jwithrow, Author at The Phoenician League

From Financial Security to Independence – Cash Flow Investing

How many times have we heard about somebody who hit it big, only to spend it all and eventually run out of money?

It happens all the time to people who win the lottery. I know a few investors who have had this experience also. And there are more than a few entrepreneurs who have risen to fame and fortune on the back of their start-up… only to ride the escalator back down the other side.

When we look at those experiences, it’s like a see-saw pattern. We can clearly see the rise and fall.

I know those experiences are limited – most of us haven’t hit it big only to go broke again. But then when I look at the conventional retirement planning model, I see the exact same pattern – just over a longer timeline. Here’s what I mean…

With qualified retirement plans like 401ks and IRAs, you work hard for years to build up assets in your account. According to Retirement Incorporated, the name of the game is to get your accounts up to a big enough number so that you have enough money to retire.

Then what happens when you retire?

According to this model, you are supposed to sell off a portion of your assets each year, pay taxes on the sale, and then use the proceeds to live on. And if you do that, your assets diminish every year that goes by.

That’s the see-saw. If you follow the conventional model, your assets go up while you’re working… then they go down when you retire.

No wonder so many people feel anxious as they approach retirement – they sense deep down that something about this model is fundamentally flawed.

So let’s shift the paradigm.

Wealth-Building Strategies from a 270-Year-Old Playbook

You might be surprised to learn that many of the world’s best wealth-building strategies don’t come from Wall Street banks, hedge funds, or tech companies… they come from old-school insurance companies.

Numerous insurance companies still in operation have been around for well over a century now, having endured wars, depressions, massive inflation, and political upheaval. And get this – there are a handful of insurance companies who have been in existence for over 200 years. That’s incredible to think about.

This comes as a surprise to many because insurance companies are boring. No father ever thinks, “I want my son to go into insurance when he grows up”.

But the fact is, the best-run insurance companies are financial juggernauts. And that’s because they quietly wealth-building strategies that follow a few timeless principles:

1. The Power of Consistent, Strategic Allocation

Every year, insurance companies use actuarial science to fine-tune exactly how much capital must be set aside for expenses, how much must be stored in protective assets, and how much can be deployed for growth and extra income. This discipline creates a system that grows even in periods of chaos.

2. They Never Gamble on Paper Wealth Alone

Insurance companies don’t bet the farm on the direction of the stock market. Nor do they rely exclusively on their bond portfolios. Instead, they build a robust balance sheet by strategically investing in assets that preserve purchasing power and continue compounding, no matter what happens with the markets or the economy.

3. Reinvesting for Generational Wealth

Unlike Wall Street firms and hedge funds, which are slaves to quarterly results, mutual insurance companies are structurally designed for the long haul. They build permanent portfolios designed to warehouse and grow wealth for centuries. Then they systematically reinvest interest payments and dividends to create a self-reinforcing system.

Wealth-Building Strategies That Work

You don’t need to be an insurance company to put these same wealth-building strategies to work. To the contrary, we can make our personal finances bulletproof by following the same model.

A New Playbook For a New Economic Era

Remember when “stocks always go up and interest rates always go down” was economic reality? With a few brief interruptions, that dynamic persisted for almost 40 years – powering through through booms, busts, and all manner of geopolitical events.

This came to be accepted as “normal”, and Retirement Inc. sold the idea that we should funnel all our savings into qualified retirement accounts and leave it there for decades. You only lose money if you sell, became the mantra.

To be fair, that conventional advice has worked out okay for people up to this point. And by that, I mean it hasn’t been a total disaster. I know plenty of people feel good about how many dollars they’ve amassed in their 401k and their IRA accounts.

But from my vantage point, a tectonic shift has quietly remapped the entire landscape of finance and the concept of retirement… and I suspect Retirement Inc.’s model will be rendered obsolete over the next 40 years. We’re now entering into a new economic era.

