Our Dow-to-Gold Trade Gives Us Calm in the Chaos

WEST PALM BEACH, FLORIDA – Things don’t make any sense.

This coronavirus outbreak will put a crimp in economic growth. Yet the market shrugs it off… and goes higher.

As I’ve written before, it increasingly seems to me the market has no relation to the real world.

It’s almost like I’m watching the wrong channel… or reading the wrong script. It seems completely off…

But this isn’t a revelation to me either.

I understood this about the stock market years ago. So I look at all this stuff with a sort of bemused detachment… like watching a couple arguing in public.

And it just underscores the decision I made a year ago: to get out of stocks and go “all in” on gold.

I don’t want to play the stock market’s game. I want no part of it.

I’m just happy to sit on the sidelines in gold, out of harm’s way, and wait for the insanity to pass.

Focus on the Process

If I were to give one piece of advice to my children about managing their investments, it would be this:

“Focus on the process, not on the results.”

In other words, don’t get caught up by all the fads and crazy trends in the world. Do what’s sensible and logical.

Even if you have to wait years – and you probably will – in the end, the market will vindicate you.

Undisciplined investors always get what they deserve. The markets always come back to fundamentals.

Meanwhile, my family and I are sticking together like it’s the only thing that matters…

Not only have Kate and I gone “all-in” on gold. We’ve gone “all-in” on the time we have left together as a family.

“Life is a precious gift,” I think to myself. “I don’t care about anything else except spending time with my family.

“I know I’ll never regret it. I know I’ll never wish I hadn’t spent so much time going on adventures with them when we were all still young.”

Not long from now, we’re starting our next adventure. Stay tuned…

– Tom Dyson

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On readers’ minds today: Being in debt… the Dyson kids’ perspectives on travel… devaluing the dollar… and the dollar’s strength around the globe… 

Reader comment: Love reading your Postcards. You are right, nothing is better than a happy family life. Question: We owe $240,000 on a $350,000 house. We are 74 years old and have an ongoing annual income of $150,000. I’ve bought some gold and cryptos. Not having a house paid off never bothered me. I figured we basically have to pay to live somewhere. In this new world we live in, would you pay this house off or would you keep a mortgage and use the payoff money to make investments? Thanks.

Tom’s response: Personally, I hate being in debt. When I had a mortgage, I saw it as an opportunity to invest my savings at 4% a year, tax-free, risk free, by paying off the mortgage. I couldn’t find another investment anywhere in the world that could beat that.

Reader comment: I’m continuing to enjoy your Postcards every day. As one of your readers said today, I’d be really interested to read what Dusty, Miles, and Penny have to say about your family’s adventures, so here’s a crazy idea: Why don’t you ask Dusty, Miles, and Penny to write one of your postcards? Each of them could write a paragraph or two.

I think it would be fascinating for your readers. You could give them some focus by asking them to write about a very good experience and then a very bad experience. (This is something I do in my writing class at the university where I teach.) 

Tom’s response: I asked Dusty how traveling had changed the family dynamic yesterday. He said “I used to have two houses. Now I have none.”

Reader question: I read your Postcards daily and look forward to each one. Reading the latest one, the question came to mind: They’ve been devaluing the dollar for at least 50 years. What’s different about now? Is it because the rate of devaluation greatly exceeds the interest rates on Treasuries?

Tom’s response: The difference is, now there’s an economic imperative to create inflation. Without inflation, the whole system collapses into a great depression. But free market forces want to deflate the debt bubble. And those forces are more powerful than they’ve ever been. 

Reader comment: I very much enjoy your Postcards from the Fringe and have followed your writing/thinking for years. Your column about dollar velocity and Federal Reserve desire to devalue dollar 3-4% is intriguing.

I have lived in Europe for last 15 years. For most of that time the Euro traded 130-140 range vs. USD with occasional spikes higher or lower. Two to three years ago, it crashed and has been trading around 110. For someone who is converting USD to Euros to pay living costs here, this is a huge boon. I have seen similar dollar strength most everywhere.

For example, the Colombian peso went from 1750 in 2011 to 3950 today. I have heard that one of the reasons for USD strength versus other currencies is that there is so much USD denominated debt around the world, there is a shortage of dollars to pay off this debt so the dollar stays strong. Any comment on that?

Tom’s response: The way I think of it is there’s a giant international short position in the dollar. And when we see the dollar rise, it’s a bit like we’re seeing a giant short-covering rally. The entity with the largest short position of all – the ringleader of the trade – is the U.S. government. And during these “short-covering rallies,” the U.S. government feels extreme stress and anxiety from its giant short position. Luckily for it, it owns a printing press… and it has the power to print unlimited quantities of the very thing it has a short position in.

What side of the trade do you want to be on? I want to be on the same side of the trade as the U.S. government, doing my best to avoid the short covering rallies, for as long as the U.S. government has the power to print. It’s easier said than done.

And, as you know, your messages are an integral part of these Postcards! Please keep writing us at [email protected].