

– Tom Dyson

P.S. The kids chose the playground for their first sortie. Here they are enjoying the sunshine…

Like what you’re reading? Send your thoughts to [email protected].

A suggestion for Tom as he liquidates his mother’s estate… another perspective on worries over the Dyson family’s nomadic lifestyle… and gratitude for the Postcards…

Reader comment: You comment that your mom’s antique furniture is almost worthless. Depending on its condition, there is a niche market for the old stuff. I subscribe to Architectural Digest. Some of the richest and fanciest homeowners featured there often point to their antique furniture. Just suggesting you check out that market. Don’t let what you think you know get in the way of discovering what you don’t know.

Reader comment: I am a military brat and moved constantly as my dad was reassigned. South Carolina, Mississippi, California, Florida, and Maryland. And someplace else I can’t remember right now. But many military and civilian families are moved frequently. One learns to adjust and make new friends.

I, personally, am grateful for the experience. At my age, 75, I look back on the people I have known, and I think those who have learned to adapt have better lives. Traveling and moving broaden one’s view and understanding of life.

Reader comment: Thank you for sharing your life’s work and your travels. I haven’t been out of my state and have dreamed of doing what you have done. I hope it’s not too late for me to get out and see the world. I’ve had setbacks in my life and am currently working out of another one because I don’t give up. I think it will pay off this time.

I lost my job of 22 years working for a school district after a work injury, and they deemed me a liability. I’m healthy and fine. I was looking for work when the pandemic occurred. I have since delved deeper into economics and finances in study and research. Your Postcards are enlightening for me.

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