Author: jwithrow

The art of economics consists of looking not merely at the immediate but at the longer effects of any act or policy. It consists in tracing the consequences of that policy not merely for one group but for all groups.

This is the key lesson found in Henry Hazlitt’s masterpiece Economics in One Lesson. This book is required reading for anyone who fancies themselves an educated person. I learned far more about economics from this one short book than I ever did from my university economics courses.

What Hazlitt’s talking about here is the importance of understanding second order effects. That is to say, we need to consider the indirect consequences of a policy or decision to truly get a feel for its effectiveness.

This sounds perfectly logical. I doubt anyone would argue against its merit.

The problem is, second order effects typically aren’t immediately visible to us. Thus, people tend to focus only on the short term, direct results of a given policy or action – what they can see. Then they tend to ignore the indirect consequences that occur down the road. Out of sight, out of mind.

That being the case, I’ll share with you how I came to understand the importance of second order effects… and why they are often ignored.

My first career was in corporate banking. I got my start in the loss mitigation division of a major U.S. bank. And we were tasked with cleaning up the mortgage crisis in the wake of the 2008 fiasco.

For context, it’s estimated that around ten million homes in the U.S. went into foreclosure as a result of the financial crisis. The movie The Big Short does a pretty good job of telling that story.

But here’s the thing – the U.S. government decided that it was bad optics to allow so many foreclosures to happen. So the various government departments and government-sponsored entities involved in the mortgage market (HUD/FHA, VA, USDA, Fannie Mae/Freddie Mac) each developed loan modification guidelines for their mortgage products. Then they asked the banks to make them a priority.

The idea was that the banks could modify the loans for those who qualified per the new guidelines. Doing so would bring the mortgage current and stop foreclosure proceedings.

And the government entities even incentivized the banks to do as many modifications as possible. They agreed to pay the banks a flat fee for every modification completed.

Of course this sounded great to everybody. Let’s stop the foreclosures and let people stay in their homes. That’s how they sold the initiative.

Now, I worked in the HUD/FHA loss mitigation division within the bank. HUD refers to the Department of Housing and Urban Development. FHA stands for the Federal Housing Administration.

These two departments were instrumental in enabling people to buy a home with very little money down.

Per underwriting guidelines, homebuyers must put 20% on real estate purchases. But those who qualify for HUD/FHA loans can buy homes with just 3.5% down. That’s because the FHA backstops these loans by providing mortgage insurance to the lenders. The insurance protects the lender in case the borrower defaults.

So the bank instructed my group to comb through our entire portfolio of HUD/FHA loans and modify as many of them as we could. The modification process was as follows…

First, we took the past-due balance, including late payment fees and attorney fees, and we recapitalized it back into the mortgage. That means we added these fees to the mortgage’s principal balance. We basically stuck them at the end of the loan. This brought the loan current.

Next we dropped the interest rate to whatever the FHA’s floor rate was for the day. And then we re-amortized the mortgage back out to thirty years. That’s regardless of how many years the borrower had left on their loan.

Often this process would reduce the borrower’s monthly payment. They always saw that as a great deal. They went from nearly losing their home to having their house payment reduced. What’s not to like?

But here’s the thing I started to notice… 

Sometimes these modifications would increase the mortgage balance materially. That’s because we were writing all the outstanding fees into the loan itself.

After I saw that happen a few times something important occurred to me. We weren’t comparing the new mortgage balance to the home’s market value before proceeding with these modifications. That wasn’t part of the process.

And if we remember, housing prices collapsed in light of the crisis. On the national level, U.S. homes fell by about 30% on average. But the decline was much worse in certain cities.

So many of our modifications likely made the homeowners severely underwater on their mortgage. They were walking out of the deal owing more on their home than it was worth.

I couldn’t help but wonder – were we setting people up to fail?

What if something happened and they needed to sell their house quickly in the coming years? They wouldn’t be able to. They were now stuck with an overvalued mortgage.

I brought this up at one of our morning meetings. I asked if we were assessing valuations at any point in the process. And I asked if we were going to track these modified mortgages to see how they perform in the years ahead. I figured that was the only way to know if these efforts were in fact successful.

