Editor’s Note: On Saturday, Bill reintroduced readers to his old colleague, Tom Dyson. Tom agrees with Bill that the Greed/Fear ratio – the Dow-to-Gold ratio – is headed towards “fear.” That’s bad news for stocks, but great news for gold. Today, Tom shows why he’s gone “all in” on the Dow-to-Gold trade. And he reveals why 2019 feels a lot like 2012, when he discovered something called “bitcoin”…
By Tom Dyson
The place where you made your stand never mattered. Only that you were there… and still on your feet.
– Stephen King
I put my entire life savings into gold last year.
Not because I think gold is going to rise. But because I think stocks are going to fall, priced in gold, by more than 80%. And I want to buy those 80%-off stocks, whenever that may be.
That, in brief, was the trade I told you about on Saturday.
I know this sounds far-fetched. But late last year, stocks suddenly got marked down 15% (priced in gold). And I thought, “This is happening now.”
So I bet even more on stocks falling…
The last time I got this feeling was in 2012, when I found bitcoin. I was in some internet forum for geeks and someone mentioned it. I looked it up. And the moment I saw what it was, I knew. I just knew.
It cost $4 at the time. There was only one place to buy it – a website in Japan called Mt. Gox. And it was a brute to get a hold of…
I had to open an account with a PayPal-type service to transfer the money. Then, I had to jump through hoops like sending faxes, passport copies, and bank details. The whole thing seemed like a scam.
But I wired $5,000. Which was a lot of money for a guy, with three babies, who was still trying to make it in the world.
Then, I wired another $5,000. And another. Then, bitcoin jumped to $6. And I thought, “This is happening.” So I wired another $10,000, which was enough.
I withdrew all my bitcoin – I had 3,330 of them – and transferred them to thumb drives via an internet airlock I set up using Linux, so they couldn’t be intercepted by online thieves.
Next, I made duplicates of the thumb drives, in case they broke, got corrupted, or burned in a fire. I encrypted them. And then, I hid them in two secret locations.
Meanwhile, I’m a big mouth about this sort of thing. I told anyone who’d listen to buy bitcoin. I even started giving them away.
I gave one to anyone who came to my office, including Bill – I gave him a physical version of bitcoin called Casascius. And I gave them to my friends, Michael Checkan – co-founder of Asset Strategies International – and Swen Lorenz, an investment blogger.
I must have recommended it publicly, although I don’t remember doing so, because Chris Weber – who pens the Chris Weber Education blog – forwarded me a note from one of his readers recently:
I found this post from Tom Dyson on Facebook a few days ago… (I’m not FB “friends” with him, but I do read anything he posts as he pointed out bitcoin when it was like $15 or something crazy cheap…)
“With the Rupee near all-time lows against the dollar, India feels very cheap to us. We’ve been here a week already and we’ve only spent $180.
“Our hotel is $14 a night. Our meals are $3. Tuk Tuk rides are less than a dollar. A big bottle of water is 15 cents and a freshly squeezed juice or smoothie is 50 cents.
“Here we are in Jaisalmer, the city-inside-a-castle in the far northwest of India near the border with Pakistan…”
As an investor, THIS is what I love reading… and it instantly makes me want to drop everything I’m doing, travel to India, and see for myself! On one side of the world (USA), you’ve got a 9% default rate on subprime car loans. And on the other, you’ve apparently got a genuine bargain… so fascinating!
I also went shopping on the darknet, and I sent packages of cannabis lollipops and Rice Krispies Treats to friends all over the world, paid for with bitcoin.
You know what happened next.
The price went crazy, and my investment turned into $1 million. And I thought, “That’s enough. I’m out.” So I sold all my bitcoin. After taxes, bitcoin volatility, and Mt. Gox’s insolvency, I ended up with about a $500,000 profit… and a lot of pot lollipops.
I should have held on. The bitcoin I had would be worth about $30 million today…
Which brings me back to stocks falling in terms of gold. It’s a little different, but I’ve got the same feeling about it as I had with bitcoin.
I’ve put an irresponsibly large investment into it. I’ve told my brothers and my parents to sell their index funds and buy gold. And now, I’m telling you…
So we will see.
This morning, the Dow-to-Gold ratio holds around 19.44. I’m expecting it to go down to 4. My stop loss for the trade is 22.36, where the Dow-to-Gold ratio makes a new 13-year high and invalidates the downtrend.
In the meantime, our travels continue…
A few days ago, we were in New Delhi, with no plans except for a plane ride to a place 1,600 miles away we knew nothing about.
But we made it. The destination: Cherai Beach, one of the most popular beaches in India. We’re staying at a house that belongs to a friend’s parents… by the warm waters and gentle breezes of the Indian Ocean… eating nothing but the freshest fruits, vegetables, and spices… doing yoga and getting massages… and playing in the surf.
“Where will you go after you’ve completed your trip?” asked one of our hosts this morning.
“We don’t know,” we replied.
Here’s my ex-wife Kate doing yoga in Shirley’s garden at sunrise…
Monsoon season started a few days ago. It will rain all day and all night for the next two months in Kerala, we are told. And we won’t see any other tourists. We went to the beach. It was deserted, as you can see below…
We’re living the simple life, and I’m trying not to look at my phone. (I am writing this letter to you with a pencil and a piece of paper on a veranda overlooking the Indian Ocean.)
I’ll write again soon…
– Tom Dyson
P.S. Shortly after writing this, we left our lodging in the rain and rode south in a car for about three hours, to a new beach and new digs. Here is the room I’ll be sharing with Dusty (11) for the next three nights…