As for why, we have to rewind to 2022…

How to Protect Your Savings from Inflation, Volatility, and Hidden Fees

There’s an unsettling feeling millions share—a gnawing sense that, despite hard work and responsible saving, something is always working against us… making it hard to protect your savings.

Those plugged into mainstream sources never put their finger on it, but we’ve all felt its effects. The target is constantly moving, making it difficult to ever get ahead.

The unseen challenges we face are insidious, but only because Retirement Incorporated (Retirement Inc.) preaches a model that exposes everyone fully to the effects of these challenges. They are:

1. Economic Volatility

A single market crash can erase a decade of growth. What happened in 2008 and then again in 2022 demonstrated this. Those were years when “balanced” portfolios trapped inside of qualified retirement accounts tumbled, wiping out years’ worth of savings.

What most didn’t realize was that the “rules” suddenly changed in each of those years, and millions found that they were far more exposed than Retirement Inc. led them to believe.

The Retirement Mirage: Why Traditional Planning No Longer Works

How many times have they told us to imagine the magical finish line known as “retirement”?

The mainstream narrative paints the picture: a farewell office party, a gold watch, and then… freedom. This idea, planted by decades of financial media and financial planning “experts”, is so ingrained in our culture that questioning it has been seen as sacrilegious for the better part of the last forty years.

But what if that finish line is just a retirement mirage? What if it’s just an image conjured to keep people on the hamster wheel for four or five decades – with the carrot of “retirement” always just ahead?

For the entire generation born in the first half of the 20^th century, retirement was anchored by two pillars: the employer pension plan and the promise of Social Security. These pillars provided retirees with two permanent streams of income, in addition to their personal savings.

Early Baby Boomers entered the workforce while employer pensions were still widespread… but that’s no longer the case. Outside of segments within the public sector, employer pensions are a relic of the past.

Meanwhile, the cost of living has exploded right as the Social Security program has become stretched thin. Anyone expecting Social Security to remain a key pillar of retirement may be disappointed in the years to come.

Three Planks to Build a Bulletproof Financial Foundation

Have you ever noticed that certain companies seem to have been around forever, resting on a bulletproof financial foundation? Meanwhile, it seems like we read about bank failures every few years now… and we know how retail shops come and go.

This begs the question… What separates businesses (and households) that thrive over long periods of time from those that don’t?

Here’s a secret that we’ll never hear on CNBC: The world’s most time-tested financial model is simple. It can be summed up in three basic planks:

Always pay yourself first.
Invest your earnings in strategic assets that protect your purchasing power.
Build streams of steady cash flows.

When we take the time to analyze them, we’ll find that the world’s most enduring enterprises prioritize building their own reserves first – before they distribute profits or chase risky growth. This is the “pay yourself first” principal, and we can each mimic it. The goal is to systematically build out a bulletproof financial foundation.

The key is to build out this foundation across a group of strategic assets that will protect and grow your purchasing power over time. The world’s best businesses understand that there will be periods of economic distress… which is why having such a bulletproof financial foundation is so important.

Once those reserves are in place, the name of the game is to gradually build extra streams of steady cash flow. This is what creates resiliency.

Why Traditional Retirement Planning Falls Short

If the last several years have taught us anything, it’s that traditional retirement planning falls short in today’s economy. Because the old rules of saving and investing no longer apply.

As we’ve discussed before, the conventional retirement planning model came to fruition in the 1980s. The industry has been peddling the same advice for over forty years now.

But I submit to you that the conventional model was built on two faulty assumptions – that interest rates would constantly fall and that the US dollar would retain its purchasing power.

Neither of those assumptions have stood the test of time. That’s why traditional retirement planning falls short.

We live in a world where home and car prices have soared. As have groceries and the cost of living in general… all as interest rates have risen dramatically over the last three years.

Meanwhile, wages have lagged far behind inflation, leaving the average household in a tough spot. This occurred even as American productivity powered forward… which tells us that the Cantillon Effect is in full swing.

