The Stock and Bond Markets Aren’t Normal

CASPER, WYOMING – Greetings from Wyoming!

My family and I are cruising around America. We left Florida two and a half months ago. We’ve driven 9,000 miles and visited 17 states across the South and the Midwest so far.

Next stop: Colorado.

Here’s the route we’ve taken so far:

I’m writing to you today from our latest campsite. We’re in the mountains above Casper, Wyoming.

It’s a primitive campground, which means there is no electricity, running water, or cell phone service. Only a latrine. We’re paying $10 a night.

Here’s our camp, and that’s Casper, thousands of feet below us…

(It’s chilly up here. We wrap up in blankets to keep warm. It’s also so windy, our car shakes and vibrates in its spot.)

Prepare for Inflation

Turning over the financial markets… In these Postcards, I’ve been making the argument that investors should be preparing for inflation.

This is somewhat of a “fringe” idea right now because there’s no inflation in the published statistics yet.

With $13 trillion in negative-yielding debt, clearly, the credit markets aren’t afraid of inflation. And with the Dow at generational highs relative to commodities, clearly, equity markets aren’t positioned for inflation, either.

That brings us back to an important insight I’ve mentioned before…

Don’t Be Fooled by Nominal Prices

There are three main exchange-traded capital markets that “account” for – or “reflect” – the total economic value of our society:

Bonds, stocks, and currencies.

Right now, the bond market and the stock market are NOT functioning normally. What do I mean by this?

Normally, markets reflect the buying and selling decisions of millions of self-interested, ambitious participants. Transactions are completed at prices at which supply matches demand and the market “clears.”

Right now, the bond market is under the administration of central banks. It wouldn’t clear at current interest rates without the central bank’s intervention.

And the stock market is being “administered” by gigantic passive money flows from firms like Blackrock and Vanguard.

These firms don’t care about value or quality. Only about momentum. So the stock market also wouldn’t clear at current prices without the central bank’s intervention.

In short, don’t expect long-term declines in nominal prices in either of these markets, as long as the Fed has its printing press – and the mandate to act – intact.

The Global Synchronized Currency Devaluation Is Here

Meanwhile, we’re in a recession. Our economy has lost trillions in economic value over the last six months. Further losses lie ahead, too.

Where do these losses show up if the bond and stock markets won’t fall?

The answer is the currency market. It’s going to be the “relief valve.” Here’s what I mean…

The collective value of ALL paper currencies must fall to reflect society’s losses. I call this a “global synchronized currency devaluation,” and it’s already started.

The clearest way to see this is in the price of gold.

Gold is like a “one-stop” short position against all paper currencies. So even though the gold price has gone from $1,478 to $1,900 in the last four months, I don’t see this as a rising gold price but as a decline in the value of the U.S. government’s paper currency.

Another way to see this is in the price of commodities, like oil, copper, coal, uranium, corn, etc.

Or in the prices we pay at the store, as a reader points out in the mailbag today:

Last week, I went to my local health food store to pick up a bottle of my favorite vitamins. Last month the cost was $30.09. Today the cost was $30.99.

I took a package of chicken legs out of the freezer to defrost for dinner, and noticed that in March, I paid $2.98 for a one pound package. Today, that same package is $6.98. The cost of ground beef has nearly tripled.

I am a widow on Social Security, and my monthly check is not keeping pace with the market costs.

Technically, these items are not going up in price. It’s the currency that’s going down.

In sum, don’t expect the stock market or the bond market to properly reflect society’s economic losses going forward. They’re being supported by inflation.

Instead, the currency market must now be the relief valve.

Expect all paper currencies to lose value… not against each other… but against goods, commodities, hard assets… and especially gold.

Invest accordingly.

– Tom Dyson

P.S. Gold is at its all-time high of $1,900 today. One big surge and we’ll be at record gold prices. Next stop, $10,000…

P.P.S. I created an entire gold trade to take advantage of this opportunity. And I invested nearly $1 million of my own money into this strategy. Since May, some of the gold stocks I recommended to my subscribers are up 52%… 66%… even 107%. But this trend is just getting started. I explain why – and show you how to get access to the 11 gold stock names I recommend today – in this special video briefing…

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

An update on Tom’s mom in London, who – because of the pandemic – hasn’t been able to use the Duodopa pump she needs to treats her Parkinson’s Disease…

Comment from my mother’s neighbor in London: Just to let you know, your mother has not been too well lately with continuous urine infections. She fell today and was unable to get up, but luckily, she pressed her button and I got the call! She is confused and now can hardly walk. I hope it is lack of Madapar, as she has not taken any apart from the morning dose today. (She has now!) She is unable to get out of her chair without a lot of help.

I suggested we get someone I worked with recently to come and live in for a few days. Your mum has agreed, and Amy is arriving shortly. Amy is a qualified nurse in the Philippines, but works as a carer here in London. She has just finished a 10-year job living-in. I am sure this is just a temporary glitch and things will return to normality soon (if only they would hurry up and replace the tube so she can use the Duodopa pump again. The hospital doesn’t consider it an emergency, and all not-essential operations have been postponed because of the virus.) I am sure you will talk to your mother soon.

Meanwhile, the aforementioned reader weighs in on inflation…

Reader comment: Hi, Tom, I really love traveling vicariously with you and your family. Last week, I went to my local health food store to pick up a bottle of my favorite vitamins. Last month, the cost was $30.09. Today, the cost was $30.99. I took a package of chicken legs out of the freezer to defrost for dinner, and noticed that in March, I paid $2.98 for a one pound package. Today, that same package would be $6.98. The cost of ground beef has nearly tripled.

