DRIGGS, IDAHO – Greetings from the Teton Mountains…
Tucked away in our winter bolthole, it’s hard to believe what’s happening in America’s capital.
But it’s time for another Friday mailbag edition here in our Postcards… and many of you want to know what 2021 might bring for your wealth. So let’s get to it.
Below, I answer your questions about “Income for Life” insurance policies (if you’re a paid-up Tom’s Portfolio subscriber, you can access my full course on that here)…
…whether America is headed the way of Japan, with runaway money-printing but dismal economic growth…
…and why I stand by my prediction that China will overtake the U.S. as the world’s next superpower…
Reader question: One of the allures of Income for Life is the fact that after 7-10 years, you can start to borrow money from the insurance. However, the insurance policy is written in USD. Since we are already seeing instances of asset inflation in the housing, stock, and farmland markets, what is the point of an Income for Life policy unless you have a loved one who would profit from the death benefit?
Wouldn’t it be more beneficial for someone who has already a life insurance policy with significant cash value to take out a loan, up to an amount where the annual premiums and interest are still covered by the dividends, invest that money in gold, silver, copper, nickel, farmland, housing, or perhaps even in cryptos, and repay the loan when the Dow-to-Gold ratio is down to 5?
Would you start an Income for Life policy now, given the high chances of runaway inflation? Are there insurance companies that write their policies in ounces of gold, like a policy with a 500-ounces-of-gold death benefit? Just wondering and pondering how to avoid being ransacked by Monopoly money. All the best for your winter sport adventures in Driggs.
All good thoughts. I have the same thoughts. Recently, I considered taking a policy loan and buying shipping stocks with it.
They have just as much inflation protection as gold (ships are scarce assets) but unlike gold, they’re working assets and generate an income. We could meet our monthly interest bill from the loan with dividends…
In short, I do worry about the threat of dollar debasement on my Income for Life policies… but I’m well hedged. And for the moment, I haven’t done anything about it…
Reader comment: My son and I are lifetime members of Legacy Research and avid readers of your advice, finding your case for the Dow-to-Gold ratio compelling. We are in the process of converting assets to your gold and silver recommendations.
However, I have a nagging remembrance of the Japanese experience. They printed massive amounts of yen, currently have a national debt twice their GDP, and despite efforts to inflate, they remain, for 30 years now, deflated.
I understand your concern about Japan’s lack of inflation. This is something I’ve pondered myself many times.
The fact that the Nikkei is still 28% off its all-time highs 30 years later, while the Nasdaq is up 160% from its 2000 high, alone tells me the U.S. is on a very different trajectory than Japan.
Reader comment: I noticed that you are homeschooling. This is good, but you are educating them to eat rubbish food every time you are on the road. Perhaps you could do a lesson on good diet as opposed to bad diet. It’s a lifelong lesson that can help their brains develop. P.S. My bitcoin is up more than my silver or gold.
This is an interesting argument. They do know the difference between healthy and unhealthy food. But I wonder, is it that simple? I know the difference between healthy and unhealthy food, for example, and I still make bad choices.
Maybe the policy is giving them freedom to choose the food they want to put in their bodies from an early age and trusting them to figure it out themselves is best? (They can see how much weight I put on after I started eating fast food every day.)
Reader question: I was reading somewhere that it is likely cruise ships will be sold off as freight carriers because the only option for them is to be scrapped or converted. Your thoughts? Who would be buying them?
Cruise ships can’t be converted into cargo ships. What’ll happen is – and this is already happening – COVID-19 will accelerate the scrapping of old cruise ships. The rest of the fleet will continue to operate as best it can… as cruise ships.
Reader comment: Always interesting… but as a Canadian, I think your family is nuts to spend a winter anywhere near snow. Also, I think you are completely wrong about China – it’s unlikely to still be a single country within 10 years. And those splinter parts will be a totalitarian nightmare of Orwellian scale. And broke. A good beer fart could collapse China’s financial infrastructure, and a lot stronger breeze than that is heading its way.
Things are going to be awful in China, starting pretty much now. For one thing, China throws Canadian citizens in prison, to be held as hostages for their 5G execs. That’s for starters. China will soon be a pariah, and maybe even at war with a lot of countries. If none of that happens, things in China are still in no better shape than their ghost cities, which are beginning to fall apart.
My point with China is, the way things are structured, China is eating America’s lunch.
China has all the factories and – despite its unpleasant government – a national sense of “pull together” that somehow lets it dominate economically. We’ll see…
– Tom Dyson
P.S. As always, thanks to everyone who wrote in. Please keep sending us your questions and comments at [email protected], and I’ll do my best to answer them in future postcards.