Management didn’t like these questions. Those were things for the “higher ups” to worry about, they told me. My job was to get the modifications done.

That’s when I learned the hard way that nobody cared about the second order effects. They didn’t care if our modification initiative was successful long term.

For the government, they just wanted the foreclosure numbers to come way down. Then they could talk about how they saved the day.

And for the banks, they wanted to collect as much revenue from the government incentives as possible. I’m sure they were thinking about the massive bonuses they’d be able to pay themselves that year.

This single lesson likely changed the course of my professional life. Once I saw that nobody cared about the second order effects of what they were doing, I realized that I didn’t want to work in corporate banking much longer.

It also opened my eyes to just how negligent the government and major financial institutions are when it comes to economics. I suppose that’s why we’re in the position we’re in today…

-Joe Withrow

P.S. Don’t forget that we’ll be opening the doors of our investment membership The Phoenician League very soon. This will be just the third time we’ve accepted new members since we launched last year.

If you’re interested to learn more about what we’re doing, you can do so right here: The Phoenician League Waiting List

“The Maronite Church is an ancient Christian community with a unique spiritual heritage rooted in the Syriac tradition.”

In the spirit of our discussion on the ancient Phoenicians last week, I attended a traditional Lebanese festival over the weekend. The Maronite Church in a neighboring town hosted the event… and the turn-out was great.

Here’s a snapshot of the scene walking in:

Here we can see the walkway lined with tents and vendors. In the background we can see a majestic bell tower. It rises above the beautiful stone walls that encircle the Maronite Church’s campus.

Walking through the arched doorways beneath the bell tower leads to a circular courtyard. It connects the church itself with the dining hall and the office facilities.

A beautiful fountain sits in the middle of the courtyard. And over the weekend this area featured traditional Lebanese music and dance performances.

Here’s a look at the courtyard:

Continue reading “The spirit of the ancient Phoenicians is alive and well…”

Americans of all ages, all conditions, and all dispositions constantly form aAmericans of all ages, all conditions, and all dispositions constantly form associations… The Americans make associations to give entertainment, to found seminaries, to build inns, to construct churches, to diffuse books… Wherever at the end of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association.

I love this quote by Alexis de Tocqueville. It speaks to the principles of private association and mutuality that were so prevalent in 19th century America.

We’ve been talking all week about the historical influences that underpin our new investment membership The Phoenician League. And today we’ll wrap up our discussion by assessing the mindset that was core to the American experiment.

19th century America featured a robust network of mutual aid societies. This is a topic that I’ve only learned about through independent study. My public school textbooks failed to mention anything about it.

What’s forgotten is that mutual aid societies were the backbone of American society before the Welfare State. They provided safety nets just as the Welfare State does today… but these networks were so much more than that.

Many of these networks employed their own doctors full-time. They called them “lodge doctors”. The lodge doctors were always on call for the society’s members. How’s that for personalized medicine?

And that’s just the start…

These mutual aid networks also built orphanages and retirement homes. And they ran job exchanges and trade skill programs.

These items are each critical to civilized society. And they were all handled by private associations in this country.

That’s because Americans knew that it was people in the local community who were responsible for their own civil functions. The government had nothing to do with them. This is what de Tocqueville’s quote above refers to.

And here’s the beautiful part about it all – mutual aid membership was 100% voluntary. Nobody was forced to support these networks. They had to stand on their own merit. And if members didn’t like the direction things were going, they could opt-out at any time.

Compare that to the government model today. We are all forced to support all government programs with our tax payments – even if we don’t believe in them personally.

To me, the big takeaway is this: Private associations have been foundational to the human experience for most of our history. They may have declined in popularity over the last one hundred years or so… but I think we’re waking up to the fact that they are still important.

And that’s why we’ve formed The Phoenician League. We’re taking the lessons we’ve learned from the ancient Phoenicians, the Hanseatic League, and 19th century America’s mutual aid networks, and we’re packaging them all into a modern membership.

The crux of our membership is financial in nature. We have a comprehensive financial training program in place. And we maintain a professional investment portfolio. Anyone can piggyback on the investments we present.

