Tom Dyson on Wealth (Palm Beach Letter)

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Part 2

Transcript

FutureMoneyTrends.com: Greetings and thank you for joining us at FutureMoneyTrends.com, I’m here with Tom Dyson. He bought his first stock at just 11 years old. He has worked for Solomon brothers and Citigroup in the past; more recently he wrote for Stansberry & Associates, the 12% Letter. Today he runs his own newsletter with business building legend Mark Ford. They run the Palm Beach Letter of which I am a very happy subscriber. In the past, in my youthful days; talking about 15 years ago now, I had wen to seminars and I had paid thousands of dollars for information on real estate and stock investing, and options and read countless books and I can tell you the Palm Beach Letter is the most valuable newsletter I’ve ever subscribed to. I hope I don’t insult Tom here but it’s cheap; the value you are getting to what you are paying is absolutely incredible. Tom thank you so much for joining us today.

Tom Dyson: Thanks for having me Daniel and I’m not insulted at all, that was a really nice introduction. I appreciate all of those kind words you said.

FutureMoneyTrends.com: Tom, having a very successful newsletter as well as buying stock since you were a young boy; you’re known as one of the top stock pickers in the newsletter industry. Can you share with us some early losses and mistakes that you might have encountered that made you who you are today.

Tom Dyson: I’ve made pretty much every mistake under the sun. It cost me…I’ve paid my education I’ll put it that way. Some of the big ones: When I was a college student I lost about $5,000 on a sports bet which really hurt me at the time; that taught me a few things about risk and speculation and controlling losses…I was betting on the England Cricket team if you can believe it. In the technology boom in 1999 and 2000 I lost a packet in there as well on one stock that I fell in love with and kept averaging down as it went to zero which kind of hurt but I learned a few lessons from that. In 2008 I thought I could time the market and I tried to buy a company with mortgage bond investments, right before the crash…it had a really high dividend yield and I was trying to play that…that hurt a little bit too but I understand how to control my risks now a lot better so that mistake didn’t cost me so much. I think I would never invest or take advice from anyone who hadn’t lost a lot of times in the past because it’s really the only way I believe that you truly learn these very important lessons.

FutureMoneyTrends.com: When did you kind of go from a speculator; as an 11 year old boy I assume you were speculating is that correct?

Tom Dyson: The first stock I owned was Euro Tunnel which was the company that built the tunnel under the British Channel to France and it went up tons. I think I still remember the exact numbers; I paid 3 pounds 27 a share and in a year it had gone up to 12 pounds or 13 pounds. I wrote a letter to my stock broker to sell it, a real letter with a stamp and I had to send it. By the time he got the letter and executed it, it already had fallen down to 10 or 11. That was a nice little trip, I guess it was speculating because I had no idea what I was doing or any idea about that company and why it was going up. It eventually went bankrupt which is interesting. I still speculate but I don’t write about them because we have a different audience and they have different requirements than I do but I still take speculation from time to time and if you do it right you can definitely make money from them.

FutureMoneyTrends.com: What is your current outlook for the U.S. economy; a lot of people are worried about severe deflation or a currency crisis. Do you have these same concerns right now?

Tom Dyson: I don’t know to be honest; yes I’m concerned, I see a lot of stupidity going on from the people who are in charge of managing the economy. Particularly the FED, I can’t stand these zero interest rate policies going on. I think the market should control the interest rates. I’m a Laissez-Faire guy, I think the market ultimately make better decisions than any individual can. So there’s a lot of stupidity, bad decisions and government intervention. Taxes are too high; so I’m expecting problems. There’s going to have to be problems, fallouts, inefficiencies and mal-investments that need to be shaken out, I just don’t know how that’s going to look. When it comes to investing, that stuff doesn’t play any part in my investment strategy. I setup my investments to profit no matter what happens. I don’t believe in investing based on predictions of the economy and the future; it’s so difficult to predict. Even when you predict it correctly, your investments can still lose money. To me it’s such a tenuous way of allocating your money. I am concerned, I do see big problems, not sure what the problems will be, if I was forced to predict I’d say there’s going to be some kind of recession first and then down the line we might see some inflation after that.

