The Stock Market Is Extremely Overvalued

SALMON, IDAHO – “I’ve got something really big I have to ask you,” I said to Kate. “Would you consider moving to London and helping me take care of my mother?”

“Of course,” said Kate, without any hesitation.

Winter in Idaho

Greetings from Salmon, Idaho!

My family and I are a homeless, nomad family, drifting around the world like seeds in the wind, going wherever, homeschooling our kids wherever, and sleeping wherever…

We’re currently traveling through the American West, exploring as much of the country as we can.

This is our classroom for today…

And what our campsite will be for tonight…

Planning for the Future

The problem is, my mother has a degenerative illness (Parkinson’s Disease) and some point soon, I’ll need to go and take care of her. (She lives in London by herself.)

Anyway, Kate and I have lots to discuss. But I think we’re going to wrap up our camping trip in the next few weeks, then hunker down for the winter in rural Idaho. When the snow starts melting in the spring, we’ll head to London and go live with Mum…

The River of No Return

We travel by road, sleeping in a tent trailer we pull with our car. I bought it from Craigslist a few months ago for $1,500, without any title or registration. We love it, even though it only has two beds.

We left Bozeman, Montana yesterday and drove 235 miles west on desolate roads, across mountains and vast stretches of ranchland.

This was cowboy country… the terrain I associate with Marlboro commercials from my youth.

Tomorrow, we’re getting in a raft and we’re going to float down the Salmon River for five days and nights. It’s a 90-mile trip through the largest wilderness area in the lower 48 states. They call it the “River of No Return.” I’m not sure why they call it this, but it sounds exciting.

(We’ll be completely offline. You’ll hear from me next in a week’s time.)

Extremely Overvalued

The stock market crashed yesterday. And it’s crashing again today.

I haven’t voiced any opinion on the direction of the stock market since March when I suggested it was a good time to buy.

But now I want to throw my hat in the ring with the bears. I think the stock market is extremely overvalued, having been propelled upwards by the greatest stimulus package ever in history and a day trading mania among retail investors. Now that a little downtrend has formed… if I owned any stock ETFs or highflying individual names like Apple or Tesla, I’d be getting out now.

I intend to explore this idea – that the stock market is entering a bear market – in more detail when we return from our rafting trip…

– Tom Dyson

P.S. We got tested for COVID-19 today, the one where they draw blood. The test took 10 minutes and cost us $60 each. Our tests came back negative, both for COVID and for COVID antibodies (which means we’ve never had COVID.)

Here I am in the clinic:

And here’s what the test looked like…

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

A Tom’s Portfolio subscriber asks about updates on shipping and mining stocks… one reader is concerned about currency exchange rates when selling gold… while others are curious about living off of gold and investing in gold inexpensively…

Reader comment: Hi Tom, I registered to your newsletter Tom’s Portfolio last week. So far, what you are saying makes a lot of sense to me. In my account on the website, you have a section called “Issues and updates.” I tried to open it, but it is only a welcome chapter with all you are offering. It dates from May 20! There have been NO updates or advice since!

We are at the end of August. Is that all? Is there another page? I am really confused. Please advise. Thank you.

Tom’s response: I use these Postcards to update the strategy on a daily basis. I am going to publish a subscribers-only update of all our mining and shipping stocks on September 30.

Reader question: Hi Tom, thanks for the great travel reads and the very informative financial lessons. Just thinking about the gold strategy if gold is bought and sold with U.S. dollars. I live in Australia. I see that it could be a problem for me if the U.S. dollar is devalued in years to come and I sell my gold.

If the USD falls in value by 20% or more, that’s a big hit to the price of gold when the USD is converted to AUD. Do you see this as a concern? Thanks, and safe travels.

Tom’s response: No concern. Gold is going to rise in terms of the Aussie dollar, too. Possibly by even more than it rises in terms of the U.S. dollar. But even if it doesn’t, don’t get caught up in the paper currency exchange rates. The important thing is you’ve got your money out of paper currencies…

Reader question: Hi Tom, I’m really enjoying your travel stories. I understand that when you are in the Dow side of the Dow-to-Gold trade, you focus on dividend-paying shares for income. I am interested in how you generate income and pay the bills while in the gold side of the trade as you are currently.

Do you simply consume some of your capital or do you have another method to generate income to pay the bills at the moment?

Tom’s response: I’ve been getting paid a salary to write these Postcards since last year. But before that, we just consumed capital and tried to live as frugally as possible…

Reader question: Hi Tom: I’m hooked on your family’s excellent adventure. I’m seeing premiums and commissions on gold coins climb up to 5% and higher – above the range you’ve recommended. So in trying to reduce overhead, I’m considering VaultChain. Have you used it before?

Tom’s response: I haven’t used VaultChain before. But I like what they’re trying to do and it’s probably a good way to invest cheaply in gold and silver. Before I’d recommend them, though, I’d need to do a little more research and maybe try it out myself…

Reader question: Tom, I’m a big fan. Been reading the Postcards certainly since Egypt/India (forget exactly). Great education for the kids, great reunion for you and Kate, and I wish you all the best of luck.

