CHISWICK, WEST LONDON – From CNBC a few weeks ago:

Clip art of a rock just sold for 400 ether, or about $1.3 million… The transaction marks the latest sale of EtherRock, a brand of crypto collectible that’s been around since 2017 – making it one of the oldest non-fungible tokens (NFTs) on the block.

EtherRock is, as the name implies, a JPEG of a cartoon rock, built and sold on the ethereum blockchain. There are only 100 out there, and that scarcity is part of what’s driving up its value. So, what are these rock pics good for?

According to the EtherRock website, “These virtual rocks serve NO PURPOSE beyond being able to be bought and sold, and giving you a strong sense of pride in being an owner of 1 of the only 100 rocks in the game :)”

$1.3 million is about what my mother’s house is worth… for a JPEG of a rock.

Just last week, another EtherRock sold for $2.6 million. See these EtherRocks for yourself…

image

Source: EtherRock

It reminds me of the pet rock craze of the 1970s, but worse (a pet rock in 1975 would’ve cost you only $3.95)…

This is a mark of what we call “late stage” or “degenerate” capitalism… And it’s 100% a symptom of money-printing, absurdly low interest rates and, a belief that investments never go down.

The feds have basically created a gargantuan speculative bubble, the greatest of all time, in all things… And as the rock pic shows, the speculative fever has gotten maniacal.

More below…

Wealthy Tramp Family

Greetings from London…

My family and I are a wealthy tramp family. We drift around without a home, living in campsites, Airbnbs, and on mattresses in the houses of our friends and family.

We have about $1 million worth of liquid savings, which we plan to husband intelligently over the next 40 years to pay for our “on the road” retirement lifestyle.

A million dollars in any other period of history would have been plenty of money to retire on. It should still be plenty today, as long as it’s husbanded correctly.

And that’s what I spend all my time thinking about…

End of the Line

As I mentioned above, we’re seeing signs of late-stage capitalism.

It’s all tied to what we’ve been calling the “greatest financial experiment in history.” There’s no way this experiment ends well.

And from where I sit, we’ve reached the end of the line now.

Interest rates can’t go any lower…

…the U.S. government has maxxed out its credit with foreigners…

…the economy couldn’t be more allergic to rising interest rates and inflation…

…and the great deflationary forces of the last 40 years – especially China entering the global marketplace 30 years ago and delivering a massive positive supply shock – are spent. 

The attitude in Washington to this is like that of a fugitive speeding towards a roadblock, determined to end her life in a fireball. Spend. Spend. Spend.

But when will the bubble pop? (On Monday, I called it the “cockroach bubble” because it refuses to die.)

It will pop. The only question is when. It could take 20 years. It could happen tomorrow. So we watch this chart…

image

It’s the Dow-to-Gold ratio. In our opinion, this is the most sensitive gauge of America’s wellbeing.

The Dow represents the fortunes of stock market investors and, by extension, the world’s economic prosperity. Gold is an inert lump of heavy metallic clay.

When the great speculative bubble pops, I expect this ratio to fall by over 75% from its current levels – to a level somewhere below 5. We call this its “rendezvous with destiny.”

For now, it climbs higher. (The only reason it’s been able to bounce over the last 16 months is because they injected an epic quantity of stimulus. But it’s looking tired to me now.)

But as investors, what do we do with this information? What’s the best way to husband our savings, so we can protect and grow our little nest egg?

How to Survive the Coming Financial Inferno

The first hurdle we must clear with our savings is to survive the great financial inferno we see coming. So Kate and I are in maximum safety mode.

That means we’ve put nearly all our savings in gold coins and other cheap, hard-currency proxies, like silver and cargo ships. 

Last night, I was looking at platinum. Platinum meets my definition of a cheap hard currency. As you can see below, its price has been stuck in a trading range since 2004…

image

Gold is almost twice the price per ounce at the moment. (Gold is hovering around $1,800 per ounce.)

I don’t think I’d buy platinum coins, as they lack the liquidity of gold coins, and they have a large trading spread.

