What Investors Should Do After the 2020 Presidential Election

DRIGGS, IDAHO – As I write, the election is almost behind us. So what should investors do now?

My answer: Go where the strength is…

A Taste of Winter

Greetings from our winter hideout in Idaho…

My family and I are a nomad family. After two and a half years of non-stop world travel and living out of a suitcase, we’ve decided to pause for a few months and catch our breath.

We’ve chosen one of the coldest, snowiest places in America to spend the winter… the Teton Mountains. 

We had a taste of winter last week – some snow and freezing temperatures – but as I write, the sun’s out, the snow’s gone, and it feels a bit like Florida still.

Here is Miles (10) at the skateboard park earlier today, riding a bike we found in the trash near where we live…

We hope to make some friends in Driggs… and experience a little small-town life. But in these times of COVID-19, it’s not easy to meet people.

They’ve closed the churches. They’ve canceled all the after-school activities and meetings. Even the big ski swaps aren’t happening this year.

We’re hoping we’ll meet people once the ski mountain opens. We’ll see…

Either way, we’re having a great time in our new home, watching movies, playing board games, doing jigsaw puzzles, and studying.

While the kids learn mathematics, science, history, and geography, I study economics…

Long-Term Bullish on Gold

So where do I see the most strength in the stock market?

My charts tell me that gold and silver are outperforming stocks.

Yes, stocks have been rising, but it’s just a temporary bounce, driven by stimulus and liquidity, not by fundamentals.

Meanwhile, gold is in a primary bull market that began in 2001, paused between 2011 and 2018, and has now resumed…

I’d always choose to sit tight and hang on to an established bull market over trying to zig and zag the fluctuations in a bear market. It’s the right thing to do.

Today, we look at the European stock market. This chart shows the price performance of the 50 largest European stocks, going back four years…

As always, I present it in terms of gold, to get the true picture. Notice the pattern of lower lows and lower highs. And notice how the chart’s most recent bounce is running out of steam. 

How far will stocks keep falling? My reading of the chart suggests that stocks – in general – have another 60% to fall, in terms of gold.

Meanwhile, gold is at record highs. Any way you look at it, the gold chart is long-term bullish.

– Tom Dyson

P.S. As we saw on Monday, China has beaten COVID. And their economy is the only large economy on the planet that will have grown this year. (The International Monetary Fund forecasts its economy will grow 1.9% in 2020 and 8.2% in 2021.) 

In other words, China is now the engine of global growth, not the USA. It’s also becoming a financial superpower… 

China has the second-largest government bond market in the world, but unlike the USA and Europe, Chinese government bonds have positive real interest yields after inflation. The Financial Times says China is attracting “increasing amounts of developed world portfolio capital.” 

Finally, the world’s biggest initial public offering (IPO) could soon take place in China. A company called Ant Group was set to go public at $37 billion this month, before the IPO was halted.

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

A reader schools Tom in snow driving… two express their bitcoin concerns… and one reader says Tom’s Postcards are a breath of fresh air…

Reader comment: OMG Tom. Every time I read tips on winter driving from your readers, I feel compelled to write in… lol. Don’t stomp on the brakes and lock up. Not a good idea. Shifting to neutral is ridiculous. Slow down before the corners and accelerate slightly as you go through the corner. If you have a front-wheel-drive van and you start to slide, accelerate gently. It will pull you straight. Hard to get used to, but it works.

Not using your cruise in winter was good advice. The guy who suggested playing in the parking lot after a snowfall was good advice. You can get the feel of it and have some fun. When we were kids we would be sliding our vehicles all over town after the first snowfall… Lots of fun when you are young and dumb.

Reader comment: Greetings to you and your family, Tom! What a wonderful experience you and Kate have given your children over the past few years! You have an interesting viewpoint on the usefulness of bitcoin as money. But your final point that bitcoin’s fatal flaw is that it has no inherent value can also be made about fiat currency, which has widely been accepted as money for 50 years. I think the main point in the economy you were describing is that anything can serve as money if it is useful as a medium of exchange, which bitcoin can be (it also has the other characteristics commonly quoted for a good money: scarcity, divisibility, portability, etc.).

Bitcoin is also free from government manipulation, which is its biggest benefit. To me, if bitcoin has a fatal flaw, it’s that it only exists electronically. If our power grid goes down or the internet stops functioning, then bitcoin immediately loses its usefulness. Continue to create experiences with your family!

Reader comment: Thank you so much for your letters. I enjoy them tremendously. I also wanted to thank you for your thoughts on bitcoin. With so many Bitcoin Bugs buzzing around these days, we Bitcoin Deniers are having a tough time at the moment. I’m an old techy with decades of experience in IT, banking, and encryption, so no-one can say that I don’t understand bitcoin. I do, and probably better than most. The technology is clever, but it’s not money. You have mentioned the major problems with bitcoin, but let me add a few more:

Bitcoin is quite difficult for most people to understand and use, and it’s quite easy to make a mistake and lose your keys, which means that your bitcoin is gone forever. Google says, “According to a recent study by Chainalysis, about 4 million bitcoins have been lost and cannot be recovered.” Almost 20% of the total supply has evaporated in about 10 years. What happens after another 40 years?

People like the idea that bitcoin is decentralized, but when something goes wrong, they soon complain that no one wants to take responsibility. I read an account of a poor chap who lost a month’s salary due to an error in the free wallet software he was using. No one could help him. A decentralized system is great, until it isn’t.

I’m also not entirely confident that we can rely on the internet always being as free and open as it is today. Lookup “Splinternet” on Wikipedia for an interesting discussion. It would be ridiculously easy for the central banks to “pull it.” A few choice words from the right people could trigger a devastating loss ofconfidence. It would all be over in a matter of hours. Gold and a little silver for me!

Reader comment: Hello Tom! I have just recently started reading your posts about your family’s travel. I love and support what you are doing as I have traveled with my husband in our little camper for a few months out each of the last seven years. I revel in the new landscapes, experiences, and the education of literally “broadening our horizons”! What a gift you are giving yourselves and your children.

I appreciate your take on the current social/economic situation in our country/world. Thanks for a different opinion!

Tom’s note: Thanks to everyone who wrote in! And as a reminder, we’re trying something new in these postcards…

Going forward, I’ll publish your questions – along with my answers – every Friday in a special mailbag edition. That way you’ll have all my answers in one easy-to-find spot each week.

As always, please keep your questions and comments coming at [email protected]. And let us know what you think about our new Friday mailbag editions…