What’s more, we get members plugged into a nationwide real estate network. And we connect everyone with the trusted professionals they need to get ahead financially. CPAs… estate planning and asset protection attorneys… LLC specialists… lenders… brokers… property managers – we can provide introductions to all of them.

We also host members only discussion calls every month. This is a forum where we can share ideas, insight, and strategies.

And we often invite experts in certain fields to join us on these calls. This gives us the opportunity to ask very specific questions and get direct, unfiltered answers.

The Phoenician League’s core goal is to help all members achieve financial independence. We all walk that journey together.

At the same time, our ethos is so much more than that. We are reviving the spirit of private association and mutuality that was once far more prevalent in our world.

If any of this sounds interesting or worthwhile to you, please sign up for our membership’s wait list. You can do so right here: The Phoenician League Waiting List

We’ll be opening our doors to new members for just the third time very soon. And we’ll give everybody on our wait list advanced notice and attention when we do. I believe we’ll be able to offer everyone on the wait list a material discount on membership fees as well.

Looking ahead to next week – I’m planning to attend a traditional Lebanese festival over the weekend. In the spirit of the ancient Phoenicians, I’ll report back to you with my thoughts on the experience Monday afternoon.

Have a great weekend.

-Joe Withrow

“The Hanseatic League’s influence extended from commercial activities to cultural exchanges and diplomatic relations.” -Unknown

Yesterday we talked about what we can learn from the ancient Phoenician commercial civilization. Today we’re turning our attention to the Hanseatic League.

The Hanseatic League was an alliance of self-governing city-states that lined northern Europe during the Middle Ages. The League was most prevalent in the 13^th, 14^th, and 15^th centuries.

This alliance of city-states created their own free trade routes throughout northern Europe. These trade routes connected London and Belgium to the west with Germany and Poland to the east and Scandinavia to the north.

The independent cities along these routes became key centers of commerce and cultural exchange throughout Europe.

And the cultural exchange element was key.

As we discussed yesterday, old trade routes weren’t just about transporting goods. They also enabled the free-flow of knowledge and ideas. This cultural exchange is what truly shapes the world.

The Hanseatic League also developed a new code of law for its participating city-states. They called it the Lex Mercatoria. That means “Law Merchant” in Latin.

Continue reading “What the Hanseatic League got right…”

“Behold the Phoenicians, whose ships dance across the waves, carrying treasures from distant lands to our shores.”

This quote comes from an unknown contemporary back in antiquity. We may not know the name or the context, but I think it gives us a feel for how the ancient Phoenicians were seen in their day.

The Phoenician civilization existed for several centuries around the year 1200 BC. Their homeland was in the eastern Mediterranean region – roughly where Lebanon is today.

The Phoenicians played a key role in shaping the world back in biblical times. In fact, the people who hailed from this civilization were referred to as the Canaanites in the Bible itself.

What set the Phoenicians apart was that they were a commercial civilization. They were traders and merchants. That was incredibly rare during this period in history.

At the time, most other civilizations established war-based cultures. They lived in a zero-sum world where the only way to get ahead was to conquer your neighbor and take his stuff.

The Phoenicians were different. They focused on building a positive-sum world. That is to say, a world based on trades where both parties win.

And as the quote above indicates, the Phoenicians were world-renowned for shipbuilding and sailing.

As such, they developed an incredible set of trade routes throughout the ancient world. The following graphic gives us a visual:

We can see Byblos marked on the far right of this map. That’s the Phoenician homeland.

And we can see that they built trade routes to the west that connected the eastern Mediterranean with Egypt and northern Africa. And these routes extended all the way out to southern Europe – modern day Italy and
Spain.

We don’t have perfect records, but there’s evidence that the Phoenicians may have extended their trade routes even farther west into the Atlantic. It’s possible they went as far as modern day England and Ireland.

The Phoenicians also built trade routes to the north that connected western Asia to Cyprus and modern day Greece. It was an incredible network.

And keep in mind this wasn’t just about transporting goods. Trade networks like this also served to spread ideas. They brought new information and new ways of doing things.

This is critical.

The free-flow of information is arguably even more important than the flow of goods. Ideas and cultural exchange are what truly shape the world.

