Why You Should Watch Commodities Prices

MARSHALL, MINNESOTA – Tonight’s campground has a little beach and a spring-fed pool for us to swim in. (Picture below.)

Penny (7) was making friends with another little girl on the beach just now. The little girl’s mother came over, moved her daughter six feet away and told her not to play with Penny.

Why?

We figure the mother was worried about COVID.

“That girl didn’t want to be my friend,” complained Penny later.

America’s Heartland

Greetings from Camden State Park, somewhere in the cornfields of Southwest Minnesota…

Two months ago, my family and I set off on an epic road trip to explore America. We’re in no rush, so we only use back roads. We never drive faster than 55 miles per hour.

We’re seeing small town America up close, meeting lots of locals, and driving past lots of pretty scenery.

We’re currently in America’s heartland… a vast plain of fields, tractors, grain elevators, blue skies, and fluffy, white clouds. They call it the “breadbasket of the world.”

Yesterday, we drove about 250 miles south – which took us all day. Today, we’re taking a break.

We’re camping in a state park near a small farming town called Marshall. Here’s our campsite…

And here we are having supper by the spring-fed pool a few minutes ago…

Tomorrow, we’ll drive another 200 miles south and enter the state of Iowa. Our friend Roger is hosting us.

Roger’s family owns a commercial hog farm. And in addition to farming, Roger also drives a semi-truck. So the kids will get to learn about two classic American ways of life.

My Favorite Chart (It’s Not Dow-to-Gold)

This is my favorite chart at the moment…

You already know how much I love the Dow-to-Gold ratio. Well, this chart shows the Dow-to-Commodities ratio going back 60 years.

For “commodities,” I used the Bloomberg Commodity Index. It’s an index of 23 commodities prices, including gold, silver, oil, base metals, and agricultural commodities. The index is weighted according to world production and trading volume.

As you can see, the ratio oscillates from high to low. When it’s high, stocks are expensive versus commodities. When it’s low, stocks are cheap compared to commodities.

Today, I just want to draw your attention to how expensive stocks are relative to commodities. They’re at generational highs compared to commodities. Maybe even century highs.

One of these years, commodities returns are going to trounce stock returns. Then, this ratio should return to its long-term median average… and maybe even return to “low.”

But we’re not there yet. There’s no downtrend…

– Tom Dyson

P.S. When will the uptrend begin? Commodities usually follow first, gold, then silver second. Gold has already started moving. Silver is about to break out too. The commodities index shouldn’t be too far behind…

P.P.S. There’s a railroad track running right through our campground. Here we are stalking trains again…

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

More tanker questions today… a gold hypothesis… along with a reader suggestion…

Reader comment: You said that there are new pollution laws for tankers. Who passed those laws? If it was the U.S., what percentage of tankers would have to obey the laws? Thanks.

I have really enjoyed all the postcards from around the world this past year. My daughter has been homeschooling her children for years. It is a good way to give children options they would not have in regular school. Have a good trip, but be careful about social distancing.

Tom’s response: The International Maritime Organization passed the laws. The IMO is a product of the United Nations and so the law applies to any vessel in international waters.

Reader comment: About a month ago, I read an article which suggested that tankers were being used to store oil until the prices are more acceptable to the industry, so I bought a very reputable and profitable company, but nothing has happened with that stock.

Do you believe that tankers are, in fact, being used to store oil? If so, then, perhaps, my investment will pay off and I am prepared to wait and see.

Take care of your family, continue to have a great time, and don’t fret selling some of your gold. The rest of your “stash” will reward you handsomely. If I was 70 years younger, I’d join you on your travels, but at 88 it is not practical.

Tom’s response: Tankers are still being used for storage, but less and less each day. Soon there won’t be any tankers being used for storage. I still think your investment will pay off though!

Reader comment: All true what you said about the tankers. Great article. Most amateur pros like me are all over it. That was a gift. Teekay at $12.85 is a joke. They paid off 20% of their debt last quarter, another 20% this one probably. Then in 2021 they will pay off like a broken slot machine. Thanks again, you are 100% right on.

Reader comment: Hi Tom, I have been thinking gold will run up until the November election. If Trump wins, be prepared to take some profits. Gold dropped after the 2016 election when Hillary lost. If Biden wins, gold will likely run higher. Your thoughts? Your family postcard adventures are motivation for my retirement excursions I am about to start.

Tom’s response: I will hold our gold until one of two things happen. A) The Dow-to-Gold ratio hits 5 and I convert it into world-dominating businesses, or B) I die and leave my children instructions on how to complete A).

Reader comment: I read and listen to your readers’ difficulties around buying and selling gold – but the one agency that doesn’t crack a mention is the Perth Mint in Western Australia, guaranteed by the state government, and who will also act as a repository for a customers’ gold – worth a look.

Tom’s response: Thanks for the note. I recommend Perth Mint in my newsletters.

Meanwhile, readers ask about Tom’s spiritual perspective… thank him for shining light on America’s good qualities… and share words of warning for the Dysons’ Canada adventure…

Reader comment: With the world descending into chaos, what I call the end of the beginning, or the beginning of the end, do you and your family have Bible study?

Tom’s response: Yes, we read the Bible.

Reader comment: I wanted to tell you I like your t-shirt with the cross on it. The cross is what I share with many and I have t-shirts like that, too. I’m guessing you might be a born-again Christian??

Tom’s response: I was baptized as an infant and then again in 2017. We are a Christian family.

Reader comment: Thank you for all your positive comments about the U.S. I’m a Brit living in Japan, and every day I read and see a lot of negative news about the U.S., related to COVID-19, Trump, violence, people being killed, etc., so it’s good to be reminded that most of the U.S. is peaceful and most Americans are friendly.

I’ve been to the U.S. many times (mainly the west coast) and this has always been my experience, but it’s easy to forget it when I read all the negative news in the media. All the best to all of you.

Tom’s response: People love to pick on Americans. We noticed it the whole time we were overseas. But not so much the locals. I’m talking about the other tourists. It’s sort of a meme. A snobbery that Europeans and Australians and all the other travelers carry towards Americans.

I assume it’s because Americans are richer than everyone else and America’s culture dominates the airwaves, and it’s sometimes a bit “cartoonish.”

Reader comment: Hello Tom, Our family has been pretty much hunkered down at home from March. It is so fun to watch your family enjoying the outdoors! We are actually getting prepared to sneak out for an adventure finally!

I would like to invest in gold/silver but am still hesitating since I don’t have in-depth knowledge how that market works. Just like crypto, it is so complicated. So I went in for tanker stocks!

Reader comment: What a great adventure you are on! Like to say how remarkable and courageous you folks are for traveling during the time of coronavirus and looking beyond the everyday media propaganda. Kudos to you!

I surely enjoy reading the posts, seeing the pictures, and watching the videos. Just want to say, keep safe and happy trails. Best wishes to you and family. P.S. I’m a Tom’s Portfolio subscriber.

Reader comment: You’ll find out soon enough at the border crossing that your travel and sightseeing through Canada will be strictly limited to the service station for gas and a washroom break. Any deviation from the main route to the Yukon will mostly likely result in the Royal Canadian Mounted Police issuing you a hefty fine.

Even the locals are ratting out “Yukon-bound” travelers who happen to go sightseeing or shopping for food. Go shopping and you might come back to your vandalized vehicle. Trust me on this; it’s happening right now.

Tom’s note: As always, thank you for writing to us! Please keep your messages coming to [email protected].