FutureMoneyTrends.com: That totally hits home what you’re saying. In 2008 I totally nailed that the market was going to crash but I had bought a bunch of Gold & Silver and of course Silver went down over 50% I believe. I have this old saying, there’s nothing worse than being right and not making any money. That leads me to your letter; it’s very conservative and the Palm Beach Letter you’ve written about certain types of accounts that yield about five times more than CD’s protect your principle and guarantee growth. It is something that the largest banks in the world are invested in. Why are these types of investments hidden from the average person and where can people listening to this learn more about these?

7:13

Tom Dyson: Well they’re not hidden from the average person, they’re just not well known about. They can’t market themselves the way mainstream financial service providers can. I think if you’re a conspiracy theorist you can argue that some of the mainstream financial services interests, maybe the people behind Mutual Funds for example, have slandered these accounts, these strategies so that they have stigma attached to them. They’re definitely not hidden or secret just people have not heard about them and those that have think they’re a bad idea. Actually they’re a fantastic idea, you said five times more than CD’s, and it’s probably more like 20 times more than CD’s. The eternal rates of return that these things pay between 5 and 6 percent right now and that’s tax free. If you’re paying taxes that’s the equivalent of 9% or something like that. The returns are fantastic and the other interesting thing is that while the guy on the street probably has no idea about these things, the big banks, all the banks and a lot of huge corporations plow billions into this; billions and billions of dollars. What I’m talking is life insurance; whole life insurance which is the old school life insurance; the simplest, most vanilla, no bells and whistles, no indexes or anything like that, no variable insurance. Whole life insurance, the same as JC Penny used or Walt Disney used, a whole lot of people back in the day, it was a very popular product that didn’t have the stigma that it does today. It is very important that it’s issued from a mutual life insurance company; it cannot be a stock life insurance company. There’s a very important distinction because with a mutual insurance company the policyholders own the company and therefore it can be run without paying any attention whatsoever to the stock market analysts or earnings estimates to basically the short term interest that stock market ownership will engender in the company. These things are run by the policyholders, all the policyholders, using and extremely long-term time horizon; like centuries not even decades.

FutureMoneyTrends.com: When people here that, they think of life insurance and so I did find it interesting that in your newsletter, that if you want life insurance buy term, but you’re treating these as savings accounts, correct?

Tom Dyson: Correct. The principles that we’re using just happened that life insurance is the best product to make it happen. We’re not doing this because we want life insurance; we’re doing this because we want to save money in a way that’s incredible efficient, from a fee perspective and also from a long-term returns perspective. Life insurance just happens to come with it. If you’re looking to protect your family against your untimely demise, then term life insurance you can’t go wrong; it’s so cheap and you probably just want to get some term life insurance that covers you until the end of your or majority of your working career. When you turn 65 or 70 that’s when you want your term to end. If you’re looking to save money, this is the paradox, most people when they buy life insurance they want to get as much insurance as possible, paying as little money as possible. We want to do the opposite. We want to get as little life insurance as possible and jam as much cash into these things as we can upfront.

FutureMoneyTrends.com: My first thought comes to inflation, if rates are to rise in the future would an account like this, I know they protect your principle but will they grow, will the dividends or the growth increase if rates increase?

Part 2:

Tom Dyson: You mean inflation rates or interest rates?

FutureMoneyTrends.com: Inflation rates and interest rates.

Tom Dyson: Inflation rates, nothing’s going to change in the policy because of inflation rates. They’re not inflation adjusted or anything like that but if you go back over the last five decades when there has been very high inflation; I’m not sure the average CPI over 50 years ago, but it’s probably between 3 and 4% which is very high and life insurance policies have kept up just fine with that and even exceeding it. Of course your premiums you’re paying in devalued dollars every year too so that’s kind of a nice tailwind. It’s a valid concern about inflation when you’re investing in life insurance; kind of like a bond you’re going to get a fixed amount of money back in the future and the more that inflation is the less that money is going to be worth in real terms. It’s a valid concern, I have this concern myself. Just looking at the evidence, the way the death benefit grows over time, it compounds, it keeps up with inflation just fine and then a lot of these companies have been around 100 years plus. They’ve been through it all and insurance did just fine. The most important point to make here is that the way we’re using life insurance as a platform, as a bank for all our other financial activities; whether entrepreneurship, real estate investing or owning precious metals or stocks, whatever. You can use your policy and you can suck the money out of it and use that to invest in inflation protected assets like Gold or stocks or whatever you want. I’m not worried about inflation at all in terms of insurance. As for interest rates, if they rise the dividends that we receive in our policies will also rise so that will be a good thing.