And that’s one of the core ideas that underpins our new investment  membership The Phoenician League. Much like the ancient Phoenicians, we are building our own commercial network with this membership.

I think this kind of network is more important today than ever before.

As we discussed yesterday, we are each inundated with loads of information every day. It floods our airwaves and our inboxes.

The problem is, most of this information is just noise. Much of it is nothing more than junk. And if we fill our head with junk, we’re far more likely to make bad decisions.

What we have to understand is that there’s a big difference between information and insight. The more we can sift through the information and focus only on the insight, the better.

Having a robust investment network like The Phoenician League helps us do just that. We cut through the noise and zero-in on what’s really important.

That’s true when it comes to money and investing… and it’s just as true when it comes to boots-on-the-ground intelligence.

Having a commercial network allows us to each relay what we are seeing in our own corners of the world. This provides the context we need to analyze current events.

In many counselors there is security, as the late Gary North used to say.

What’s more, The Phoenician League connects members with specific investments across a range of asset classes.

In fact, we help members build a customized asset allocation model. We maintain a core equity portfolio. And we get members plugged into investments that generate passive income immediately. Our goal is to help everyone achieve financial independence in six to twelve years’ time.

If this sounds like it may be something that’s up your alley, I’d like to invite you to join our membership’s wait list. You can do so right here: The Phoenician League Waiting List

 Up to this point we’ve only opened our doors to new members on two
occasions. We do this because we always take the time to onboard everybody individually. This includes personalized attention for those who would like it.

That said, we’ll be opening our doors for a third time very soon. And we’ll give everybody on our official wait list advanced notice and attention.

So please give us a look if you’re interested in this kind of thing. Tomorrow, we’ll talk about another important historical influence: The Hanseatic League.

-Joe Withrow

“Dairy farms served as pillars of stability and self-sufficiency during a time of economic uncertainty. And in rural America, dairy farms were often the heart of the community, providing jobs and a sense of pride” -Unknown

I spent all day Saturday at the historic Homestead Dairy Barn in Warm Springs, VA. It was a family reunion of sorts.

Today the old dairy farm serves as a vacation rental business.

There are several idyllic houses available for rent across the property. There’s a market serving lunch and refreshments. There’s a heated outdoor pool. And in the middle of it all is a large clubhouse with plenty of space for events. That’s where we congregated.

Here’s a snapshot of the old Dairy Barn in all its glory:

What a hidden gem.

Obviously a lot of the facilities have been modernized. But each of these structures was an integral part of a functioning dairy farm at one time.

One of the rooms inside the clubhouse is dedicated to the property’s history. There are pictures on the wall depicting various aspects of the farm at the turn of the 20^th century and on up into the 1930s, 40s, and 50s.

I spent some time looking at these pictures with my 96 year old grandmother. She’s the last of her generation. And she provided us with some great insight.

My grandmother grew up on a small farm in Bowlegs, OK. That’s just over an hour east of Oklahoma City. It’s about smack-dab in the middle of the state.

Grandma shared with us what things were like on the farm during the Great Depression. Times were tough for everybody. But they were insulated from the worst of it simply because they were largely self-sufficient.

Back then, the kids each had their own responsibilities on the farm.

Grandma shared that her older sister’s job was to milk the cows every morning. They kept enough milk to support the family. Then they sold their surplus to the local dairy. That was a great source of income.

Grandma’s job was to collect the chicken eggs each day. She was also responsible for bringing in the firewood. Her mother cooked each of their meals on a wood stove.

Seeing all the old pictures of the Dairy Barn took Grandma back in time. They didn’t have all the conveniences back in the 30s and 40s that we enjoy today… but life was far more simple.

That simplicity provides peace of mind. It’s a good feeling when we understand the world around us and our place in it.

This is an idea that’s rooted itself in my head.

You know, I don’t get the sense that people are generally happy and fulfilled today. The 24/7 news cycle is constantly bombarding us with negativity. Our email inboxes are slammed every day with advertisements that suggest we will always be inadequate unless we buy the proposed product. And on top of it we’re all dealing with an economic landscape that’s constantly shifting due to the rate of technological advancements.

It’s hard to find purpose and peace of mind amidst all this noise. But it is possible…

One of the themes I keep coming back to in these pages is the Jeffersonian vision for America.

