If you’ve been reading my recent essays, you’ll know that I’ve been promoting a simple exchange: Sell stocks, buy gold.

Now, keep in mind that we’re not buying gold as an investment. We’re simply lightening up on passive stock market investments like ETFs, robo-index funds, mutual funds, and buy-and-hold stock market strategies…

…and moving to the sidelines (in gold) until stocks get cheap enough for us to buy them again.

In other words, we are using gold primarily as money — a safe haven — and not as a speculation on higher gold prices.

This is why I’ve put the bulk of my money into physical gold. It’s a way to keep us safe while the investment markets correct.

Primary Trend

This chart shows what I’m talking about. It shows stocks (specifically the Dow Jones Industrial Average) priced in gold.

As you can see, the primary trend in the stock market has been DOWN since October 2018, when it peaked at around 22. It’s currently around 14. And it’s on its way back down to below 5.

By owning gold, we set ourselves up to buy stocks at some point in the next five to 10 years at much lower valuations than they are at today.

And as such, the only thing that matters is how gold performs relative to stocks. Its nominal price of around $1,700 is irrelevant.

So if you’re worried that you’ve missed the boat, keep in mind that this trend still has a long way to go. So for the moment, I have the bulk of my portfolio in physical gold.

My strategy does involve other plays, in smaller amounts. All in all, I’ve invested nearly $1 million in this strategy.

But here’s the rest of my plan…

Corporate Aristocrats

When the Dow-to-Gold ratio reaches 5 — what Bill Bonner calls its “rendezvous with destiny” — I will sell my gold and buy what I call “corporate aristocrats.”

These are companies with decades-long track records of relentlessly raising their dividends.

There are no better passive investments than stocks like these. You get rich twice this way. Once from the rising dividends and then, from the compounding effect of reinvesting dividends.

There is no better way to grow wealth.

But until it’s time to buy these corporate aristocrats, I’m sitting on the sidelines in gold, where I will remain until stocks are ready to beat gold again.

Timing the Trade

And I’ll know the time is right by keeping an eye on the Dow-to-Gold ratio.

Then, I will resume my long-term “corporate aristocrat” compounding strategy.

If I’m right about this — and if I time my zigzag correctly — my family will never have to worry about money again.


Tom Dyson
Editor, Postcards From the Fringe

• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.