WEST PALM BEACH, FLORIDA – I can’t keep up with the news.
Commercial paper funding facilities… distributions of cash… income tax holidays… repo injections… bailouts for airlines and casinos…
Are we about to witness the greatest financial experiment in history? (My answer below.)
Brace Yourselves
Greetings from South Florida…
My family and I are holed up with Kate’s parents. We’re fine. And I hope you are, too.
In 10 days – I imagine – we’re going to be in the thick of the worst national disaster of our lifetimes. Some of us will be very sick. Some of us will go to the hospital. And some of us will die.
All of us will be affected.
“You shouldn’t read so much,” my mother said to me on the phone from London. “It doesn’t do you any good.”
“But it’s my job,” I told her.
I don’t know how to prepare anymore, so I’m just going to keep doing my job (even though writing about finance and showing pictures of my family seems a little superficial right now.)
I’ve been teaching Penny to ride a bicycle. Here we are…
Teaching Penny how to ride a bike
Homeschooling Tools, Part Three
Kate and I have been homeschooling our children for years. Here is a free resource from Scholastic, the world’s largest publisher of books for children:
We’ll be using it over the next month.
These are 20-day courses made especially for children affected by school closures. They’re suitable for all grade levels.
If you – or anyone you know – have to homeschool children this week because their schools are closed, perhaps you’ll find this useful.
(I’ll post more of our favorite homeschool resources every day. See the ones I posted on Monday here and Tuesday here.)
Final Act: Stagflation
Are we about to witness the greatest financial experiment of our lives?
No.
The greatest financial experiment began in 1971. (See this great website. It shows you what happened in 1971… and the aftermath… in a series of charts.)
We are about to witness the Final Act. This is the part of the story where the Federal Reserve prints $10 trillion – and so do the other central banks – to restore the solvency of the financial system.
The title of this Final Act is “STAGFLATION.” Stagnation combined with inflation. And it ends with a synchronized global currency devaluation against gold and silver… and the death of the existing world monetary order.
Incredible Payday Ahead
This is a very contrarian position. Economists, politicians, CEOs, and even investors are all positioned for DEFLATION right now.
When the trend changes and the herd begins to sniff out stagflation, there’s going to be a terrific stampede in the capital markets… from fixed income and bonds into hard assets and hard currency.
Investors and speculators who can summon the courage to buy gold, silver, and royalty streaming stocks at current prices are setting themselves up for an incredible payday in the future.
It occurs to me the Fed and the federal government may even decide to buy gold to kickstart inflationary sentiment. That’s how fearless they are of stagflation.
– Tom Dyson
P.S. If you know any nurses or doctors working their asses off on the front lines of this battle, please write to me at [email protected] and tell me about them. I’d like to use this platform to acknowledge them publicly.
Like what you’re reading? Send your thoughts to [email protected].
FROM THE MAILBAG
In today’s mailbag, reader questions on gold… ETFs… life insurance policies… and the gold-to-silver ratio…
Reader comment: Love both the travel and investing info that your Postcards provide. I’ve even created two text files in which I copy and paste my favorite parts of each! My question is about NUGT, the 3x-leveraged gold miner’s fund. I mention it only because it had a MASSIVE selloff last week, falling from $16/share to less than $7 (in one day)! And what about purchasing call options on it? I hate to buy "falling knives", but that sure sounds like a bargain to me. I am really looking forward to your response. Thanks and God bless you and your family.
Tom’s response: I hate NUGT and all other 2x and 3x ETFs, on gold stocks, technology stocks, bonds, volatility, etc. I would never buy one. They’re structured to transfer money from the individual investor to the issuer of the security. They’re toxic investments and I’ll be happier when they cease to exist. The decline in NUGT you reference is a perfect example of why I hate these leveraged ETFs.
Reader comment: I know you are a smart guy, if a bit unconventional. Sounds exciting, the traveling you are doing. I have been floating the idea of traveling to warmer places. My question for you: Why do you suppose silver and gold are down a lot? My theory is the plunge protection team. You say gold is such a great value, but it gets beaten down every time. It feels kind of like betting against the house.
Tom’s response: I don’t know the specific reason. But as I wrote yesterday, there’s a huge market of paper gold traders who use gold in conjunction with other strategies, and when liquidity dries up in the market, the gold price can fall fast. Two things: I try to focus on the long term (5-10 years), not on the day to day movements. And second, I accept and expect the volatility. The world monetary order is ending. How else could it possibly be?
Reader comment: You put your life savings in gold? Are you still paying off the 401(k) you said you committed to "Income for life?" I followed your lead on that… Did you decide it’s not such a great strategy after all? Really would love to hear some flow up thoughts on this!
Tom’s response: I love my “Income for life” policies. I will hold them until I die and absolutely nothing will make me reconsider. So the only way you can take them from me is by peeling back my cold dead grip from the contracts they’re written on.
Reader comment: I respect your market knowledge and dig your Dow-to-Gold plan, seems sound, backed by history. Although, I’m surprised you’d buy paper anything (silver ETF/annuities) backed in U.S. dollars, with counterparty risk, given my impression of investment style (I can understand a speculative portfolio percentage in mining for leverage).
Tom’s response: I understand my life insurance contracts come with counterparty risk. And it’s a risk I’m prepared to take. My providers have been in business for over a century and have never needed to be bailed out or rescued. And they don’t use leverage like banks. I’m hoping that track record will continue.
Reader question: I agree that we’re due for a financial reset, where world currencies require backing by a real/hard asset (probably gold). Therefore, causing gold to spike higher to adjust. However, I don’t understand why you think the gold spike will be higher than silver on a percentage basis given they’re both historically monetary metals, with the current gold-to-silver ratio >100 (highest in 5,000 years).
It seems like you’re saying I believe in cycles, reversion to a mean (Dow-to-Gold)… except for monetary metals, am I mistaken? I’m in the park with your mentor Mr. Bonner, that everything eventually reverts to a mean, as a natural law, which implies silver surpassing gold in percent gain. Thoughts?
Tom’s response: It’s just my hunch that gold will do better than silver for a while. I’m not saying their prices will NEVER return to their mean. I’m saying I think the gap will widen before it reverts because the world monetary order is about to change. I also own silver and I imagine it’s going to do just fine in my portfolio. I’m not worried about it at all and if I had any spare capital, I’d be buying more of it right now.
Reader comment: I never miss one of Bill Bonner’s letters or Tom Dyson’s postcards. Between the two of you I get informed, learn something, and have a few laughs.
Bill said he had some lung trouble. I’m passionate about my health. I am 82 years old and have not been on any medications for the last 30 years, except for a few infections which was my stupid fault. Let me know if you’re interested in some health advice. Don’t want to lose you. You’re too valuable.
And one reader comments on Tom’s March 9 postcard, in which he witnessed a cow slaughter in Nicaragua…
Reader comment: It is a normal reaction to be sick when you see an animal slaughtered unless you have become desensitized by the culture you live in (which is the norm). Of course, the animal wants to continue living like any other living being.
Two of my five children decided all by themselves to become vegetarians when they were 11 and 12 years of age because of their love of animals. I have thought a lot about this. I am now 70 years old and live in France not far from Bill Bonner’s home in Poitou. I also made the decision to become a vegetarian! I have not regretted it.
Like I tell others, the avid hunter that I was during my younger years has made peace with all land animals. I feel better for it (and healthier), and the meals are delicious. Just wanted to tell you where life has led me on this subject. Thank you for the postcards. Being such a financial novice, I appreciate the clarity of your analysis and good advice.
Tom’s note: As always, thank you for your messages! Kate and I read every one. Please keep writing us at [email protected].