FutureMoneyTrends.com: That’s a very positive thing and access to cash, I totally get it. Talking about inflation, what is the most likely scenario to the end of quantitative easing, where is the FED taking us with the current policies, Tom?

Tom Dyson: I have to say quantitative easing can’t ever end. I just don’t see how the FED can raise interest rates with the amount of debt the government has, in fact the amount of debt that everyone has I just can’t see raising interest rates it seems like it’s impossible to imagine that because it would just cripple everybody’s debt loads, most of all the U.S. government themselves. I wouldn’t be surprised if we had zero percent interest rates and quantitative easing for decades to come just like they did in Japan. I really wouldn’t be surprised. Imagine if they set interest rates to five percent today. That would just cause the interest on the national debt, which Obama’s done a great job and racking that up, would be more, I’m guessing, than the entire deficit of the U.S. government. It’s ridiculous when you do the calculations.

4:10 of Part 2

FutureMoneyTrends.com: A lot of people feel like we have not left the recession. Food stamps are at an all-time high, the labor force participation rate is at a 34-year low and most of the general public did not participate in the stock market rally. With the consumers so dependent on the state and the state so dependent on borrowing, I totally get why people are afraid but I think they’re missing gout on some great opportunities to be entrepreneurs in this time and to purchase good companies on the market. What is your best advice for people who are kind of stuck in a state of fear.

Tom Dyson: First of all, take responsibility for yourself and your money. No one else is going to take care of you and nor should they. It’s such a powerful feeling to take responsibility of yourself. I’m not saying it’s their fault or it’s your fault but these are the cards you’ve been dealt, it is your responsibility to play them as best as you can. Another thing I would say is forget about investing. You’re not going to get rich from investing, it’s very difficult. It requires a longtime horizon, a lot of patience, a lot of discipline and a lot of capital to make any sort o major inroads into wealth. Remember, we’re living in America, the richest cohort of people ever in mankind’s history are living here right now today and they are retiring; I’m talking about the Baby boomers. There’s never been a richer cohort of people than the baby-boomers. There’s money everywhere, all over the place there is so much money and you wouldn’t want to be any country in the world except for America if you wanted to make money. Go out there and grab some of it, it’s there for the taking. Create something, build something, offer a useful service; do whatever. The money is there all you have to do is pick it up. I think we’re living in great times, especially with all this government throwing around all this money and running all these deficits, it’s never been a better time to get rich than there is now. Forget about investing, that’s hard, there’s much easier ways of doing this.

FutureMoneyTrends.com: Tom, how did the Palm Beach Letter come about and who was it created for?

Tom Dyson: It came about three years ago. One of my good friends and old mentor of mine Porter Stansberry came up with the idea. He set Mark and I up together and we got started and basically it was built around the fact that Mark has all this good advice on wealth; Mark knows how to build wealth and I know how to analyze investments. By putting us together we sort of covered both bases, we felt like we could create a service that didn’t exist out there already that was more than just investment ideas and stock picks but actually showed you how to incorporate them into a much bigger financial solution. We’ve taken on a lot of these subjects like asset allocation, risk management and entrepreneurship. The response has been fantastic; who we aimed at I think most of our readers are already retired and if they’re not retired then within ten years of retiring. So much of our advice is basically piloted toward who is worried about retirement.

FutureMoneyTrends.com: When it comes to life success, what is it that’s driven you? You have a very successful history, what is it that has been your drive?

Tom Dyson: That’s a deep question. There’s two major projects I’m involved in on the micro-level. One is I’m building a business and the other is I’m building a family; those take up basically all my time on a day to day basis. I think in the bigger picture I would probably say that my search for fulfillment and inner peace is what drives me. Now I don’ know what that means exactly because I haven’t found that yet but it sounds kind of good. The key to that I think is helping other people which is kind of in line with what I’m trying to do with my business and with my family to. Does that answer the question a little bit?