Back in the colonial days, Jefferson looked out at the vast, untamed land on this continent… and he saw a tremendous opportunity. Why couldn’t everybody own a small plot of land and be kings and queens of their own castle, he thought.

I see the wisdom in it.

People were far more self-sufficient at one point in this country’s history. My grandmother’s farm is a great example.

And the thing is – the more self-sufficient we are, the less we have to worry about things that are outside of our control.

I shared last week our approach to backup energy sources. They serve to enhance self-sufficiency tremendously.

We’ve also connected with the local agriculture community in our area. Now we’re buying nearly all of our meat and eggs directly from local farmers. And we keep a big stockpile in a meat freezer in the basement. That also adds to self-sufficiency.

And recently we set up a subscription to have local spring water delivered to us every two weeks as well. We now keep twelve 5-gallon jugs of spring water on hand at all times.

Put it all together and we’ve now got plenty of food, water, and energy at our disposal. We could go at least a month without leaving the house and we wouldn’t be inconvenienced in the least.

To me, that’s the lesson from our agrarian history. The more self-sufficient we are, the more control we have over our lives.

I’ll leave you with that thought today. Looking ahead, we’ll spend the rest of the week talking about the historical influences underpinning our new investment membership The Phoenician League.

-Joe Withrow

P.S. Speaking of self-sufficiency, I would like to introduce you to a non-profit that we recently formed. We call it the Foundation for Human Civilization.

Our mission is to help enable vibrant, self-sustaining local communities.

And our first project is to drill a centralized well in rural Uganda. It will service the remote villages of Mwera and Bugolo-Kireku.

These two villages are home to about 2,000 people across 220 households. Children make up more than half of the population.

Yet, the villages have no running water.

Residents must collect rainwater and/or travel to a natural spring to fill up their jugs. The closest spring is up to three miles away from residents in these two villages.

By drilling a centralized well, we’ll reduce the need for residents to travel to the spring each day. This will free up their time to engage in more productive activities… which in turn will help the villages become more prosperous.

If you would like to learn more about our little project and how you can support it, I invite you to visit the Foundation’s site right here:

Foundation for Human Civilization: Uganda Water Project

And I’ll add that our non-profit is completely volunteer driven. We do not have any staff nor do we pay any salaries. 100% of donations go to the projects we support.

How you choose to own energy is the whole thing of what investing is about…

That’s what Tom Dyson said to our investment membership on our monthly call last week. This perspective struck me as so insightful that we’ve been talking about it all week in these pages – from several different angles.

Today I want to wrap up our discussion by sharing with you my absolute favorite ways to own energy. They may not be what you expect…

I’m a big proponent of what I call “home resiliency”. It’s the idea that we should make our homes as self-sufficient as possible. I see this as a key principle underlying Thomas Jefferson’s vision for America.

And a key part of home resiliency is backup energy.

We take it for granted that we can flip a switch and lights will come on in the house. We think nothing of the fact that we can adjust a thermostat and the house will heat or cool itself to our liking. And we certainly don’t think twice about turning a dial so the oven warms up to cook our food.

But for nearly all of human history our ancestors lived without these luxuries. They would be in awe of the conveniences we enjoy.

At the same time, these comforts disappear the second something happens to our power grid. Then what?

Typically the electric company can restore our power within a few hours for us. But occasionally a disaster strikes that makes the power restoration process take much longer than normal.

For example, a Derecho storm ripped through the mid-Atlantic region back in 2012. It left millions without power. Derechos are long-lived windstorms that feature intense thunderstorms.

When that storm hit, most households in my area here in the Virginia highlands lost power for at least a week. Some went closer to two weeks without power.

This speaks to why owning backup energy sources is so important. I consider these to be “alternative investments”.

When we think about backup energy, the first thing we need is something that allows us to cook when the power’s out. The easiest solution here is to keep a propane grill and several extra propane tanks on hand.

I also love having a wood-burning stove. That’s not going to be an option for some people. But in places where it’s feasible, a wood stove means we can always cook and heat the house… so long as we have wood to burn.

