Shelter-in-Place: Memories of Another Lifetime

WEST PALM BEACH, FLORIDA – I remember the very moment.

I was sitting in my bed. Next to me, in his bed, a boy was crying… He was trying to hide it, but I could hear him.

Several other boys in the dormitory were crying, too. I could hear their little muffled sniffles in the dark.

I didn’t cry. I just sat upright in my bed, looked around the room, and thought to myself: “I’m not going to cry.”

And just like that, I buried my feelings. And I adopted the brave-faced, defensive position that would get me through the next 11 years in British boarding schools…

Sheltered In

Greetings from West Palm Beach, Florida…

We’re sheltering in place from the virus that’s spread around the world recently.

I hope you and your family are doing okay.

As for the financial markets, they seem to have gotten past the initial shock from the coronavirus story.

Governments and central banks around the world are – as we predicted all along – doing whatever it takes to re-inflate the everything bubble.

Stock markets have bounced 40% from their lows last month. Bond ETFs have recovered similarly. It’s no surprise…

First, we went through what they call the “guillotine” stage of the bear market.

That’s the sudden collapse that happens in the early stages… as investors try to price the sudden appearance of a “black swan” event. (Black swans are events that happen suddenly and have major consequences.)

The black swan has now been factored in, the uncertainty factor is clearing, and prices have found some stability. Now, investors have the much more gradual task of pricing in the effects of the black swan on the economy over the next couple of years.

They call this next stage of the bear market the “sandpaper” stage… because it’ll be a long, grinding slog to lower prices instead of the guillotine chop we saw last month.

Our Stock Market Timing Tool

As regular Postcards readers know, I traded my stocks for gold in the fall of 2018.

That’s when the Dow-to-Gold ratio – our stock market timing tool – started falling again, for the first time in almost a decade.

This chart shows the ratio of the Dow to gold…

My view is that the stock market is in a BEAR market (measured against gold) and it will keep drifting lower (in gold terms) for the next five to 10 years.

I expect the chart above to go below 5. Then, and only then, it’ll be time for us to get out of gold… and get back into the stock market.

Dyson, 103

I went to boarding school when I was 7. My mother dropped me off one Sunday evening at dusk.

The school was a small country estate house in the Berkshire countryside, built in the Georgian era, with stern concrete steps leading up to a big, wooden door.

There was a large, dark cedar tree on the front lawn. It was huge and foreboding.

When my mother dropped me off, I was wearing grey flannel shorts, a grey shirt, a grey flannel jacket, and a green tie.

I wore long socks, too, that were fixed below my knees with tight elastic garters… along with stiff polished chestnut leather shoes, of a sort I’d never seen before. (I’d only worn American sneakers up until then.)

Every boy had a trunk for his stuff. It was a large box with reinforced corners, rivets along the edges, and a big brass lock on the front.

It was the sort of luggage you’d have with you for a trip on an ocean liner a hundred years ago. Mine was navy blue.

My mother had painted my name – “Dyson” – and the number 103 on the top in white paint.

Boarding School Syndrome

I don’t remember what happened to my trunk. It had come with us in the car. I expect one of the teachers took it away somewhere.

And I don’t remember my mother driving away, either. Or even saying goodbye to her.

The psychoanalyst Joy Schaverien, who coined the term “boarding-school syndrome,” calls this the “threshold moment.”

She describes how, for some, the memory of it is obliterated in later life by protective amnesia… while for others, it becomes etched on the brain, to be re-lived endlessly thereafter.

What I do remember is standing in the driveway, feeling shell-shocked as the reality of what was happening to me finally started sinking in.

A few minutes later, I found myself standing inside the building, alone in some corridor. It was cold, even though I was indoors. And it smelled like a Victorian-era hospital.

But I remember the light most of all.

A single lightbulb hung from the ceiling on a wire. It cast a dim but menacing light. Together – the half-light, the cold, and the smell – said, “This is not your home.”

In the morning, the matron came in and gathered up the sheets of all the boys who had wet their beds in the night… including the boy in the bed next to me.

He would cry himself to sleep and wet his bed every night, I’d come to learn…

– Tom Dyson

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In today’s mailbag, one reader praises Tom for Thursday’s postcard, “This Can’t End Well”… and asks him about the safest places to live in the world…

Reader comment: I read your articles every day. They are very entertaining and informative. I travel internationally as well and enjoy reading about your family’s adventures on the road. As much as I enjoy your personal stories, I appreciate and benefit even more the economic advice you offer.

Thursday’s guidance was especially appreciated. Your writings are always presented in a simple and easy-to-understand format, yet profound and vital in impact. If and/or when things go from bad to worse economically in America, where do you believe there would be safer and more secure places to move to in the world?

Tom’s response: This is a tough question to answer, because there are so many things to consider when deciding where to live. Just to throw out one place that we visited and felt very safe, Japan. We felt so safe there, we let our children run around unsupervised, which was the only place in the world we felt comfortable doing this.

But here’s the thing. Most places in the world are neither safe NOR dangerous. While we wouldn’t go to places like South Africa or Venezuela, because they are dangerous, we also wouldn’t limit ourselves to places like Japan that are safe. I guess another way of saying this is, avoiding all risk isn’t an optimal strategy for us.

What makes much more sense to us is going to cheap countries, where our money can be stretched much further and going to countries that are unpopular with tourists, where the locals work hard to earn our tourist dollars. These countries aren’t necessarily safe, but they aren’t exactly dangerous, either. And at least we get much better value for our money by living there.

We can debate how safe America is. I feel that you’re just as likely to get robbed or be the victim of violence in America as you are in most other places in the world. I don’t mind. I just don’t want to pay twice the price to live here for the same amount of risk. Does that make sense?

While other readers ask about gold ETFs and exiting the bond market…

Reader question: I enjoy your Postcards but would appreciate a further explanation about your feelings about GLD. You expressed a negative feeling about it once…

Tom’s response: There are a dozen gold ETFs in the market you can choose from. GLD is one of the most expensive ones. It has an annual fee of 0.4%. Other gold ETFs have annual fees as low as 0.17%.)

The other thing I don’t like about it is that you can’t redeem GLD shares for physical gold. Other gold ETFs offer this feature and I prefer that.

Reader question: When you suggest getting money out of the bond market and into most anything else, are you just talking about government bonds, or corporate bonds as well? It would seem that the Fed flooding the economy with easy money and low interest rates would make corporate bonds safer, at least in the short term. And thanks for these marvelous postcards!

Tom’s response: I’ve said bond investors are going to be served as the main course at this feast. I don’t mean their bonds are going to default. In fact, I don’t think the Fed will let any bonds default. They’ve even started bailing out the junk bond market recently. What I mean is, they’re going to debase the dollar drastically.

When the bond market figures this out, I think there’s going to be an almighty stampede out of the credit markets and into the markets for real assets, including stocks, real estate, and especially gold and silver.

And, as always, thank you for your messages! Kate and I read every one. Please keep writing us at [email protected].