DRIGGS, IDAHO – Greetings from our bolthole in the American West. It’s time for another Friday mailbag edition, where I answer the latest questions you’ve sent in…
Today, we talk gold, oil tankers, and investing outside the USA… along with travel destinations south of the U.S. border.
But first, one reader feels strongly about my comment that China may soon overtake the U.S. as the world’s economic superpower…
Reader comment: Your fascination with China takes one thing for granted: FREEDOM. The wealth of a nation should be reflected in the quality of life of its citizens.
Americans and the West are living a better fulfilled life, and their debt problem will be taken care of. I will never bet against America. Many people have serious trust issues with China. I will not be surprised if nobody buys their vaccine.
Many countries have signed up for China-made vaccines already, including Chile, the United Arab Emirates, and Turkey. European- and American-made vaccines are scarce, so what choice do they have?
But my point in previous Postcards was that China exploits the international monetary system perfectly with its brand of authoritarian mercantilist economy that resembles a mega-corporation.
If nothing changes about the way the current monetary system works, China will soon surpass the U.S. as the world’s largest economy.
Now, let’s move on to gold, oil tanker stocks, and international investments…
Reader comment: I was sad to hear that Goldman Sachs took over AAAU. I sold the shares I had and am looking for a replacement. This is for my IRA so I can’t just go out and buy bullion with it, but am looking for the best alternative.
I can’t give personalized advice. But in my Tom’s Portfolio advisory, I suggested the Sprott Physical Gold Trust (PHYS) as a replacement for the Perth Mint Physical Gold ETF (AAAU). Its shares are redeemable in physical gold, so it’s a great alternative for anyone looking to own physical gold through the stock market.
PHYS is a closed-end fund from Sprott, a well-known asset management firm in Toronto, that specializes in precious metals investing. The annual expense ratio for PHYS is a little higher compared to AAAU (0.45% versus 0.18%). But it checks all the right boxes.
Reader question: On February 5, you told a reader, “You can also buy physical gold in vaults through the stock market, although I’d only recommend this once you own enough physical gold at home.” How do you determine how much is enough? Surely you mean in a place easily accessed rather than in your house.
Yes, I meant physical gold which you have access to… like in a home safe, or buried somewhere, or in a safety deposit box at the bank.
What’s the right amount? I’m afraid I don’t have a good answer. Once we start talking big money, we want that gold secure in an insured vault, not in our homes.
Reader question: I would appreciate your comment on making gold and silver purchases through the OneGold service. The best to you and your wonderful family, and have fun skiing.
I have never personally used this service but I’m very familiar with it. I have even spoken to the CEO, Ken Lewis, who patiently explained to me how the product works.
In short, it’s a way to buy and sell gold and silver using an app on your phone at very reasonable prices, in very small quantities, or even with a regular drip purchase.
Your gold is stored in one of four vaults around the world (USA, UK, Canada, or Switzerland.) It’s a joint venture between Apmex and Sprott, two of the largest gold bullion dealers in the world.
Reader question: Love your Postcards and your family! Always look forward to the pictures you send out. It’s fun to see the kids as they grow. I took your advice last year and bought 50 shares of Frontline Ltd.
I was getting 50 cents per share, which I thought was great, so I bought 50 more shares. (Ok, you can tell I’m a small-time investor just starting out.) After I did this, Frontline stopped paying dividends. Do you know what’s up?
Yes, last fall, things looked very bleak in the oil tanker business. Frontline made the decision to suspend its dividend out of caution.
Frontline has a reputation for paying big dividends, so this news not only shocked Frontline’s investors, but the tanker industry as a whole.
Tanker rates are still terrible… but I think we’re through the worst of it. Global oil consumption is growing every day, the oil price is above $60 a barrel again, the floating storage has been drawn down, and OPEC will increase exports again. The next rate spike will be coming soon…
That said, in my Tom’s Portfolio advisory, I no longer recommend buying Frontline.
Nothing against the company. We were just overweight tankers, and I wanted to spread our tanker recommendations more evenly over other shipping sectors.
If you haven’t yet, make sure to catch up on my latest quarterly update for more details. You can find it here as a Tom’s Portfolio subscriber.
(If you’re not a paid-up subscriber yet, find out how you can get access to my full list of tanker stocks – along with the 11 gold stocks I recommend today – right here.)
Reader question: As a Brit permanently residing in the UK (near Maidenhead), your suggestion of Equity Commonwealth doesn’t work because of the currency risk. Do you know of anything similar that’s quoted on one of the UK stock markets – AIM or LSE?
Having just subscribed to Tom’s Portfolio, I realize that I am going to have the same problem with your list of high-dividend stocks. I suppose that since you are working on very long timescales, I should be prepared to take the rough with the smooth and that in the long-term, the currency effects will be small compared to being in a rising market for solid shares that have been bought at a low point.
Great reading your Postcards. I took up skiing too late (mid-thirties) and found it a painful experience. Our son, aged 10, was much better than me! Many thanks.
I don’t know of anything similar to Equity Commonwealth trading in the London Stock Market.
However, UK stocks, in general, offer nearly three times the value of U.S. stocks (in terms of cyclically adjusted P/E ratios). So I’m sure there are some really good deals available right now.
I’ve got it on my to-do list to dive into the UK stock market one of these days…
Finally, a reader weighs in on our plans to go to Mexico…
Reader comment: You and Kate are considering Mexico as a potential future spot for you and the fams? We recently spent almost two years living in Mexico City, which we absolutely loved… apart from three things:
Air pollution – Some of the worst in the western hemisphere, and especially not good for kiddies.
Earthquakes – We had a few big ones while there, including the September 19 one that flattened a good section of our barrio. Nothing fun about running down the stairs with your 3-year-old in your arms as the alarms sound. And…
Altitude – Not everyone is affected by this, but it can be uncomfortable if you are.
Anyway, I feel like you’ve spent a lot of time in Mexico (though not sure why I think that… could be wrong?), so I’m sure you’ve got your own plans… but I might humbly suggest checking out Argentina if you don’t already know the place well.
We’ve been here – on and off – for almost a decade, and right now, it’s by far the cheapest I’ve ever seen it (in dollar terms). I’d say, conservatively, Buenos Aires is 50% cheaper than Mexico City (with similar differences between respective small towns).
It’s super family-oriented, the air is clean (hence the capital city’s name), and there are zero natural disasters. The kids will learn Spanish in no time, too (plenty of bilingual schools, Montessori programs, home-school support groups… whatever your preference).
Plus, in just a couple of hours’ flight from Buenos Aires (and for about $50 round trip per person), you can be in a tropical rainforest up north… Andean wine country out west… skiing to the southwest… or hiking a glacier way down south.
We’d love to come to Argentina. In fact, we had plane tickets to Buenos Aires that we bought a year ago, just before COVID-19 came along, and we weren’t able to use them. But isn’t it closed to foreigners?
We’re looking at Mexico because it’s the one place we can actually get to. We’d avoid Mexico City, though… and shoot for San Cristobal or Oaxaca, or perhaps San Miguel, although that’s probably more expensive.
And we’d want to live in a little pueblo, where we can integrate into the community a bit…
– Tom Dyson
P.S. As always, thanks to everyone who wrote in! Please keep writing us at [email protected]. I can’t give personalized advice, but I’ll do my best to address as many questions and comments as possible in future Friday mailbag editions.