BALTIMORE, MARYLAND – Greetings from Bill Bonner’s office in Mt. Vernon…
It’s time for our Friday mailbag edition, where I answer the latest questions you’ve sent in.
This week, we talk about our “Income for Life” whole life insurance policies (one of the world’s best-kept retirement secrets)…
…our cramped living arrangements in Grandpa’s one-bedroom apartment…
…letting go of my mother’s possessions… and more.
Let’s jump right in…
Reader comment: Taking over grandpa’s one-bedroom flat and forcing him to sleep on the floor just demonstrates how selfish your head works. You are not socializing your children but rather turning them loose to take advantage of others. You are a moocher. Shame on you.
We’re having a great time huddled up together in Grandpa’s apartment.
Everyone’s comfortable with the sleeping arrangements. (If Grandpa were uncomfortable, he would tell us.) The main thing is, we’re all together. So don’t worry about Grandpa.
Your comment does strike a nerve, though.
Many friends, family members, and kind Postcards readers have invited us to stay with them over the last few years. And sometimes I think we aren’t worthy of all those invitations and acts of kindness… or that we’re imposters somehow.
We’d be especially horrified to learn we’d “mooched” from someone. (We’re very conscious about NOT being moochers.)
Reader comment: I sympathize with you on your dilemma as to what to do with your mom’s collection of antiques. I suggest that you contact a reputable auction house to dispose of the remainder of her possessions.
It is hard, very hard, to see the things that were for so long part of her and you pass to a new generation. If you truly want a simple life of travel and less possessions, you need to take a deep breath and let go of the past and sell those possessions. You do not need the responsibility to care for all of that stuff she treasured (and probably do not want the heavy anchor).
You are not her. You have a different set of priorities in how you live your life. You may change those priorities with time. But, for the time being, you find these things a burden. Down the road, you may wish to have “things” and less freedom. As age settles in, you may find that you are comforted by having things that are familiar around you. But that is the future. This is now.
It is strange how things possess us. Do not fear the “loss” of things. Things come and go all the time. Some people, not you, place great store in the things they possess. But you and your family have come to the realization that it is not things that make one happy or give comfort. It is people and places and experiences.
So, divest. Do it with the certain knowledge that you are unlocking the chains that bind you to a place and a time. If you wish to keep a few portable mementos of your mom and her life, you can keep them in storage somewhere.
The greatest thing you possess of her is her memory and how she lived her life and influenced yours. All our possessions and all our memories will disappear over time. Our possessions should not define us or burden us. Keep what is most important and sell the rest.
Beautifully written. I should print out this message and tape it to the bathroom mirror.
Reader question: What currency will your whole life insurance policies pay out to your children? If it is in a currency, what makes you believe that currency will have any real value at the time of payout? Truly enjoy your Postcards, stay well and don’t change.
Our Income for Life insurance policies pay out in U.S. dollars.
Now, as regular readers know, I expect the government to keep devaluing the dollar in the coming decades.
The dollar has lost 90% of its purchasing power over the last 70 years. And I expect the next 70 years to be even more inflationary… at least at the trajectory we’re on.
So why do we own these policies? And why did we sign our kids up for them?
It’s a good question. I’d be very uncomfortable if the dollar’s devaluation was all there was to this story. But there’s more.
For a start, we’ve put the rest of our savings into gold, so we’ve hedged the risk. For another thing, we can borrow against our policies… and buy hard assets with the proceeds.
If gold fell back to $1,000 an ounce, for example, I’d immediately borrow every penny I could from those policies and buy gold with it.
And finally, those policies allow me to sleep well at night knowing if anything happened to Kate or me, the kids would be okay financially.
Reader comment: Regarding Tom’s opinion on the inevitable crash ahead: The government can and does buy bonds and stocks in order to prevent said crash and will continue indefinitely. Therefore, the crash will be hyperinflationary.
That’s my persuasion, too. Or as I prefer to say, the dollar will be the “release valve” for the financial losses that are coming – more so than the bond or stock markets.
Reader question: Hi Dusty, I missed your column that readers are talking about and I can’t find it in the archives. Can you twist your dad’s arm and get him to publish it again or send a link? I am really curious to know what you wrote about…
Dusty’s essay is here.
Reader question: I have been busy with other things for a bit and just started reading your Postcards again. Lately I am wanting to invest a small sum of money into some kind of investment vehicle and think life insurance would be the logical place to place it.
My investment agent/insurance man (whom I trust to know what he’s talking about) tells me they don’t have a whole life insurance program that is not based on the stock market. It seems they invest all their funds, even plain vanilla whole life insurance, into the market.
Can I ask what sort of plan you are referring to as “plain vanilla” whole life insurance? What does your company base its investments in?
Plain vanilla isn’t a technical term. It’s our way of describing whole life insurance that isn’t linked, tied, or indexed to anything. It’s permanent life insurance in its simplest form.
For more information, I invite you to check out my Income for Life library. You can find it here if you’re a paid-up Tom’s Portfolio subscriber. Or follow this link to learn more about a subscription.
Reader question: I recently read there are concerns about a possible collapse of the global transport system affecting container shipping due to multiple effects from the pandemic. Can you share your assessment of this impact and the short- and long-term effects on our shipping stocks?
Kudos to Dusty for his well-written and enjoyable newsletter. All the love and support from his parents were on display and such a joy to see.
It’s simple. Ports are seeing record-breaking congestion.
Take the ports in Los Angeles and Long Beach, which take in 40% of all shipping containers entering the U.S.
There were 100 ships stuck at port on Tuesday, waiting to unload their cargo. Before the pandemic, the highest record was 17 ships, according to a report from Business Insider.
The net effect of congestion is a massive decrease in the supply of ships.
All else being equal, when supply of a commodity falls (in this case, shipping capacity), the price rises. Right now, it’s as if a big chunk of the world’s shipping capacity has suddenly been taken off the market.
There’s an old joke in shipping: “If there are 100 cargoes and only 99 ships, everyone makes money, but if there are 100 ships and only 99 cargoes, no one makes money.”
The point is, very small changes in supply and demand can make big differences to shipping rates.
This is why congestion at the ports and at the entrances to the canals has caused charter rates to soar, especially for the dry bulk and container segments.
Container shipping rates are up about 5x in the last 12 months, as measured by the Harpex Index. Dry bulk rates are up about 3.5x over the last year, as measured by the Baltic Dry index.
And rates will stay high until they build more ships, unclog the ports, or demand for shipping capacity declines.
As the owners of shipping stocks, we own these ships and receive these great shipping charter rates. We’re directly capitalizing on these supply chain issues, even though supply chain issues are not the reason we bought shipping stocks in the first place.
We bought shipping stocks because they were cheap, and we knew there’d been almost no serious new investment in shipping capacity in 13 years.
We knew shipping was vulnerable to market shocks. And that’s exactly what is happening.
Reader question: Are the Income for Life policies only open to U.S. residents/citizens? I am a U.K. citizen living in Germany. Do such policies exist in the U.K. for example?
My impression is that Income for Life policies are only available to U.S. residents. But I’ll turn this one to your fellow readers.
Has anyone opened a whole life insurance policy while residing outside the U.S.? Write us about your experience at [email protected].
And, as always, keep your questions and comments coming, too. I’ll do my best to address them in a future Friday mailbag edition.
– Tom Dyson