You have mentioned a couple of times places people can buy gold inexpensively, which I remember you defined as a markup of no more than 5%. Do you know anyone back in the UK who does that? I have some limited funds and would like to join this market, but cannot find anyone trading at a reasonable markup. Keep up the good work.

Tom’s response: The markups are even higher in the UK than they are in the USA. Have you considered Bullion Vault?

Meanwhile, another reader invites the Dyson family to camp with them… while another wants to know the best hedge against deflation…

Reader comment: Hi Tom, Kate, and kids! If you go through Yellowstone and come out by Teddy Roosevelt’s famous arch, and on through Gardiner, Montana, you’ll catch the river all the way from Gardiner. My son and kids plus myself live on an acre. You are welcome to camp here and go peruse the beautiful mountain scenery and neighboring ranch towns. From there, it is a short trip to Bozeman (west) or Billings (east). A great place to raise kids and live a more natural lifestyle! Much Lewis and Clark history here, too.

Tom’s response: Thank you for the kind invitation! We’d have been absolutely honored to come and camped with you there. Unfortunately, we’re heading west towards Idaho…

Reader question: Tom, a thought. Could it be that the “missing” inflation all these years is the result that the massive Federal Reserve stimulus and quantitative easing (QE) never really made it into the economy?

I have heard rumbles from other analysts that nearly all of funny-money was used by the investment banks to make stock and bond investments, buy Treasuries, pay dividends, and do massive stock buybacks. Stats show loan demand, except for mortgage spurts, has been under 3% growth for a long, long time. I am wondering if we are not getting a fake head move.

Once the COVID-19-related bailouts (which has seen more money go into the economy somewhat) is over, the previous deflationary trend may come roaring back. Especially if unemployment remains elevated (or worse), consumer confidence stays low or worsens, etc. If gold, silver, and bitcoin are the inflation hedges, what are the best deflation hedges (just in case)? Thanks…

Tom’s response: Best deflation hedge is cash in USD. Or short-term Treasury bonds.

(P.S. You didn’t ask my opinion, but I’ll give it to you anyway. I agree with everything you wrote. And I do expect to see the deflationary trend reappear from time to time. But the big difference is that now the U.S. government has become the primary driver for lending and spending in the economy, not the banks. And so the question has become, “Do you think the U.S. government will spend enough, using the Fed’s money-printer, to counter deflation?”

And I think they will. So deflation will only ever be a short-lived phenomenon from now on – at least until the bond market takes away the Fed’s printer. But that’s still a way’s off.)

And finally, other readers offer kind words and their thoughts on the Dysons’ travel experiences…

Reader comment: Hi Tom and family! Just wanted to say sorry for missing y’all while you were here at Rock Springs. To be honest, I felt a little intimidated by all your knowledge of economics and finance. Then I saw you do the dishes in the sprinklers in Rexburg and thought, “How dumb of me for not meeting Tom and his family.”

That’s exactly what I would do, and I should have stepped out of my comfort zone. Maybe I’ll have another chance in the future. Wish you and your family well and safe travels.

Reader comment: Hi Tom. If you make it to the coast of Oregon, be sure to take the kids to the U.S. Coast Guard museum. Cool modern-day stuff, about the CG and a lot of WWII history stuff too. Oregon Coast is beautiful and has a ton of parks to camp in but you’d have to have reservations as they are super popular with all the valley residents who “pop over” to the coast. Safe travels.

Reader comment: Tom, you and your readers’ attitude towards Canada is unfortunate. Canadians love Americans, and we look at the division in your country with deep sadness.

It should be noted that the Trump administration closed the U.S./Canada border first, and Canada responded in kind. Since the closure, COVID cases have exploded in the U.S. relative to Canada. For perspective, Canada (with 1/9 the U.S. population), has had fewer COVID cases since the beginning of the pandemic than the U.S. was logging in two days during its summer peak. So as much as Canada depends on U.S. tourism spending, public health takes precedent.

Your readers are correct about the majority of Canadians’ attitude towards Donald Trump. They see him as dishonest, incompetent, narcissistic, racist, and a conman, and are flabbergasted that so many Americans are spellbound by him. Trump supporters typically cast Canada as socialist. They should look at Trump’s policies. Farm subsidies: socialist. Tariffs: socialist. Pentagon spending in every state: socialist. Federal Reserve purchase of corporate bonds: socialist. Money-printing: socialist. Economic nationalism: socialist. $600 enhanced unemployment benefits: you know. Americans can be very hypocritical.

Reader comment: For heaven’s sake… and yours, stay out of Oregon… especially Portland. It’s the epicenter of world liberalism. I was born in Oregon almost 83 years ago, but I no longer brag about it!

Reader comment: Dear Tom, I enjoy your photos more and more! The golden hue of the sunlight is the gift that one can save by taking pictures. Thank you for transporting my mind there.

Reader comment: Tom, I’ve been investing for over 35 years now. Some hits and some misses. Went into the oil tanker stocks and I am having a hard time figuring out the market’s response.

Frontline came out with earnings that beat estimates by .01 and the stock tubed .50 that day. AND they announced a .50 dividend coming up on an $8 stock! How does this happen? I bought more because I love their dividends and they are making money and paying down debt right now. Just can’t figure out the market’s reaction? Love the adventures. It is going to get cold quickly out there in a pop-up tent trailer.

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