Another Reason to Get Out of the Mainstream Financial System

BOZEMAN, MONTANA – Tesla shares rose more than 12% yesterday. Tesla has now become the seventh most valuable company in the U.S., overtaking Visa.

Tesla stock is up 559% since March 18 (that’s less than 6 months).

More below…

Treating Ourselves

Greetings from Bozeman, Montana…

My family and I have been floating around America for the past three months, camping, visiting national parks, and exploring the backroads…

We’ve traveled over 10,000 miles, been to 20 states, and visited deserts, mountains, farms, forests, rivers, small towns, and lots and lots of campgrounds. It’s been epic.

Today, for a change, we treated ourselves to a hotel room. We booked three nights. We’ll be sleeping in soft beds and resting our heads on fluffy pillows. And taking hot showers.

Here I am writing to you from our room.

And as I sit here, with my feet on the carpet and a cup of free hotel coffee next to me, I realize how tired I have become. I think Kate and the kids are tired, too, although they haven’t said so.

Winter Is Coming

Besides, winter is coming. (It’s already starting to get cold in Bozeman. Last night, the temperature was in the 40s.)

I think we’ve got about one more month of camping in us… then it’ll be time to find somewhere to hunker down for the winter. We had been hoping to spend the winter in Canada, but that’s not possible as the Canadian border remains shut. So we’ll have to make another plan.

We’ll see…

Visa Versus Tesla

We’re living through the greatest financial experiment in history…

Yesterday I noticed this comparison between Visa and Tesla in my Twitter feed…

Market cap:
Tesla: $464 billion
Visa: $451 billion

Net Income:
Tesla: $0.4 billion
Visa: $11.8 billion

Profit Margin:
Tesla: 1.4%
Visa 51.4%

I’m not sure why Tesla’s stock is rising so fast. It’s not a company I follow or a stock I have any interest in. But it’s clearly going crazy. (Visa is not a cheap company, but compared to Tesla, it looks very cheap.)

It’s just another example of why I want nothing to do with the stock market or the wider financial system.

– Tom Dyson

P.S. The U.S. dollar is weak. The dollar index – which measures the dollar against a basket of international currencies – fell to its lowest levels since April 2018 yesterday. It’s down nearly 10% from its recent high, reversing almost half of its appreciation of the last 10 years.

A weaker dollar suggests to me that the Federal Reserve has been successful in getting investors to speculate again and take risks again, which supports the recent action in Tesla’s stock. I’ll have more to say about this tomorrow…

Like what you’re reading? Send your thoughts to [email protected].

Readers want to know how Tom classifies gold stocks in his portfolio… what to expect when they sell gold… and what would happen if the Dow dropped next month…

Reader question: I read your Postcards intently as I, too, have been moving my stocks from tech to gold gradually over time. I assume when you discuss the Dow-to-Gold ratio, you still have it in mind that a gold stock comes under gold rather than stocks? I do have physical gold, too, but this is minor compared with my portfolio.

Tom’s response: Correct. I own gold stocks as part of my total gold strategy. I will sell them when the Dow-to-Gold ratio goes below 5.

Reader question: When you want to sell gold, do you get paid the spot price?

Tom’s response: No. Only professional and institutional investors trade at the gold spot price. The prices of all other gold instruments key off the spot price, but don’t trade at the spot price. Gold ETFs, for example, trade close to the spot price. Gold coins, depending on supply and demand, may trade at prices far away from the spot price.

Reader question: Is there ever a time you will not be able to sell gold (no buyers)?

Tom’s response: No. Gold is a deep and liquid international market.

Reader question: If the Dow were to drop next month, gold has only reached $3,000, and the Dow-to-Gold ratio were to be 5 at that point, would you sell gold and buy stocks even though you predict gold to reach $10,000?

Tom’s response: Yes. I don’t care about the specific levels of gold or the Dow. Just the level of the Dow-to-Gold ratio. (My best guess is, the Dow-to-Gold ratio won’t be less than 5 until gold has exceeded $10,000 an ounce.)

In early August, a reader asked Tom about reporting gold gains to the IRS… to which he said the IRS will always take its cut. Today, another reader asks Tom to explain further… while one reader wants to know how to get started in stocks…

Reader question: You mentioned that the IRS will take their cut. How do they know/how do you report?

Tom’s response: The IRS always gets its cut. As with any investment, you must report your capital gains and trading profits in your annual tax return.

Reader question: I know nothing about buying stocks and how to get started – is there a VERY simple tutorial you could recommend?

Tom’s response: Buying and selling stocks is easy. Far easier than buying a business or a property, or even a car. I’d recommend you open a brokerage account and use play money to practice buying and selling. All the big brokers offer help and tutelage.

And finally, a reader echoes Tom’s claim that “America is the most generous, hospitable, open society on the planet”… and one reader apologizes for Canadians’ reported hostility toward Americans during COVID-19…

Reader comment: YES to your comment about American society being open and hospitable. I also have traveled the world. I chose to live in the U.S. (I moved from Europe) because, in my experience, there is a much higher percentage of kind, generous, and open-hearted people in the USA than anywhere else in the world. Completely different from what the media says.

Reader comment: Hello Tom and family, I enjoy reading your Postcards each day. I am envious. It would be a great way to see your country and your kids are getting a great education, far better than they would if they were sitting in a classroom somewhere.

I have to apologize on behalf of some of my rude fellow Canadians. It is true that some Canadians are becoming hostile to Americans who are visiting this great country. Unfortunately, the fear that has been poured out through the media every day has made people very afraid of a virus that has about a 2% chance of killing anyone.

I’m not giving advice about whether you should come to Canada or not, but that is the situation here. Looking forward to reading more about your adventures.

Tom’s note: As always, thank you for writing us! Please keep your messages coming to [email protected].