CORPORATE APARTMENT, BALTIMORE – Yesterday I published a long-term chart of the Crestmont P/E ratio. It shows we’re right at the top of the third stock market bubble in American history.
Below I’ll show you another chart. It promises us that if we buy stocks and bonds today, we’ll make ZERO returns over the next 12 years…
Heading Into Hyperinflation
Greetings from Baltimore!
I’m writing to you from a wine store on Charles Street. They’ve put a couple of tables in the store and you can drink your wine after you’ve bought it. It feels more like a coffee shop than a bar.
I’m waiting for Bill Bonner. We’re having an after-work drink together tonight…
My family and I are enjoying a bit of down-time from traveling. We’ve got a nice apartment. A car. Some friends. And lots of museums to explore. Everything’s great.
Next month, we’re going to pack a suitcase and hit the road again. We’re going to live in Buenos Aires, where I expect we’ll be able to live comfortably on less than $2,000 a month.
We’ll rent an apartment and sign up for Spanish lessons. Maybe we’ll explore Brazil and Chile, too? We’ll see…
Oh… and Argentina is heading into hyperinflation. I’ll have lots of interesting economic phenomena to write to you about…
We love this lifestyle.
We live as a tight-knit family, the kids get a fantastic but unorthodox education, and we’re experiencing life in a way I could only have dreamed about several years ago.
Worst Time to Buy Stocks and Bonds
I love this chart from John Hussman…
The blue line predicts the return from a portfolio of 60:30:10 mix of stocks, bonds and cash over the next 12 years. It just reached 0% for the first time in history.
In other words, statistically, there’s never been a WORSE time in history to buy (or hold) stocks and bonds. According to this analysis, they are likely to return NOTHING over the next 12 years.
The red line shows the actual subsequent 12-year returns of the 60:30:10 portfolio for each year. (It stops in 2008 because that’s the most recent data point for a full 12-year cycle.)
The fact that the red line and the blue line match each other so closely shows the model’s predictions have been extremely accurate for 100 years…
Trust logic and reason, I said yesterday, and ignore the fads and trends. Do what’s right.
If you find the chart above as compelling as I do, gold is the thing to own.
As I’ve shown many times with the chart of the Dow-to-Gold ratio, gold soars versus stocks during periods when the market suffers from a “high valuations hangover.” (Catch up here.)
I don’t think betting directly on falls in the stock and bond markets will be that effective. Why?
The Federal Reserve will print trillions of dollars and prevent them from falling much. They’ll probably also cap interest rates – what we’ve been calling “curve control.”
Gold is the way to play this.
Sit on the Sidelines
One last thing to note about the chart above is it doesn’t predict what’ll happen in the stock and bond markets this month or even this year.
It’s not saying the stock market will start falling tomorrow. It’s making a point about the average return you can expect if you buy today and hold a 60:30:10 portfolio of stocks, bonds and cash for the next 12 years.
Again, the right thing is to stop participating in this market. Go sit on the sidelines… or go to the locker room and take a shower.
I really hope you’ve lightened up on your holdings of stocks and bonds. The system isn’t healthy at all…
– Tom Dyson
P.S. The magazine CEO World published its latest ranking of the world’s 132 countries by cost of living.
We love exploring the world’s cheapest countries. The countries that catch my eye – because they’re both cheap and would make for an interesting trip – are Pakistan, Colombia, Sri Lanka, Argentina, Turkey, and Iran.
Many readers turn to gold – including a question about gold coins as “disaster” money… While others offer encouraging words for the Dyson family’s nomadic lifestyle…
Reader comment: Thanks for your Postcards From the Fringe. They are as interesting to me as the responses are to you.
They have confirmed my belief that people throughout the world are more like each other, in spite of our differences in customs, religions, and languages. Thanks and keep the postcards coming.
Reader comment: Thank you for your Postcards from the Fringe. I love them. They keep me grounded in unimaginable ways. Stay safe!
Reader comment: Telling the world you have a large stash of gold in “physical” form is a very bad idea. For me, it’s a bad world and there are way too many wanna-get-rich-quick folks out there.
