Tom’s Simple Bet

CHISWICK, WEST LONDON – Greetings from the U.K…

We’re still holed up at my mother’s house in quarantine.

I’m working on our application for probate. The kids are doing their schoolwork. And Kate is building a pile of clothes for donation to charity. 

Here are Kate and Dusty (13) getting some screen time…

Not much more to report from us, so let’s turn to the markets…

Simple Bet

As regular readers know, Kate and I bet our life savings on a simple idea: That gold will beat the Dow Jones index over the next 10 years or so.

We track this by following the decline in the Dow-to-Gold ratio. This ratio measures the Dow in terms of gold.

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 the 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 this in the chart below…

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

Notice how it peaked in 1999. Then, notice how the primary trend down got interrupted in 2011, and the Dow-to-Gold ratio rebounded.

Finally, notice how the ratio started falling again in late 2018. That’s when we placed our bet.

Since then, despite a retracement over the past nine months, gold has gone up 51%… while the Dow has gone up 28%.

That means we’re winning.

By the time this cycle is over, I expect the Dow-to-Gold ratio to be somewhere below 5 – what we call its “rendezvous with destiny.”

That’ll be the time to get out of gold and back into stocks.

But for now, we wait. The Dow-to-Gold ratio stands at 19 today…

– Tom Dyson

P.S. My mother had a will. And she kept detailed records of all her affairs in a filing cabinet. She also versed me in everything she owned before she died.

Thanks to this prep work, my job as executor couldn’t be any easier. I don’t even have to log into bank websites to access her statements. It’s all here in hard copy in front of me.

Kate and I must remember to help our children in the same way when the time comes. Because dealing with a disorganized estate must be a nightmare…

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

Well wishes and a suggestion for Tom… and an update from a couple who gave the Dyson family a place to stay during their American road trip…

Reader comment: Have a safe and stressless journey! Love reading your Postcards! Would have loved to experience your lifestyle as an adult but also as a child. A great adventure indeed! Cheers!

Reader comment: Glad that you all made it to London. Good luck with the sale of your mother’s residence and furnishings. I hope you price it two ways, one in its entirety (real estate and furnishings) and the other auctioning off items separately. When the appraisal is completed, you may wish to let your readers know, in case any of us are interested in purchasing.

In any event, good luck.

Reader comment: Hard to believe it’s been a year since you camped in our horse pasture! I want to wish you well on your trip to London. We have spent the past year clearing out my parents’ house. They had moved into their assisted living residence shortly before your visit. We spent over six months going through the items in their house.

First, making sure they had everything they wanted to take to their new home. Then, we started to clean out the remaining items to get the house ready for sale. We found a number of envelopes with cash in them. We asked my mom why she did that. We had a great laugh when she said, “Because your father never gave me an allowance!” We literally had to go through every drawer and open every envelope to make sure we didn’t throw any cash out.

We can attest to the shortage of houses for sale. Once we finally got the house cleaned out in January, the house sold in two weeks, as is. At asking price. The realtor had over 50 people lined up to tour the house when he held the open house. I hope you are able to resolve your mother’s estate faster than we were able to do my parents’ home and belongings. Safe travels!

Tom’s note: Thanks for writing in! We love hearing from you, and we love getting updates from those we met during our trip across America. Please send your questions and comments to [email protected], and I’ll do my best to answer them in a future Friday mailbag edition.