I am a widow on Social Security, and my monthly check is not keeping pace with the market costs. But you say there is no inflation? How can that be, when nearly everything I buy has gone up in price, even when there is no scarcity? I have lived frugally, within my means, all my life, and can still afford to purchase whatever I need. However, if this is not inflation, I don’t know the meaning of the word. Please keep your Postcards coming. I enjoy armchair traveling with you.

Tom’s response: Thank you for your letter. When I said “there is no inflation” I meant there’s no sign of inflation in the published statistics.

While others advise the Dyson family on their travel plans through Canada and on to Alaska… and on Tom’s fast-food diet…

Reader comment: Before you give up on making it to Alaska, you might want to look into the Alaska Marine Highway system. I don’t know the situation regarding the pop-up, but you could depart from the U.S. and cruise up the coast, which would be scenic, then arrive in the U.S. never dealing with crossing the Canadian border. Just a thought most people wouldn’t even think of. Safe travels.

Reader comment: Dear Tom, 10 years ago we took the Alaska Ferry from Belleview, WA to Skagway, Alaska and then spent a month driving the Alaska Highway to Fairbanks and down to the tip of the Kenai Peninsula. It was the experience of a lifetime.

You will never see it all, but don’t miss the little village of Talkeetna for the Russian influence, Homer, that is famous for, “I’ll leave the light on for you.” There’s flounder fishing (up to 600 pounds) and the best breakfast cafe in Alaska. Take a flight over the glaciers in a vintage aircraft for a double thrill. Seward, Anchorage, Palmer, and Wasilla (home of the Iditarod) should be on your list. Take your time. Each day will be an exciting adventure. Bon voyage!

Reader comment: You may have already checked this out, but I did not think they allowed people into Canada from the U.S., except to go directly to Alaska. I have read some news articles where people from the U.S. got in trouble for being away from the direct path to Alaska. Things may have changed, and you can go now.

On July 16, the United States and Canada announced a mutual agreement to extend temporary restrictions on non-essential travel across our shared border for an additional 30 days. “Non-essential” travel includes travel that is considered tourism or recreational in nature. “Essential travel” still permitted includes: work and study, critical infrastructure support, economic services and supply chains, health, immediate medical care, and safety and security. Trade and business travel will continue to operate across our borders, ensuring workers and goods are not impeded. Hope this helps your planning. I enjoy your Postcards every day.

Reader comment: Kate and the kids look great and happy. Just wanted to say I read your post today and saw the pics before reading further and thought you looked healthier now, Tom. Then, I read that you are eating better! It shows. Just sayin’! Also, Fernie sounds great. Secluded mountain town to ski. Anything away from the States with a possible civil war coming due to election results.

Reader comment: I think you would really enjoy Fernie, BC. I have skied my whole life and have lived in multiple ski area towns around the country and world. I am now in Park City, UT for the last 25 years, but am thinking of moving on to a smaller, quieter mountain town like that again. Enjoy the travels.

I loved rock climbing while I was there in SD a few years ago. When I travel, I am normally alone and tend to take a motorcycle in the summer to explore all the wonderful small roads and little towns off the beaten path. Being a “ski bum” most of my life has allowed me to cross the country, Mexico, and Canada many times before I could afford to get to the rest of the world. Enjoy the daily update! Everyone seemed to like the videos also!

Reader comment: Hi Tom and charming family, I’ve enjoyed following your adventurous travels. I have visited many countries around the world myself, often traveling for months at a time each year and sending travel diaries to friends and family. Now grounded since March due to the spread of COVID-19 around the planet… Bummer.

I’m a longtime resident of Vancouver, BC and as you are aware, the Canada/U.S. border remains closed to non-essential travel. Looking at the dismal trajectory of COVID-19 in the U.S. it’s very unlikely the border will be open by the fall. U.S. travelers lying at Customs (like saying they are going directly to Alaska… and sneaking in for other purposes… and getting caught at shops, restaurants, etc.) are being fined and booted out of the country for at least a year.

In western Canada, we have the virus under pretty good control and are trying to keep it that way. The stats in the U.S. are very frightening so it’s quite doubtful the border into Canada will be open again for visitors by the fall… We’ll be very shocked here if it is! So considering you may not be allowed to go to Fernie, you should have a backup plan.

Might I suggest somewhere in beautiful Montana, like the Bigfork/Kalispell/Columbia Falls/Whitefish area? It’s very scenic there. And there’s good skiing at Whitefish. Or, if you want to venture further west, the area around Leavenworth, WA (charming Bavarian-style village in the Cascades) is lovely, with skiing nearby and lots of smaller towns in the area. It’s very picturesque.

Your family would probably enjoy any of those destinations for a few months. Of course, you’d miss out on the cheap Canadian currency exchange rate which draws a lot of Americans here (…when we aren’t all living in the COVID-19 twilight zone, that is!) Just a couple of alternative destination suggestions there. Happy travels and stay safe… and please feed your children some fresh fruit and vegetables! ’Tis’ the season…

Reader comment: Hi Tom, seems like you are paying more attention to your nutrition and health. I recommend two books: Eat to Beat Disease by Dr. William Li (he talks about the body’s five defense systems and how to strengthen them, including the microbiome system) and Mitochondrial Dysfunctions by M. Chang. These two books represent the leading edge thinking in medicine.

Tom’s response: Thanks for all the messages! Please keep writing us at [email protected].