Tom’s response: I agree, but sharing my story is more important to me.
Reader comment: I religiously read your postcards on “The Throne” every morning as part of my routine. I can instantly escape to your world each morning and it shapes my mood for the day. Always in a positive way. Thank you.
I’m locked and loaded in silver and junior minors until the world wants them. Why don’t you invest in top-quality junior minors or royalty streams instead of buying call options? 1,000% gains and possible dividends, and one would hope less chance of going to zero?!
Absolutely appreciate everything you are doing with your family. An inspiration.
Reader comment: I LOVE your travel updates! I have three grandchildren roughly the same ages as yours and am hoping you write a book on your travels. It will be “required” reading for them. Actually, that won’t be necessary as they are all avid readers and will enjoy reading about your adventures.
Reader comment: Thanks for the truth and advice from all of you. Don’t know how I found your site or signed up for your newsletters, but I’m so glad I did. Keep the vital advice coming. Our society is deteriorating rapidly. Waiting for the shoe to drop.
Reader comment: I just had to comment on the photo of you and the boys reading while sitting on a sofa. I suppose Bill Bonner might have reserved a nice place for you guys to stay, but looks like heat wasn’t included in the deal. All of you are bundled up like the apartment temperature is down in the 40’s.
The other day you mentioned how nice those old hotels in Baltimore look. They do look nice, but a few times we stayed in them (years ago), it was far from pleasant. The fire alarm sounded around 2 a.m. in one, and in another they’d overbooked and had to cab us over to some motel.
Right now gold is at $1,559 and I should probably buy another 10-pack of Vienna Philharmonics. And maybe another couple weeks’ worth of storage food. If the coronavirus disrupts trucking in any way the food might be handy to have around.
Reader comment: Where can I find the details about the trade Tom has set up around the Dow-to-Gold ratio? I’m a little hesitant about taking a short position, but I’d be more than happy to reallocate assets leaning in the direction of the thesis.
I have small positions in physical gold and silver, but not sure if gold-aligned investments are how he’s played this.
Tom’s response: The easiest and best way to play the coming down leg in the Dow-to-Gold ratio is to own physical gold and lighten up on passive index funds invested in stocks.
Reader comment: I enjoy reading your postings. They are entertaining, thought provoking, and informative. I also enjoy reading postings from E.B. Tucker, Nick Giambruno, Teeka “Big T” Tiwari, and many more. Bill Bonner is one of my favorites.
I am wondering when you will be in the position to be offering a subscription newsletter with your investing ideas. Thank you again.
Reader comment: Love your postcards. And how your kids have thrived while being “deprived.” When I was 14 (1954) my Dad had a sabbatical and we traveled to 19 countries in 2 1/2 months. I loved it and can recite the day-to-day travels even now!
Now we enjoy a multi-family summer “encampment” on an island on a remote lake in Canada. No electricity. Propane for fridge and stove.
A few years ago we made some capital improvements, but our “kids,” now adults, said “NO!” to the question of electricity. It really is an “oasis” and a wonderful place for cousins to connect without cellphones!
You have given your kids a gift to enrich their lives for years to come. BRAVO to you and Kate.
Reader comment: I am texting you from Australia. Have you given any thought to bringing your family to visit our welcoming country?
You deserve the highest kudos for giving your children an insight into the wider world. All the best to you and your family in your future endeavors.
Reader comment: How about getting Bill Bonner to have a gold and silver investment letter that is written for the average Joe?
Reader question: I don’t have a problem buying gold coins as you suggested in Wednesday’s letter, but I am not sure how to use them to live on when the economy falls apart. How do you use it to buy groceries or pay the power bill?
Tom’s response: I get this question a lot. I do not expect any sort of societal breakdown, hyperinflation, or apocalypse where we’re reduced to bartering with gold and silver.
Gold may be the hottest investment on Wall Street — like bitcoin was in 2017 — and we’ll enjoy selling into a strong market. But we won’t be trying to pay bills with gold coins.
As always, please keep writing us at [email protected]! Kate and I read every note you send us.