In the 1840s, Henry David Thoreau lived in a cabin in the woods for two years. He wrote Walden, a famous book about his experience.
In 2018, Kate and I went to live in our own “financial” cabin in the woods.
We sold all our liquid assets, drained our bank accounts, and handed in the keys to our apartments. I sold my car, all my furniture, and converted everything to physical gold and silver.
It wasn’t an investment in gold. Or a speculation to make money.
We simply decided we didn’t want to participate in the financial system anymore. So we took a financial sabbatical… and decided to go live in the “woods” for a while…
Today, as I write to you, Kate and I remain in our financial “cabin in the woods.” And as I study economics and watch the financial news, things have gotten even worse…
The Feds’ Inappropriate Experiment
The whole system resembles a giant and completely inappropriate experiment. The feds are still “managing” the economy… with more financial engineering, more unsound money, bigger deficits, and more soothing words.
The weaker the economy gets, the more they prop it up.
I see cracks everywhere – sudden air pockets in the stock market… irrational pricing… fragility… and absurd attitudes toward investing.
A popular refrain these days to anyone who sounds the alarm is “have fun staying poor.”
I see TikTok videos of inexperienced investors gloating about their profits. And celebrities pumping cryptocurrencies. And flash mobs engineering massive coordinated short squeezes.
In the roughly two years since Kate and I left the banking system, we’ve seen the stock market act like a penny stock, declining by 14%, then rallying by 28%, then declining by 34%, then rallying by 66%.
I see a total rejection of saving in favor of speculation… Things like quantitative easing (QE). And negative interest rates. And stimulus checks for purchasing penny stocks.
The economy seems almost like it is begging to liquidate itself. And yet the feds keep pushing it up and talking it up.
The most disconcerting part of it all is that no one seems to care. It feels like we are riding on the Titanic towards an ice field… the captain keeps pushing the boat to go even faster… and below deck, they’re drinking and dancing.
So we’re sticking with our cabin in the woods. We’ll stay here, off the grid, until it’s safe to return to the financial system. How will we know when it’s safe?
For that, I follow the Dow-to-Gold ratio…
Our Ultimate Barometer
As longtime Postcards readers know, the Dow-to-Gold ratio tracks the Dow Jones stocks as priced in gold. And it tells us the best times to be an investor, and the best times to be a saver.
When stocks are cheap relative to gold, you hold stocks. I’m using 5 as an important level. That is, when the Dow-to-Gold ratio goes below 5 – meaning you can buy the Dow with less than five ounces of gold – we’ll venture out of our cabin and start investing in the stock market again.
And then, we’ll sell these investments when they become expensive – when the Dow-to-Gold ratio rises above 15. At that point, we’ll convert our investments back to gold and return to our cabin until stocks become cheap again (in gold terms). Hopefully, this is a long time in the future.
The Dow-to-Gold ratio is our ultimate barometer. It’s around 16.75 today… And, despite bouncing over the last nine months, if history is any guide, it still has some big declines ahead…
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– Tom Dyson
P.S. This is not a typical stock market boom being driven by a “new economy” or another great innovation. Instead, we’re in the early stages of a global synchronized currency devaluation. And the activity we’re seeing in the stock market is a reaction to the dollar and other world currencies losing their values.
It’s why real estate prices are going crazy, too. And the price of steel is exploding. And agricultural commodities like wheat and corn are soaring. While the atmosphere is quite rowdy, I don’t think it’s irrational, for the most part…
Still, that doesn’t necessarily mean it’s sustainable. That’s why Kate and I moved to the sidelines in gold, so we can protect and grow our nest egg over the next decade. For anyone who wants to do the same, I put together a model portfolio – including specific percentage allocations and the 11 gold stocks I recommend today. Learn more here.
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FROM THE MAILBAG
Praise for Tom’s bitcoin conversation, “A Bitcoin Skeptic Speaks Out,” with Chris Lowe, from Legacy Research’s Inner Circle newsletter (click here to learn more)… and gratitude for the Postcards…
Reader comment: Just wanted to say that I listened to your recent conversation with Chris Lowe and found it to be the most interesting, intelligent discussion I’ve heard in a LONG time…I’ve been following your Postcards since India and am a big fan.
I’m not a wealthy man but have a large chunk of my assets in gold (physical and mining stocks). I was in tanker stocks before you brought them up and have expanded that position since. Plus, I own some other stocks, real estate, art, and collectibles…
Sometimes, you do things that make me shake my head but there is method, maybe even genius, in your moments of madness. I’d truly enjoy a long conversation with you someday, but for now, I will just settle for saying, “Thank (insert your favorite deity here) that Tom Dyson lives and writes!”
Reader comment: The nice thing about reading your posts is they trigger happy memories of experiences I have had with my kids during their upbringing. Not only do I learn from your economic insights, but the emotional satisfaction I get dredging up those happy memories is a rich added bonus.
I admire your life choices. The bonds of love and family-bonding you have created mark you as a special man with exceptionally wise instincts. It makes me study ever harder your investment and economic advice.
Reader comment: I have saved your emails. I find the beautiful life you are living with your wife and children refreshing. I’m sure it will shape your children in a way all the money in the world can’t buy!
I grew up in a middle class home and we lived a very humble life. The one thing I was always sure of was my parents’ love for me and my four brothers. The simplicity of our lives has given my brothers and me a bond, and work ethic superior to anyone I have ever met.
I feel my children are cheated not for their lack of things… but with the age of computers, cell phones, and the material world of today. That my children will never feel as secure as I did doing the simple things… like a card game or going to church all together on Sunday! Can’t wait to read your book one day!
And finally, condolences to the Dyson family on the loss of Tom’s mother, Teddy Dyson…
Reader comment: We are sending our deepest condolences to you and your family in the passing of your beloved mother. It feels like a loss to us (of course, not in the same way) because of how you have opened up your life to us. You have an incredible gift in writing, not just about the financial arena, but about your joys, grief, losses, and dreams. Thank you for sharing yourself and family with all of us. We are all better and richer from it.
Tom’s note: Thanks to everyone who wrote in! Your notes keep us going. Please keep writing us at [email protected].