BACKPACKER HOSTEL, EAST TOKYO – I saw this yesterday…
The Economist had “The end of inflation?” on its cover last month.
And in April 2019, Bloomberg Businessweek ran a similar cover. “Is inflation dead?” it asked.
Writing by Phone Light
Greetings from Tokyo. We left Hong Kong, and after a long day of travel we’ve made it to our new hostel in Tokyo.
It’s late. The kids are asleep. And I’m writing this to you from my bunk bed by the light of my phone…
Inflation, Recessions Ahead
We’re in a “valuations bear market.” A bunch of recessions are coming. The Federal Reserve and other central banks are going to print heavily to combat these recessions.
Meanwhile, foreigners – especially China – aren’t buying Treasurys anymore. The government’s gargantuan borrowing habit is overwhelming the money markets and causing strains. The September seizure in the repo market is a symptom of this.
So the Fed is going to print heavily to finance the government’s borrowing needs, too.
The bottom line is, they’re going to devalue the dollar (and other world currencies), and inflation is coming.
It’s the only way.
This chart shows inflation over the last 60 years.
You can see by the red line above that there hasn’t been much inflation recently.
That’s why popular investment magazines like The Economist and Bloomberg Businessweek are talking about inflation’s death. It’s also why trillions of dollars have piled into bonds this year.
Absolutely NO ONE in mainstream or institutional finance expects inflation is coming.
They’re going to get a big surprise over the next 10 years.
Stocks and Bonds: Dead Money
In Monday’s postcard, I explained why the S&P 500 will be dead money over the next 10 years. Bonds will also be dead money over the next decade. But I don’t expect bonds to crash, and I certainly wouldn’t bet against bonds.
The Fed will print money. If necessary, it will nationalize the entire yield curve like it did in WWII, or like Japan is doing now. They call this “curve control.”
The correct position over the next 10 years is in gold, silver, and commodities. It’s the most contrarian position we can take…
– Tom Dyson
P.S. On Monday, Donald Trump met with Fed Chairman Jerome Powell to discuss “negative interest rates, monetary policy easing, dollar strength and U.S. trade,” according to Reuters. A devaluation/inflation is definitely coming…
P.P.S. Easy traveling today. The road to Hong Kong’s airport had no traffic. There was no line at passport control. And our plane was empty…
The open road to Hong Kong’s airport on our way to Tokyo
Dusty (11) enjoying the perks of traveling where no one else wants to go
Strong feelings today around Tom’s depictions of Hong Kong, where the Dyson family just spent over a week amid the protests…
Reader comment: Your version of HK is completely crazy!!! Are you seriously trying to say the police are the violent ones??? Dude, you need to take your wife and kids into the middle of the protesters and rave about how great China is and how much your family loved it. You may not walk away from it. They just KILLED a man.
Your travels obviously mean nothing, as far as truth is concerned. I don’t care for your obviously biased and ignorant opinions of the few minutes you’ve spent educating yourself and your children in Hong Kong. And I’m certainly not going to read any more of your rubbish.
Reader comment: So much enjoy your travels and descriptions. What a rip-off on the price of a closet room! Travel safely, and best of luck on your adventure.
Reader comment: I want to let you know how interested I’ve become in your adventure. Skipped many of your posts (I get so much email, I can’t read it all… lots of deleting), but I got interested when you arrived in China. I’ve actually read most of what you’ve taken the time to relate.
You’ve given your children the best education possible. I’m actually jealous, as I always wanted to take your trip, but never had the guts to throw it to the wind and do it! Good for you.
Looking forward to the rest of your emails.
Reader comment: As so many of your readers do, I too enjoy reading your adventures. It’s nice to hear from someone who’s recently been in China.
I was aware of their ghost cities, but find it amazing that there are so many. (Cheap rent.)
What’s your view of China and traveling on a very limited budget? Also, travel in Thailand and their costs? Enjoy your travels, and mostly your family.
Reader comment: I just would like to note, a lot of pollution overlooking the South China Sea. Good picture to send to every lib in America…
I have enjoyed reading about your journey.
Reader comment: I certainly am enjoying your postcards. Please be careful in Hong Kong. Definitely a volatile situation.
Best regards to your family and you!
Tom’s response: Thanks to everyone who wrote in. Kate and I read every note. Is my depiction of Hong Kong “crazy,” or did you have a similar experience there? Write us at [email protected].