Inflation Concerns Hit the Mainstream Media

DRIGGS, IDAHO – Gold was at $1,729 an ounce last week… down 11% year-to-date and nearly 17% from its peak last August.

But I’m not worried… even though I’ve put almost my entire life savings into gold. More below…

Life in the Idaho Backcountry

Greetings from a cabin in the mountains…

My family and I are a traveling family, living on the road and homeschooling our children from hotel rooms and Airbnbs.

We’re currently in the Teton mountains, living in an Airbnb on the outskirts of a remote little village in the Idaho backcountry, called Driggs. We’ve been living here all winter, learning how to ski and snowboard.

The ski resort closes for the season next week. So we’re packing up our suitcase and moving on shortly. Next stop: London.

Here are the Tetons. We live at the base of these mountains and drive up into them every day to go skiing…

We’ve skied more than 100 days this season. Dusty (13) has done over 700 runs down the mountain. (The lift operators can see how many chairs we’ve taken when they scan our lift tickets.)

But spring is here now in the Tetons and temperatures are rising fast. In the valley, where our cabin is, the snow is disappearing.

The boys even managed to find a patch of grass for a game of baseball this weekend…

Meanwhile, our car is full of water. The carpets… the foam in the seats… the floor mats… all soaked. Water is even pooling in the trunk.

We put our wet skis and snowboards in the trunk after skiing every day for the whole season, and never aired it out. (Now we know why people use roof racks for their skis.)

This weekend, we used the nice weather to dry out the car…

Finding Freedom

We are attempting to finance our lifestyle by speculating with our life savings in the financial markets.

Why do I write these Postcards? Because I want to document our attempt to find freedom as a family… to escape from “the matrix.”

Will we be successful? I have no idea. I think there’s a good chance we’ll end up broke, friendless, jobless, rootless, and our kids won’t have the tools they need it to make it in life.

At least these Postcards will be interesting as I document our downfall. Only time will tell.

In the meantime, we continue to plough whatever cash we can into gold…

Stampede Into Hard Assets

For the first time in 75 years, we think the government has decided to promote inflation and intentionally devalue the dollar.

The fixed income market is huge (the global debt mountain was $281 trillion at the end of 2020).

When debt holders realize the authorities around the world intend to keep real interest rates negative for the next decade or two and debase their currencies, capital is going to stampede out of the bond markets and into hard assets.

We’ve put our entire life savings into gold, silver, and steel (shipping stocks) to speculate on this. (As regular readers know, shipping stocks are high-yield infrastructure plays made of steel and in limited supply. They’re perfect to capture this trend.)

The gold, silver, and shipping markets are tiny in comparison (just under $20 billion, combined). The flight from bonds should inflate gold, silver, and shipping values like balloons.

Exodus Out of Bonds

Treasury bonds just had their worst quarter since 1980, so the dynamic is starting. But the exodus of capital from the bond market isn’t driving gold higher yet.

For gold to rise, the Federal Reserve will have to drive real rates negative again by capping interest rates – what economists call “yield curve control” – while letting inflation “run hot.”

This should happen over the next few years…

In the meantime, I’m watching the Fed’s balance sheet closely for signs it’s expanding its bond-buying program.

Last month, the Fed purchased $131 billion in Treasury and mortgage bonds… so nothing unusual there yet.

I’m also watching inflation. It’s really heating up, as last week’s news confirms…

From Bloomberg:

There’s an underappreciated side effect of all the disruptions across global supply chains: the cost of producing and distributing everything from furniture and foam to cars and machinery is rising. While that has thrown off the plans of companies, the effect on consumer wallets is much more subtle and uneven — for now.

In the U.S., 3M Co. has pointed to rising freight costs to ship its goods while Mattel Inc. has said plastic is more expensive. In China, the cost of products like furniture are going up because chemicals and metals for foam are rising. Some toy wholesalers in the country have raised prices by as much as 15%. Factory gate prices have been edging up there too.

From the Financial Times:

A growing list of businesses are warning that supply-chain bottlenecks, increasing raw material costs and higher labor expenses are beginning to bite…

Mobile home manufacturer Legacy Homes and Williams-Sonoma, the purveyor of Breville espresso machines and Wüsthof knife sets, have seen an uptick in wage costs…

“Costs are going up everywhere,” said Ted Doheny, chief executive of packaging maker Sealed Air. “It’s DefCon 4 [for] us right now. It’s a big deal.”

Also from Bloomberg:

The maker of Scott toilet paper and Huggies diapers will soon start charging more for its consumer products to counter rising commodity costs.

Kimberly-Clark Corp… told U.S. and Canadian customers that it’s raising prices for most consumer products to offset ‘significant’ commodity cost inflation, with percentage increases in the mid-to-high single digits.

Nearly all price hikes take effect in late June and impact baby and child care, adult care and Scott bathroom tissue businesses…

For now, we sit tight and wait…

– Tom Dyson

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

Readers get a kick out of Tom’s new collectors’ idea… meanwhile, another reader shares how he and Kate could keep their kids close to home…

Reader comment: Your comments on the lowly penny brought a smile to my face. Years ago, I started pulling the copper pennies out of my change and squirreling them away. I have quite a pile now and still regularly stumble on the occasional wheat penny as well.

It might be a fun thing for your children to get involved in after you return from London… The apple never falls too far from the tree. I remember my father, after they took the silver out of the coinage in the ’60s, going through his change every evening and taking out the silver coins.

Reader comment: Funny that you mentioned saving the pennies. I’ve been saving pre-1982 pennies for many years. I think the US Mint started making junk pennies in the middle of the 1982 run so that’s why I save the pre-1982s. 

By the way, I bought some Vienna Philharmonic one ounce gold coins yesterday. Seems there was a rush on gold coins recently and not much else was available. (I always buy the Philharmonic gold coins anyway.)

Reader comment: I have been collecting pre-1983 pennies for years. Gresham’s Law has made the hunt more difficult with each passing year. I’ll never get rich doing it, but “a penny saved…” 

By the way, the U.S. Mint issued both copper and zinc pennies in 1982. They are easily distinguished by weight. Nickels, which are 75% copper, are another good way to save copper, but their melt value isn’t much more than five cents at this time. Happy stacking!

Reader comment: I always enjoy your Postcards and reading about your family. About keeping family members close: I know more than one family whose dad bought acreage and built homes close to him for his kids so they could all be close. Each family had at least five kids, so you’re already ahead of the game.

Safe travels and be well. My 52-year-old son has been in the ICU for over 60 days fighting COVID-19. So I really mean it when I say be well.

Tom’s note: As always, thanks for writing in! Please keep sending us your questions and comments at [email protected], and I’ll do my best to answer them in a future Friday mailbag edition.