And the easiest way to get fire wood is to buy it from somebody locally. I’d wager most towns have numerous people who sell firewood on the side. We just have to ask around a little bit to find them.

So propane grills and a wood stove provide us with heat and allow us to cook for an extended period of time – no electricity needed.

I also highly recommend solar-compatible batteries. We keep a few of these around the house and fully charged at all times.

These are batteries that can be charged by plugging them into the wall or hooking them into the solar panel they come with. The Jackery brand is probably the most popular of these products. You can find it right on Amazon.

The batteries are equipped with power outlets that work the same as our wall outlets. So they are good for powering any electronic device during a power outage. Then if we drain the battery, we can always recharge it with the solar panel in the event of an extended power outage.

And that brings us to the big one…

I absolutely love having a whole-home generator. We’ve got ours tied into a 500-gallon propane storage tank.

The cost of these systems has come down substantially in recent years. And big box stores like Lowes even offer zero percent financing for the generator itself and the installation.

With 500-gallons of propane, our generator could power the entire house for about thirty days if we were smart about it.

And by being smart, I mean we would need to adjust the heating and cooling settings such that the HVAC unit will not run unless we absolutely need it. We would also need to refrain from doing laundry, running the dishwasher, and other unnecessary tasks.

If we do these things the generator could run the house for about a month. That brings incredible peace of mind.

So to sum up, it’s not overly difficult or expensive to make our homes incredibly resilient today. It’s all about securing backup energy sources. This is my favorite way to own energy.

-Joe Withrow

P.S. We cover alternative investments like these within our investment membership The Phoenician League. We also talk about other ways to build our home resiliency… and we discuss other alternative investments as well. These are items that can improve our quality of life dramatically.

If you’re interested in this type of thing, I’d like to invite you to sign up for our membership’s waiting list. You can do so right here: The Phoenician League Waiting List

Up to this point we’ve only opened our doors to new members on two occasions. We do this because we always take the time to onboard everybody individually. This includes personalized attention for those who would like it.

That said, we’ll be opening our doors for a third time very soon. And we’ll give everybody on our official wait list advanced notice and attention.

We’ve been talking all week about energy. Energy is the master economic resource.

And when it comes to investing, we have two choices. We can own energy. Or we can own currency. That’s it.

The thing is – we can own energy in many different forms. And, as we discussed yesterday, we can also generate passive income by owning energy.

Today let’s take a step back and take an even more holistic view.

If the historians are to be trusted, homo sapiens – humans – have been around for about 300,000 years now. However, the first written records we have from a human civilization date back to about 4,000 BC. That’s just over 6,000 years ago.

We call that first civilization the Sumerians. And the records indicate that they formed city-states around fertile agriculture land in modern-day Iraq and Kuwait.

My understanding is that most humans lived as hunter-gatherers prior to the Sumerians. I’m sure that’s an oversimplification… and I haven’t spent much time on it. But this seems to be widely believed.

As hunter-gatherers, humans lived off the land. They hunted for meat and scavenged for fruits and nuts.

This dynamic meant that the Earth could only support a small number of us. Tribes couldn’t get too big or else they may face food shortages.

The development of sedentary agriculture changed that dynamic. Once we were able to farm the land, we could produce enough food to support a larger population.

That said, the average person’s quality of life didn’t change terribly much from the time of the Sumerians all the way up until the 18^th and 19^th centuries.

That’s a period of roughly 5,800 years, give or take a few decades. And most people lived as subsistence farmers during this time. That was the world’s top occupation.

Meanwhile, the population grew very slowly. It’s estimated that 200 to 300 million humans lived on the Earth around the year 1 AD. By the year 1800 AD, we estimate the human population was around 800 million.

So the population grew 4X… but quality of life improved only slightly. Most people lived in what we would consider today to be extreme poverty. And they were often one bad harvest away from food shortages.

But then something happened.

From 1800 through today, the population exploded from 800 million to about 8 billion people. That’s 10X growth in just over 200 years.

What’s more, quality of life skyrocketed as well.

Today, relatively few people live as subsistence farmers. And almost nobody in the developed world lives in extreme poverty.

Our “poor” live comfortably in climate-controlled homes. They have plenty of food available to them. And they have flatscreen TVs and smartphones to keep them connected and entertained.

