DRIGGS, IDAHO – Greetings from the Teton mountains… It’s time for another Friday mailbag edition, where I answer the most pressing questions you’ve sent in.
Before we get to that, another big thank you to everyone who sent me encouraging notes, offered condolences after Mum passed away (I shared my eulogy for her here), and shared your own experiences with grief.
Your letters really lifted my spirits and gave me strength. Thank you! Now on to today’s questions…
Today, we talk defensive stocks… buying gold and silver… “Income for Life” insurance policies (if you’re a paid-up Tom’s Portfolio subscriber, you can access my full course on that here)… and what I call my family’s greatest financial asset…
Reader question: You made a statement in your recent newsletter: “The only viable stocks, in my opinion, are defensive stocks with high free-cash-flow yields.” Can you clarify it more? Maybe provide some examples?
While most investors are focused on hitting home runs in stocks like Tesla or GameStop, or in bitcoin, I keep finding very good opportunities for hitting singles.
These are companies that don’t offer much potential for future growth, but they’re profitable and reliable… more like income investments… and they generate 8% or 10% returns on capital invested each year.
Some of these companies pay dividends. Others just compound their enterprise values consistently. We might broadly call these industrials. They’re very asset-heavy businesses… like factories, refineries, shipping, or pipelines.
It’s about the only place in the stock market I feel secure… and even then, I’d only use these investments to supplement our portfolio of gold and silver and give us a little diversification and income.
Reader question: I have been reading your Postcards since your journey in the U.S. started from Florida. It’s such enjoyable reading.
My wife and I recently inherited quite a large amount of silver from her brother. Do you think there is any benefit of selling it and buying gold or should we just hold on to the silver?
Do you think there is ever a chance the government would make it illegal to own gold as FDR did in 1933? Thank you for sharing your journey with your family. Have fun skiing!
If it were me, I would keep holding it. There’s no point in paying the transaction costs to convert it into gold. And besides, it’s possible silver will perform even better than gold over the next few years.
Reader comment: I have only just started reading your blog and find it fascinating. I just can’t help reminding myself that you must have started from a privileged position in terms of having money.
The life you are living is not an option for the vast majority of people who have little or nothing in terms of savings, and even if they sold everything it would soon be frittered away in hotel bills!
You also have youth on your side. All that being said, I still agree with your analysis of the financial world. Keep up the blog. Well done.
I won’t deny that we’re in a privileged position financially. However, I think our greatest financial asset is that we’re frugal and we don’t mind staying in very cheap accommodations and traveling in cheap countries.
If we wanted to, we could live happily and comfortably on less than $18,000 a year ($1,500 a month), which would be considerably less than the average American family’s burn rate.
Reader question: I’ve been reading you since The Palm Beach Letter and wonder what became of your “all-in” position on Income for Life? Are these still your primary savings vehicles out of which you are taking policy loans to make your gold and tanker stock bets? Love these postcards and read them regularly.
We have 6 fully paid-up Income for Life policies. But I haven’t had the guts to take any policy loans to buy gold or tankers yet, although I consider doing this all the time.
I want to sleep well at night, and I feel that if we leverage up our investments using borrowed money, I won’t sleep as well.
I’ll let you know the day I decide to borrow money from one of our policies to buy something, but for now, we aren’t taking out any loans.
Reader question: I watched your video about investing all your money in gold. My question that prevented me from joining was this: I have a monthly mortgage, and bills like power, water, internet, gas, insurance, food. None of them take gold as payment. How do you pay for these expenses if your money is wrapped up in gold? That was never covered.
Thank you for your postcards. I do own gold mine stocks but don’t know where to buy gold. I would appreciate it if you could answer my question. Thanks.
We maintain a balance of U.S. dollars to cover our travel and day-to-day living expenses. Hopefully we won’t need to liquidate our gold for many years.
For anyone looking to buy gold, Apmex.com or your local coin shop are good places to start. Just make sure you shop around before you buy to make sure you’re getting a fair deal.
You can also buy physical gold in vaults through the stock market, although I’d only recommend this once you own enough physical gold at home.
– Tom Dyson
P.S. As always, thanks to everyone who wrote in! Please keep writing us at [email protected]. I can’t give personalized investment advice, but I’ll do my best to address your questions and comments in future Friday mailbag editions.
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