Why Tom Is Buying “Old Economy” Stocks

DRIGGS, IDAHO – Airbnb CEO Brian Chesky on his company’s growth:

The reason it’s grown so fast is, unlike traditional businesses, we don’t have to pour concrete. The infrastructure and the investment was already made by cities a generation ago. And so all of a sudden, all you needed was the internet.

“We don’t have to pour concrete”…

Businesses based on intangible assets (like an online marketplace) inherently scale better than businesses based on hard assets.

Scaling intangible-assets-based businesses = hiring people. Scaling businesses based on hard assets = pouring concrete.

My response below…

Our Cabin in the Mountains

Greetings from our cabin in the mountains…

Here we are heading up the mountain to ski this morning. We got 7 inches of snow last night, so it’ll be another powder day. We’ve got studded snow tires on our car.

Another big dump is expected tomorrow night. Our landlord rented us this garage so our car doesn’t get buried in snow…

Deep in the Idaho Snow

America hit record coronavirus hospitalizations for the seventh day on Saturday, and cases topped 16 million.

We’re alone in a cabin… surrounded by mountains… deep in the snow… cut off from the rest of the world…

We could be stuck in a jail cell together and I’d be happy. (One time we were stuck in a jail cell – in Egypt.) Or in a traffic jam. Or at an airport… as long as we’re together.

Here in Driggs, we’re in a luxurious little Airbnb with high speed internet, Netflix, and board games. There’s a nice supermarket close by. And we can go skiing every day.

I have never been happier. We’re having a great time.

Here we are eating supper and watching Heartland after we got home from skiing…

Safe Returns, Surprise Upside

I love Airbnb. We’ve used them a hundred times. We’re using one now. And I completely agree with CEO Brian Chesky’s sentiments…

These online platform companies are incredible businesses… the best, most profitable businesses in all the history of capitalism.

Meanwhile, low-margin, capital-intensive businesses like pipelines, ships, mines, refineries, etc. are shunned by investors.

But I guess it depends what you’re looking for…

If you want an exciting story stock to talk about at a cocktail party, then heavy industrials won’t interest you.

But if you want a safe 12% return, inflation protection, and the prospect of a surprise upside revaluation in your stock, cheap, old economy stocks are the way to go.

Besides, the stock market is near the highest valuations it’s ever had, we’re in a recession, and Washington is running the greatest financial experiment the world has ever seen.

The only viable stocks, in my opinion, are defensive stocks with high free-cash-flow yields.

– Tom Dyson

P.S. Investors were ignoring old economy stocks in 1999, too. That was the last time stock market valuations set all-time records. Utilities, materials, and energy underperformed tech, health care, financials in the ’90s. But then the dot-come bubble burst, and the tables turned…

Over the next decade, old economy stocks ended up being a much better investment than new economy stocks. Tech, health care, and financials lost 28% from 2000 to 2009. While utilities, materials, and energy went up 46%, according to research from CNBC.

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

Last week, readers scolded Tom for traveling from Idaho to Florida to spend Thanksgiving with Kate’s parents. Today, others come to Tom’s defense…

Reader comment: Hope you had a good Thanksgiving with your family. Unfortunate to see all the believers scolding you for spending a family holiday with your family. Here in Alberta, we may or may not be permitted to spend Christmas with our families. The government hasn’t decided yet. I wish you and your family all the best.

The people I respect the most are those like yourselves who take the hard road and do whatever it takes to raise their children and provide them with a loving, caring home. Thank you for sharing your lives with us. I read nearly every day.

Reader comment: Don’t listen to the Corona fearmongering. You did the right thing to show courage and to not bow to the Deep State hoax called Corona. Your chance of getting the hoax virus is slim and, even if you did, symptoms probably would not appear in healthy people as you folks are! Live fearlessly! Keep up the good work!

Reader comment: I would like to say it is refreshing to find out that you’re not brainwashed. Everything needs to be open. People have to work and make money. Lockdowns are illegal and the new studies show masks give you COVID. Particles get stuck in the mask and you breath it in all day.

The number of deaths are minimal compared to the amount of people in the U.S. I am 68 and I have traveled halfway around the world, and go everywhere, and I very seldom wear a mask. Lockdowns are about “cancel culture” and not COVID. Keep up your travels and Happy Thanksgiving.

Meanwhile, others have concerns about wind power… suggest fun art and TV shows… offer their hospitality… and praise Penny’s skiing…

Reader comment: I have farmland. Like you saw on your trip, there are windmills popping up on all sides of me. As a farmer, I worry about whether we will have rain at the right time and in the right amount to raise crops to feed the people of this country and the world.

The direction of the wind, in combination with pressure, determines whether there will be the opportunity for rain. The speed of the wind determines whether the amount of rain is a lot or very little. A windmill is resistance to wind. Like when you put a large rock in a river, the direction and speed of the flow of water changes.

I worry about whether all these windmills could negatively change the climate for our little farm. I have yet to see any studies about this concern. We are told to embrace windmills as the saviors of this Earth, without regard to possible negative consequences. Unfortunately, only time will tell.

Reader comment: I enjoy reading your Postcards from the Fringe. Your kids might like Zentangle (a form of art for everyone that you can do with a pen and paper, although some pens and some paper make it more enjoyable). Kids often catch on more quickly than adults.

Reader comment: We live in a suburb of Wichita, Kansas, and like many others of your readers, if you venture this way, we would love to meet you and potentially host you. We recently moved into a smaller patio home so only have one spare bedroom but do have a screened-in back porch that young people (like your kids) would probably not mind sleeping on it.

I’ve enjoyed your postcards and look forward to reading them. I agree on bitcoin and have had too many computer failures in the past to trust that I would always have access. Plus, our government, if push comes to shove, could easily deny access to the internet and thus, block access to bitcoin. I went to school at the University of Idaho years ago and Idaho is a beautiful state. Enjoy your stay.

Reader comment: I didn’t realize you were going to pass through Oklahoma on your way back to your winter playground or I would have sent a message earlier. If you head towards northwest Oklahoma, it would be great to meet you and your family and to visit for a bit. My wife and I live on the farm where I grew up, and where my dad and his siblings were born. If you want to stop by, give me a call. If you aren’t able to make it, I wish you a safe trip and an awesome winter!

Reader comment: Thoroughly enjoy reading the family’s adventures. I would like to suggest an “old” television show that I watched as a kid. The program was called Kung Fu (1972-1975). The show starred David Carradine as a fugitive Shaolin monk in the American Old West. Each episode provided a philosophical thought. Hope the family can view. Take care and Happy Holidays.

Reader comment: Don’t let the cryptocurrency boys toss you off your horse. Bitcoin et al. is a figment of imagination. Brought to you by the same folks that gave you Y2K! And AI, for that matter. Next time you’re looking at a computer and thinking about how all powerful it is, just reach over and pull the plug! Bill Bonner has a saying: “Men believe what they need to believe when they need to believe it.”

Reader comment: I just watched day 7 of Penny learning to ski and she is amazing! You and Kate must be such proud parents. Penny looks like a total natural, you go girl!

Reader comment: Dude… love your Postcards. Go Penny, go!!! Just a note: check out Canadian dentist Weston A. Price if you get a chance. You are what you eat… and your kids are what they eat. Price did some fabulous research in the ’30s, checking on the foods that “primitive” peoples ate and what happens to their bodies (and their children’s bodies) when exposed to the “white man’s” food. Check it out if you have the time…

Tom’s note: Your kind words keep us going. Please keep sending your questions and thoughts to [email protected], and I’ll do my best to respond in a future Friday mailbag postcard…