That is to say, those who we consider poor in the developed world enjoy far more conveniences than nearly everybody who lived prior to the 19^th century.

This dynamic is thanks to two things. Human ingenuity and carbon-based energy.

Carbon-based energy refers to coal, oil, and natural gas. These energy sources enabled our population to explode higher… while also providing a much higher standard of living for everybody.

Yet, there’s a very vocal movement out there to stop the use of these energy sources. There are strong political forces pushing to do away with them all. They promote a “carbon-neutral” world.

But here’s the thing – our modern way of life simply could not exist without carbon-based energy.

Sure, clean energy technologies like nuclear fusion have the potential to provide for all our power needs one day… but that day is still a ways into the future.

So the people who are rallying against carbon-based energy today are pushing for something that would impoverish billions of people around the world. They would take us back to where we were prior to the 19^th century… and that’s the best-case scenario. We talked about this on our monthly call for The Phoenician League last week.

And that means those who are anti-coal, anti-oil, and anti-gas are in fact anti-human. Whether they realize it or not.

The point is, energy is what has lifted humanity out of the darkness. I mean that literally and figuratively.

And as we’ve been talking all week – if we understand this, we come to the conclusion that investing is all about figuring out the best ways to own energy. That’s it.

More to come tomorrow,

-Joe Withrow

P.S. If you enjoy these kinds of discussions, please give our investment membership The Phoenician League a look. We explore these ideas in more detail every month – both in written form and in our members’ only calls.

If this kind of thing is up your alley, please sign up for our wait list right here. We’ll be opening our doors to new members soon.

Energy is the master economic resource.

That’s what Tom Dyson shared with our investment membership on our monthly call last week. The idea struck me as quite insightful. And it’s obvious if we stop and think about it… most of us just don’t.

The key is – nothing happens in our world without energy. That’s true on all levels.

We all need to consume food to produce the energy required for life. Same goes for animals. Then we need energy to power our homes, our businesses, and anything else that happens in the modern world.

Energy drives everything.

So, Tom’s view is that we have two choices. We can own energy… or we can own currency. And if we understand that the purchasing power of the world’s currencies is always falling, owning energy is the smart choice.

But that doesn’t mean we should only buy energy stocks and call it a day. Publicly traded companies are exposed to many different forces. They aren’t always a direct play on productive energy.

Plus, many of us like to invest for passive income. So let’s talk about three ways we can generate passive income by owning energy…

The first thing we can do is build a crowdlending portfolio. We’ve talked about this before.

Crowdlending is an alternative to traditional bank financing. It allows investors to become the bank and lend money to borrowers for a specific purpose. Debt consolidation, home improvement, and medical expenses are three of the most common purposes.

This is done through a crowdlending platform. The platform sets the interest rate for each loan and then collects the borrower’s payment every month. Each investor then receives their cut of the loan payment.

If done correctly, participating in crowdlending is a way to turn $500 into $50,000 by becoming the bank.

But wait, what does this have to do with energy?

When we help fund a loan, that loan becomes an asset for us. We own it. But what we really own is a claim on the borrower’s future income. And however they may earn their income, it requires them to exert energy in some capacity. That’s the energy we own if we build a crowdlending portfolio.

Now, I know this may sound callous on the surface. Is it right to profit from work that someone else will do in the future?

Well, this very dynamic is the crux of our entire economy. When we engage in voluntary transactions, we are each exchanging our energy with one another in some manner.

And that means when we help fund a loan, we are exchanging our realized energy for the borrower’s future energy. It’s just a trade-off based on time preferences.

Okay, the second way to generate passive income by owning energy is to own rental properties. I prefer single family rentals.

If we think about it, a house is realized energy.

A lot of energy went into building the house. And it requires a lot of energy to maintain a house. That’s both in terms of power production and in terms of human energy.

So when we own a house, what we really own is both realized and future energy. And if we rent the house out to generate passive income, we also own a future claim on the human energy required to maintain and manage the property.

Again, we’re trading our realized energy for a claim on future energy. That’s the beauty of this holistic perspective.

