DRIGGS, IDAHO – Greetings from our bolthole in the Great American West…

It’s time for our weekly mailbag edition, where I do my best to answer the latest questions you’ve sent in.

This week, readers want to know more about the relationship between gold, bitcoin, and the stock market… about Mum’s dog, Tessa… and a reader has some strong words about China, after I said it will overtake the U.S. as the global superpower.

We discuss all that and more below, so let’s get right to it…

Reader question: I am curious if the introduction and growth of bitcoin and altcoins (all coins other than bitcoin) have had any impact on your theories of the historical relationships between gold, and other precious metals, and the Dow Jones Industrial Average or S&P 500 going forward.

The short answer is “no.” Gold is the anti-investment… the original “cash.” People tend to want gold during crises and liquidations. Then, they ditch it when the outlook improves.

It’s why the Dow and gold perform such an interesting dance together… a sort of risk on/risk off dance. (For anyone new to these Postcards, you can read more about my Dow-to-Gold investment strategy here.)

Bitcoin, at least for now, has much more in common with a hot technology stock. Compare bitcoin’s chart with Tesla’s chart, for example, and you’ll find they were quite similar last year.

chart

Could bitcoin replace gold as the ultimate form of hard money? It’s possible, although I’m skeptical of this for a number of reasons I’ve addressed before. But so far, I don’t see any evidence of this.

(In my opinion, the reason for the recent lull in gold’s price has nothing to do with bitcoin, as the popular narrative suggests, and everything to do with real interest rates.)

Reader comment: Thank you for your explanation on why the stock market appears to be going up so dramatically but actually isn’t. Using gold as a yardstick instead of paper currencies makes good sense. As you observe, the upward trend is the market pricing in zero percent interest rates into perpetuity.

Thank you for your reports. I read them all with interest. As a gold bug, I have been wondering why some people talk about the role of cryptocurrencies as a “safe haven.”

Bitcoin is a hard commodity, and I think people hope it’ll one day become a sort of modern reincarnation of gold… i.e., an immutable store of value that the global economy can use as a reserve asset.

Maybe they’re right… But for now, as I mentioned above, I think bitcoin looks more like a hot tech stock. Exciting, but I wouldn’t bet my retirement on it.

Reader comment: Love your daily missives. Just to confirm some of your thoughts on gold and silver, I received an email from my bank in Panama.

Basically, it says that due to the high demand for gold and silver, at this time, they have no available inventory for sale, and as soon as they have some inventory, they will let their customers know. Maybe an isolated incident, but maybe a sign of the times.

I’ve seen similar messages from half a dozen other major silver dealers. Physical metal almost completely disappeared from the marketplace a year ago. But a few months later, things went back to normal.

I’ve seen this a handful of other times in my career. The stress always passes, sooner or later, and the market comes back into balance. For anyone who hasn’t bought physical silver yet, now is not the time to buy. Wait for premiums to fall back below 10%. Then buy.

But please don’t be complacent. It’s so easy to put off buying physical metals when there’s no urgency in the market. Set aside the cash now and wait patiently for the next violent sell-off.

Reader question: I have been a fan of your Postcards for some time and have a question. I realize you cannot give specific advice, but I just turned 65 and have access to my 401(k), which has done well since I heavily invested in gold/silver stocks.

I do not have any confidence that the current political leadership will be able to keep its hands off the 401(k) and have toyed with the idea of converting it to a physical gold account. So my question is: Are we better off in physical gold or in gold/silver stocks for safety?

I can’t give you specific investment advice. But I can tell you what I did.

I also have a 401(k). I’m keeping it because I like the tax benefits… and because I’m far too thrifty to pay the penalty for early withdrawal. You may not have that issue.

I have not added to my 401(k) since I lost my job three years ago because a) I haven’t wanted to tie up any more liquidity, and I’d rather own physical gold and silver now and b) I much prefer whole life insurance as a tax-free retirement plan.

For now, I’m not afraid of the government taking over the 401(k)… Although, who knows what lies in the future.

Finally, as my Tom’s Portfolio subscribers know, I advocate for a portfolio of about 65% physical gold, 20% physical silver and 15% gold and silver stocks.

In fact, I put together a detailed report for my paid-up subscribers about how to build the ideal precious metals portfolio – including the 11 gold stocks I recommend today. If you’re not a Tom’s Portfolio subscriber yet, I encourage you to watch this for more details.

Reader comment: I’ve followed your posts for a long time. I’ve encouraged you to remarry your lovely Kate now, which will provide additional blessings for your family.

I’ve even bought some tanker stock at your suggestion. The stock has gone down while my bitcoin has given me a nice Christmas present. If you’re waiting for gold to increase significantly and then convert it to the Dow, is there a Dow-to-bitcoin ratio which would now suggest that I convert my recent spectacular gains to the Dow?

Best times of chasing my sons down, Wild Willie and Crazy Horse – never could catch them, but made for good memories.

Haha… Maybe someday. But for now, bitcoin and the Dow are both “good time” assets. If I were in a similar position, I might convert my spectacular gains into gold, instead.

Reader comment: I enjoy your articles and agree with your position that gold and silver are the only real assets that are positioned as the world’s money.

I am sorry to hear of your loss and feel so bad for your mother’s beautiful dog, who has lost her reason for living. As you may read between lines, I am a dog lover, for my dog loves me and I love her.

My mother’s dog is named Tessa. We often joked that Mum loved Tessa more than she loved her sons. And I wouldn’t mind if she did. Tessa was the most loyal, most friendly, most deserving dog I’ve ever met.

I feel an enormous sense of gratitude towards Tessa for taking care of Mum all these years while she struggled with Parkinson’s Disease while living on her own.

Everyone loved Tessa and many people offered to adopt her after Mum died. But in the end, we chose Mum’s next-door neighbor to minimize the change in Tessa’s life. She still goes to the same parks, walks the same walks, and meets the same dogs she’s always done.

Reader comment: China is run by a communist party and dictator who has no regard for individual Chinese people. Communism is an evil ideology and is responsible for the deaths of over 100,000 million people in Russia, China, and many other smaller countries. China lies, cheats, steals, connives, oppresses, and kills. No lasting good can come from it!

I will probably spend the rest of my life defending liberty, capitalism, free markets, and small government. You’ll never hear me defending the Chinese government, for example.

That said, it does seem that China has very successfully exploited the international system, which, of course, the U.S. administers and oversees. Until something changes, China will keep getting stronger, and the U.S. will keep going deeper into the hole.

Reader question: Wondering how “The Old Folks” are doing with skiing. You two graduated from the bunny slopes yet? Thanks for your emails, observations, and recommendations…

Hahaha. We’ve graduated from the bunny slope, but only recently. Kate has good form and does nice parallel turns, but she prefers the green runs.

I’m more adventurous and spend my day chasing the boys in and out of the trees and through the mogul fields (which are basically a slope full of bumps), but with far less elegance.

Oh… and my knees wish I was 20lbs lighter. They ache every night when we get home. I’ll probably leave Driggs on crutches… but it’ll have been worth it. Thanks for asking!

– Tom Dyson

P.S. As always, thanks to everyone who wrote in! Please keep writing us at [email protected]. I can’t give personalized investment advice, but I’ll do my best to address your questions and comments in future Friday mailbag editions.

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