FutureMoneyTrends.com: It does. That kind of leaves me to a funny question I want to ask you that I heard in passing. Somebody told me that you once kind of just wandered around and you were a train hopper; can you share that part of your life with us? What time frame was that?

Tom Dyson: That was basically when I worked at Citigroup in the early 2000’s…it was right when the Nasdaq bubble burst. I worked there for four or five years; getting to about 2003/2004 I was getting these fantasies of going over to the U.S.A. and travelling; searching for some freedom and one thing I really wanted to do was to catch a ride on a freight train in a boxcar and get to see what the countryside looked like. I loved natural scenery and countryside; there’s no better scenery than the American West. I thought if I catch that it would be incredible. It became a goal of mine. I read as much as I could about it on the internet and in a couple books. One day I just quit my job, grabbed a backpack and off I went. It was a period of three or four years where it was pretty intense; I ended up travelling all around Mexico, the United States and Canada on freight trains. I even travelled in the actual locomoties; one or two which was pretty cool. It was a hell of an adventure and it really taught me a lot and in fact I’m at where I am today because of it. I would never have become a writer if it wasn’t for taking that adventure(s) and writing stories about them.

FutureMoneyTrends.com: That’s awesome. I assume you were single at the time, correct?

Tom Dyson: Yeah, I was. (laughter) even after I got married I did take a couple trips and I’ve even taking my wife on a boxcar ride when she was pregnant.

FutureMoneyTrends.com: If you had to choose one place to go on vacation for each season; where would you go?

Tom Dyson: I don’t really if the seasons make a difference to how I choose my vacations but a couple things that I would like to do…I would really like to bicycle across the country, I think that would be awesome. So that would be for the summer or the fall I guess. I would love to go camping in the Canadian Rockies sometime and spend a month just going out into the woods and the fresh air and mountains. That’s probably a summer thing to do as well. I’d love to go on a surf trip to Nicaragua; that would be a winter thing, the waves are big in the winter. I love golf. A trip to Scotland to play gold that would be incredible and would also have to be in the Summer because the winters are terrible in Scotland.

FutureMoneyTrends.com: I’m a timeshare person myself; it’s funny you mentioned camping because I heard a comedian two weekends ago that was hilarious. “I don’t understand Americans, they save up all year to live homeless for a week.” (Laughter)

Tom Dyson: That was a good point.

FutureMoneyTrends.com: Lastly, Tom where is the best place to reach out to you and how can people listening to this subscribe to the Palm Beach Letter; is it only a paid members newsletter or is there a free section as well?

Tom Dyson: It’s only paid…we’re developing a free letter now, but it’s not ready yet. For now it’s only paid but it only cost $39 for an annual subscription and for you to find out more about it I urge you to send your readers to PalmBeachLetter1.com and then they’ll find my report that I wrote about the life insurance idea and it’s got all the details in there on how it works and why it’s such a good idea. Other than that just go to our website PalmBeachLetter.com

FutureMoneyTrends.com: A lot of people, the first thing they’re going to ask is if you get some type of commission for doing a life insurance policy. One thing I like about your newsletter, if people do something, if they act, if they buy a house for example because you guy’s gave great real estate advice; you’re not getting a commission from this, correct?

Tom Dyson: Yeah, we’re independent publishers. All we do is we right and we make money from selling subscriptions. We’re completely independent, we don’t take any money from any brokers or dealers or agents or businesses or companies or stocks or anything. We ONLY take money from our subscribers. Our subscribers are our only boss and if we do a good job, they stick with us, if we don’t do as good a job they fire us and we have a refund policy on all our products; that’s pretty simple, a pretty simple relationship that works.

FutureMoneyTrends.com: Tom Dyson of the Palm Beach Letter, Tom it was a real pleasure speaking with you, I hope everybody checks you out at PalmBeachLetter1.com We will have a link posted below and in our emails; you have a great day sir.

Tom Dyson: Thanks a lot Dan.

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