Alright – the third way to generate passive income by owning energy is to write insurance contracts on great publicly traded companies. This includes energy companies.

We can write a contract that insures an investor against the possibility of a stock that investor owns falling in value. The investor will pay us a premium up front for this insurance. That’s cold hard cash that flows right into our brokerage account.

By the way, this is something anybody with a brokerage account can do. The activity we just described is selling put options on great stocks.

The catch is our insurance contract stipulates that we must buy the stock at a specified strike price if it falls in value. That’s how we are providing insurance to other investors. And it’s why they are willing to pay us a premium up front. As such, we should only sell puts on stocks we would like to own at the designated price anyway.

But here’s the thing – most of the time it won’t come to this.

Most option contracts expire worthless. That means we won’t often need to buy the stock we are insuring when we sell put options. And when the option contract does expire, we can sell another put option to collect even more premium. We can do this over and over again to generate passive income.

To sum up, the name of the game is to own energy. But that doesn’t have to be a static or boring endeavor. We can use these three strategies to generate passive income on the energy we own.

-Joe Withrow

P.S. I know we glossed over the three passive income strategies we discussed today. These are strategies that we provide comprehensive training on within our investment membership The Phoenician League.

If any of this stuff tickles your fancy, I’d like to invite you to sign up for our membership’s waiting list. You can do so right here: The Phoenician League Waiting List

Up to this point we’ve only opened our doors to new members on two occasions. We do this because we always take the time to onboard everybody individually. This includes personalized attention for those who would like it.

That said, we’ll be opening our doors for a third time very soon. And we’ll give everybody on our official wait list advanced notice and attention.’ll give everybody on our official wait list advanced notice and attention.

YoYou’ve got two choices. You can own currency. Or you can own energy… and I don’t trust the currency.

So, I choose to own energy. But how you choose to own that energy is the whole thing of what investing is about.

This is what Tom Dyson said to us in The Phoenician League’s members’ only call last week… and I find this perspective to be brilliant.

Dyson is a legend in the financial newsletter space. He’s largely considered an investment whiz throughout the industry. And Tom went on to share his holistic view with us last week.

Tom pointed out that energy is the master economic resource. Nothing happens without energy.

In that sense energy equals prosperity. Energy is what lifted hundreds of millions of people from the shackles of poverty and subsistence living.

So Tom’s investment philosophy is that all he wants to do is own energy. But that doesn’t necessarily mean energy companies.

Tom shared with us that he sees gold as a form of energy. That’s because gold is like a battery. It’s a way of storing energy for use later.

And what about land with coal, oil, gold, or other important minerals beneath it? Owning that land is a way to own energy. The same is true of land with high quality timber above it.

Then we can think about cargo ships and oil tankers – they are a form of realized energy. Indeed, all useful infrastructure is realized energy.

But we have to ask – why is this holistic view on energy important?

We talked last week about how the Federal Reserve created $8 trillion from nothing. Then the commercial banks pyramided credit on top of these new dollars. And then we saw the U.S. Treasury experiment with direct “stimulus” payments to U.S. citizens during the COVID-19 hysteria…

These things were only possible because the dollar is inelastic. The dollar’s supply is not fixed or limited. Instead, they can create new dollars from thin air at will.

The problem is, doing so diminishes the value of all dollars in circulation. Creating new dollars from nothing destroys the purchasing power of the dollar itself. That’s basic supply and demand economics.

We see this dynamic very clearly in the form of rising consumer prices. Houses… cars… groceries… fuel – most everything now costs more than it used to.

And that’s why Tom’s perspective on energy is so critical.

If we think the dollar is going to continue to lose value, then we need to own something tangible to protect our purchasing power. That means we want to own energy in some form.

I’ll leave it there for today… but we’ll talk about this idea in more detail this week.

And for those who are interested in having more detailed conversations along these lines – we’re hosting calls like the one we just did with Dyson every month in our investment membership The Phoenician League.

If you would like to explore our membership more, please sign up for our wait list right here. We’ll be opening our doors to new members soon.

-Joe Withrow

P.S. Tom Dyson currently serves as the Investment Director for Bonner Private Research. Anyone interested in following his investment research can find him on Substack at the following link:

Bonner Private Research