DRIGGS, IDAHO – Greetings from our winter hideout in the Rocky Mountains…

It’s time for another Friday mailbag edition, where I answer the latest questions you’ve sent in.

Today, a reader offers advice after I said Kate and I want the kids to stay close to us when they grow up… we talk about gold and the Dow-to-Gold ratio we follow in these Postcards – including the best stocks to buy once the ratio falls below 5… and I share my favorite book about money.

All this and more in today’s mailbag, so let’s get right to it…

Reader comment: You: “Kate and I would like our children to live nearby us when the time comes for them to leave home. But how do we make that happen?”

Idea: Teach them about business and build one with them. That will keep them close. Parents are the brains and capital, youngsters are the worker bees. I tried to pull my kids into my business, but they didn’t have any interest in recruiting. I did have a successful business with my dad in online job boards for 15 years.

Yes, totally agree. But what business? And would it keep them around or push them away?

Something online is definitely the way. Maybe online advertising for brick-and-mortar businesses? Or online publishing? They could learn to build websites, edit videos, and write content and then we could become a family marketing agency…

Reader question: Tom, I have just read the front end of your Dow-to-Gold strategy, having just joined your services with great interest. My only concern is that the U.S. government might outlaw gold, and just confiscate it from us, as happened under FDR.

I don’t know how he got away with it, but he did. I know there is foreign investment in gold, but the whole world might get on board with gold confiscation. Thoughts?!

In order to run the “financial repression” playbook I wrote about on Wednesday, it’s important that governments lock the exits to prevent capital from escaping. They’ll probably do this by regulating financial institutions and forcing them to own government bonds.

Unlike 1933, when gold and silver were money, today most of the world’s savings is held by financial institutions. So I don’t see any need for governments to gate the exits by banning gold.

Gold has been living in exile from the financial system for 50 years. I think it’s far more likely they’ll close the gates to cryptocurrency though…

Reader question: Thanks for sharing your life and all your insight. It is truly appreciated and respected! Like many of your readers, we are tracking the Dow-to-Gold ratio and awaiting the dip below 5 to start capitalizing on the wealth transfer.

When it comes time to “buy the Dow” (if one’s strategy is liquidating precious metals in exchange for equities), what might that look like? My thinking is it would mean buying individual stocks in the Dow or something like the “SPDR Dow Jones Industrial Average ETF Trust (DIA).”

Great question.

My favorite stocks are what I call “corporate aristocrats.” These are great businesses that generate profits year after year and raise their dividends every year for decades at a time.

Coca-Cola would be an example of this. (Paid-up Tom’s Portfolio subscribers can access my entire corporate aristocrat watch list – including my top 17 names – here. If you’re not paid-up yet, learn more right here.)

But again, I won’t buy these corporate aristocrats until the Dow-to-Gold ratio falls below 5, which I expect will happen sometime in the next five to 10 years. The ratio is at 18.8 as I write.

Reader question: I have been a loyal reader for many years now. I think it’s so cool that you go 100% what you believe in. I think many of us – myself included – don’t have the balls to do it.

I like your Gold-to-Dow-Jones theory. Still, I keep wondering if it wouldn’t be better/safer to convert (some) gold, after the reset happens and when there is a new global currency. What do you think of that?

Great investments anticipate the future, not react to the present. Besides, the only investment I ever want to own are the stocks of excellent businesses bought at fair prices. There is no better passive way to compound wealth than in a great business.

Gold is simply a way to sit on the sidelines until the storm has passed and it’s safe to buy corporate aristocrat stocks again.

To know when the storm has passed, we keep an eye on the Dow-to-Gold ratio. As I’ve written many times in these Postcards, it’s the ultimate barometer to track the health of the financial system.

Reader question: I remember you mentioning gold-backed debit/credit cards previously but no conclusions on your part. There are a few that I’m aware of. Any thoughts, pro or con, about having one and preferences? Always interested in your perspective.

I’m not especially interested in using gold for my daily transactions. I’m using gold to preserve my long-term purchasing power. Therefore, I keep it in cold storage.

For daily transactions, I prefer credit cards. I often study the credit card offers and promotions and I try to accumulate points and discounts…

Reader question: I purchased a 1-ounce gold coin from an online broker in the UK (I’m in Bucks UK) that posts the gold out to you. My coin is a 2021 gold Britannia. It’s a beautiful looking coin, however there is a small, almost microscopic, scratch on it (on the Queen’s face). You would have to look hard to see it.

Is this something I should be concerned with, would it affect the sell on value, should I be getting involved in trying to get it replaced by the broker, or am I worrying about nothing? A solid gold coin is a solid gold coin? Let me have your knowledgeable thoughts, please.

A gold coin is a gold coin. Imperfections only matter when you’re dealing in rare coins (or baseball cards or Star Wars figures or Fender Stratocasters, etc.), where condition is paramount.

Reader question: For those of us for whom a nomadic lifestyle is not an option, in general, do you think it is wiser to a) pay off a mortgage early (i.e., strive to go 100% debt-free) first, and then stockpile in gold, or b) really, truly, prioritize stockpiling gold over everything beyond an emergency fund? Even with a grasp on the big picture, it can certainly be hard to navigate the here and now!

A very tough question.

You present two extremes, but the right answer is probably somewhere in between. The burden of your debt should get slowly inflated away over the next decade or two, but on the other hand, a big debt service obligation can be stressful.

I’d probably pay the debt down to the point where I can comfortably afford the monthly payments. Then, I’d start accumulating gold and letting inflation erode the remaining mortgage liability. Something like that.

Reader question: I read you regularly and am pretty well informed about market cycles. But I don’t fully understand what you mean by reflation. Have you explained it in a daily post that I may have missed? It would help me understand your strategy better. Thanks for your help.

Good question.

I think of “reflation” as rising inflation combined with economic expansion. It’s the sort of inflation we get in the recovery stage after a big financial crisis, like we’re experiencing now.

Then there’s “stagflation,” which is rising inflation combined with economic contraction. There hasn’t been stagflation in decades, but I think we may get reacquainted with it over the next few years.

The distinction is important, because in reflation, risk assets do well (I wrote about the best way to reflation-proof your portfolio in the March 15 Postcard)… But in stagflation, gold is probably the asset to own.

Reader question: Enjoy your last bit of winter on the slopes! What is the best book(s) you can recommend regarding understanding what money is and/or video(s)? I’d like to get a good fundamental history lesson under my belt.

My favorite book about money is Harry Browne’s 99% of Everything You Need to Know About Money & Its Effect Upon the Economy. For videos, we really enjoyed Mike Maloney’s YouTube series titled Hidden Secrets of Money.

And that’s all we have time for today… Thanks to everyone who wrote in!

As always, please keep your questions and comments coming at [email protected], and I’ll do my best to answer them in future Friday mailbag editions.

– Tom Dyson

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