LONDON, ENGLAND – Greetings from across the Atlantic…
It’s time for another Friday mailbag edition, where I answer the latest questions you’ve sent in. But first, an update…
After 18 hours of airplanes, airports, and cab rides, we arrived at Mum’s house in London early yesterday morning.
The news here is full of stories on the “inhumane” and “ridiculous” seven-hour immigration queues at Heathrow airport (London’s main airport).
Luckily, we only had to stand in line for 90 minutes at Heathrow. And all our paperwork was in order, including our COVID-19 tests and our passenger locator forms, so we passed immigration without any problem.
Our flight was 90% empty, too. So we could spread out as much as we wanted on the plane…
Now, turning back to this week’s mailbag, readers offer suggestions for the next leg of our journey…
I share the simple – yet important – reason why I don’t buy physical gold or silver on eBay…
And I explain why I’ve referred to our investment strategy as “gambling” – even though I have absolute conviction in our Dow-to-Gold strategy.
Lots of good questions (and recommendations) this week, so let’s dive in…
Reader question: I am a reader of your Postcards from the UK. Whilst your children may enjoy homeschooling, they may also need to have some formal education soon.
As you are coming back to the UK in the very near future? Or have you ever considered settling back in the UK so that your children can benefit from free education and health service?
If you settle in Scotland, after three years, your children may be entitled to free Scottish Universities education, too. So, please do investigate the benefits of settling in Scotland for your children’s future. Of course, wherever you decide to go, I shall continue to enjoy your Postcards.
We hope our children never set foot in an academic institution of any description, including university. However, if they decide they’d like to go to high school or university, then they will be free to do so, as long as they pay for it themselves.
As for settling in the UK, we love the UK, but there are many other (cheaper) places on the planet we’d much rather settle.
Reader question: Enjoy reading your adventures since your beginning travels. Why not have your mother’s place, with all the antiques, etc., appraised, and then use that value to set up a foundation to purchase and hold the property for your personal and public use?
Perhaps you could raise the money on a “GoFundMe” site for its purchase. Or maybe one or more of your readers would be interested?!
Interesting ideas… but property seems like a millstone tied to my ankle. I find it high maintenance and I hate owning it. Especially in London, which has long been a big beneficiary of the global credit bubble.
Reader question: Been reading your Postcards for some time now. I’m just curious why you have decided to sell your mom’s house in London, rather than renting it out, possibly using Airbnb or some other rental service.
That way, you would always have a landing spot on Mother Earth as you travel about. Just wondering. Safe travels, and regards from Texas.
First, the rental yield in London is under 3%, I’m told, so hardly compensation for the risk or for the headaches of managing tenants. (Although, granted, a well-managed Airbnb would probably yield far more than 3%.)
Also, I consider gold to be a far greater opportunity for our capital. That’s why I went nearly “all in” on gold in 2018, and intend to keep it that way for the next 5-10 years.
Reader question: Thank you for your explanations on the market situation. For discussion purposes, what, in your opinion, can or should the feds do to get the economy back on the right track, without causing too much inflation, in a reasonable time frame that the politicians can accept?
Great question. I don’t think there’s a way out.
That’s the thing about inflation. Once you start down the path of using artificial stimulus to create the appearance of growth, you can never turn back because doing so would cause a recession.
So they dig the hole deeper and deeper, with bigger bailouts, big spending bills, and bigger liquidity injections to keep the recession away.
“Inflate or die,” as we like to say…
Reader question: A quick question before you leave on your trip. With regard to the stock market: When the market bubble bursts, do you believe gold stocks and ETFs will get thrown out as well – “the baby with the bath water”?
If so, should they (gold stocks) recover sooner than the broader market or at or about the same as the rest of the market? Good luck with everything. Travel safe!
Yes, I think gold stocks are vulnerable to stock market crashes (a general decline in the value of publicly traded equity). Gold stocks are speculative vehicles by nature, and when the liquidity evaporates, they can fall quickly, even as gold rises.
Two things to say about this…
First, I think we’re entering a period of stagflation (economic stagnation combined with inflation), which we haven’t seen in 45 years. It should support gold equity prices over the long term, without the big deflationary crashes we’ve seen twice in the last 14 years.
The feds will do whatever it takes to prop up the stock market, the bond market, and assets prices, in general (including foreign assets.)
In their eyes, this strategy worked beautifully in 2008 and it worked beautifully again in 2020. And they’ll use it again, with even more conviction, the next time there’s a panic or liquidity crisis in the financial markets.
What this means is, any drawdowns in the stock market – if there are any – will be brief.
There is one caveat to this thesis – inflation. If either inflation is rising or the dollar is losing value, it’ll restrict their ability to use stimulus. But we’re not there yet…
And second, if there is a major sell-off in the mining sector, I will be taking the opportunity to accumulate stock in my favorite mining and royalty companies in anticipation of much larger gains ahead.
Reader question: You do make me a little nervous when you use words like “gambled” when it comes to the stock market.
I’ve read your Postcards/articles over several years, and believe in your “hypothesis” or “expertise” and educational background.
It’s time you believe in yourself and your convictions. We do! Your children are depending on you, no matter where you live in the world.
I have absolute conviction in our thesis. But I still think what we’re doing is gambling.
It feels like gambling… That is, taking a calculated chance with our capital in the pursuit of making a profit.
Reader question: I have a question about gold. Why are so many people willing to sell it for dollars that have no intrinsic value? Shouldn’t they all be hoarding it instead?
They should be hoarding gold… But they aren’t thinking about things like inflation, interest rates, purchasing power, and money-printing.
I think it’s a form of recency bias. People just assume the financial order we have now will continue… and so they don’t feel any motivation to do anything different… or unconventional.
Reader question: Is the conversion from dollars to SDRs the most logical direction Janet Yellen (and others) will want to go? Retired, I’m very concerned about what percent dollar devaluation will take place if this move is made.
SDRs (or special drawing rights) are a competing form of reserve asset issued by the IMF. They are not a paper currency, but the big central banks around the world hold them as reserve assets. Their value is determined by the market prices of a basket of major currencies.
If governments decide to change the global financial order and replace the dollar as the world’s primary reserve asset, SDRs, gold, and a basket of major currencies would all be major contenders for the new reserve asset, or perhaps even a combination of the three.
Reader comment: You should consider buying your gold and silver from eBay. The online marketplace certainly has its problems, but worldwide availability, and fierce competition, forces dealers to keep prices down.
Also, consider buying only coins. I doubt the U.S. would again ban the possession of gold, like in the 1930s, but even then, collectible coins were permitted.
I’d be afraid of buying fake Chinese knockoffs.
Reader comment: About 10 years ago, I read Risk: The Science & Politics of Fear by Dan Gardner. It’s a fascinating/enlightening read, which I would highly recommend. I feel sure it will resonate as much with you as it has for me.
Thank you for the recommendation. I have added this book to my reading queue.
By the way, please keep sending me your recommendations… in any field… at [email protected]. I love them and nearly always act on them.
– Tom Dyson
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