Instead, I’d buy a platinum exchange-traded fund (ETF). The Aberdeen Standard Physical Platinum Shares ETF (PPLT) would be my choice for a platinum ETF.

But there’s more to our strategy than just hard currencies and hard-currency proxies…

As regular readers know, we also have a ton of life insurance, which I call “Income for Life.” We each hold a policy except Penny.

Life insurance guarantees that we have provided a little something for our descendants after we die.

It’s permanent. And it’s fully paid-up, meaning the dividends generated by the policies now exceed the premiums we pay each year to maintain the policies. They’re now on “auto-pilot.”

The life insurance companies that wrote our policies have been around for more than 144 years.

Finally, as you know if you’ve been following these Postcards, I’m also itching to short the stock market. 

“Shorting” the stock market means placing bets that profit if the stock market goes down.

It’s an aggressive move. Rarely in history has betting against America been a good idea. And if I do it, I expect I’ll probably regret it.

But I think I’m going to do it anyway, with only a small amount of money.

I’ve considered this trade from many angles, which I’ve shared with you in these Postcards… including buying put options on the most indebted zombie companies. But I don’t have the guts to do that.

In my opinion, the most sensible approach to shorting a cockroach bubble as we have today is to do it without leverage…

And to use the 60:40 “short” portfolio I introduced on Monday. (As a refresher, that’s 60% short stocks and 40% short bonds.)

That way, the bet against America has more of a passive buy-and-hold feel to it than an aggressive trade that uses leverage and requires perfect timing. 

What does this mean for our Dow-to-Gold trade?

Nothing at all. I’m still husbanding nearly all of my savings based on the decline of the Dow-to-Gold ratio. And I’m sticking with safe, hard-currency investments (our portfolio of gold, silver, and steel) until the ratio falls below 5.

But I have a speculative streak, and it’s calling on me to take some chances.

If I do follow through with this, though, I’ll only do so with a small portion of our money – money we won’t miss if my short trade goes against us…

– Tom Dyson

P.S. We took Penny to the toy store for her birthday and this is what she chose:

image

Penny chose a toy camper set for her ninth birthday

P.P.S. I’ve been a chronic smartphone user for the last 15 years. I checked my phone on average 80 to 100 times a day. (I used an app to calculate this.) As regular readers know, I just got rid of my smartphone. I first wrote about this last week. But it’s been about a month now since I got rid of it.

The first thing I noticed? I felt really bored and listless. Then, all these emotions erupted from inside me and I broke down in tears. I could finally hear my own thoughts. The second thing I noticed? I started pestering my family for interaction. “Beat it, Dad! Find something to do. We’re busy…” they said, without looking up from their phones.

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

FROM THE MAILBAG

One reader commends the Dysons’ homeschooling, but questions how Tom’s feelings around bitcoin might impact the kids…

Reader comment: Sounds like you are giving your children an education in money unlike 99% of the world. However, I’m wondering if there is a gap in your children’s education around bitcoin. Even if you don’t like it, you may find your children are captivated by it and will be extremely grateful you allowed their curiosity to go in that direction.

My children are now adults, but I realize that was a gap in their education. Bitcoin and the Lightning Network will soon be widely seen as the base layer for sending value over the internet in the same way TCP/IP is the base layer for sending information over the internet.

Meanwhile, following Monday’s Postcard, others wish Penny a happy birthday… and congratulate the boys for their Chiswick Cricket Club induction…

Reader comment: Congratulations to Dusty and Miles for their cricket awards! They certainly have come a long way. Happy Birthday to Penny! Hope she has a wonderful year ahead!

Reader comment: 💕🥳Happy birthday, Penny! 🥳💕 Hugs 🤗 for you and your family.

Reader comment: Happy Birthday, Penny!

Reader comment: A very happy birthday wish has just been sent!

Tom’s note: Thank you for the kind words! As always, please keep writing us at [email protected], and I’ll answer as many questions as I can in a future Friday mailbag edition.