Named for classical economist Richard Cantillon, the dynamic he observed describes the uneven impact that changes in the money supply have throughout the economy.

Specifically, Cantillon noted that when new money is injected into the economy through a central bank or government printing, those who receive and spend the new money first benefit by being able to purchase goods and services before prices rise. This disadvantages everyone else in the economy because it effectively steals purchasing power from the dollars they work for and save.

This chart illustrates the insidious nature of the Cantillon Effect over time:

How Dr. Ron Paul’s Legacy Inspired My Journey

Happy 90th Birthday to Dr. Ron Paul—a true legend. Ron Paul’s legacy has transformed countless lives, including my own.

A Journey from Uncertainty to Purpose

Dr. Paul’s advocacy for individual freedom, informed decision-making, and genuine education inspired me to find real purpose and take responsibility for my own growth.

And his influence did not stop with me…

Thanks to Dr. Paul’s example, my family has pursued an educational path rooted in critical thinking, independence, and lifelong learning.

And that means we homeschool using the Ron Paul Curriculum. Through his work to create this homeschool program, Dr. Paul will have an outsized impact on the next generation as well.

Join the Celebration

Please join me in wishing this great man a very happy 90th birthday! My daughter and I created this tribute video in honor of Dr. Ron Paul’s legacy. And if you would like to celebrate the event in person, go to https://ronpaulbbq.com/.

Is Fed Independence at Risk?

We’re going to talk about Fed independence today… and a secret plot that may be brewing. But first, I hope the summer months are treating you well!

Up here in the Virginia highlands, we’ve had more summer storms and heavy rains than I can remember since we’ve been here. There’s something aesthetic about a good storm, and the rain keeps everything green.

But it turns out that Mother Nature is a force to be reckoned with… and we learned that this week when a torrential downpour washed out part of our gravel road. Here it is:

Will Fed independence get washed out like the road?

This hasn’t happened in the twelve years we’ve lived here on the frontier. That river of muddy water rushed down from the mountain and worked its way across the road and down into the river. Amazing.

Almost as exciting as roads washing out, we were talking about interest rates last time we spoke. Specifically, went examined the three key interest rate benchmarks and how each impacts rates throughout the economy.

The key takeaway we came to was that the Federal Reserve (the Fed) no longer controls long-term interest rates. The only benchmark it controls is the Federal Funds Rate, which influences short term rates (up to 2 years)… and that’s it.

So the conclusion we came to was that, even if the Fed were to cut its target rate aggressively, there’s still no guarantee that long-term Treasuries or mortgage rates would go down. As evidence, the 10-year Treasury and the 30-year mortgage rate actually went up immediately after the Fed cut its target rate last year.

Regardless, the Trump Administration has not stopped pounding the table on their desire for the Fed to cut rates. In fact, President Trump tripled down on his attacks on Fed independence. He recently said that the Fed should cut its target rate to 1% – which is three times lower than where it is today.

This further fueled media speculation that Trump might try to fire Fed Chair Jerome Powell. CNBC even asked Treasury Secretary Scott Bessent if someone could be both Fed Chair and the Treasury Secretary in a live interview.

Bessent responded, “Hasn’t been done since the 1930s…”

“That’s not a no,” the reporter quipped. Bessent paused and didn’t elaborate much on the matter.

You can intuit a lot from watching someone’s body language in conversation… and I think Bessent’s body language was telling in this interview.

Why Market Forces, Not the Fed, Now Set Long-Term Interest Rates

We’re talking long-term interest rates this week… in honor of America’s Independence Day, I suppose.

When we left off yesterday, we suggested that the Federal Reserve (the Fed) no longer has control over long-term interest rates – which are the rates that matter the most.

The reason being is that there are three key interest rate benchmarks that influence rates throughout the US economy. They are:

The Federal Funds Rate (Fed Funds Rate)
The Secured Overnight Financing Rate (SOFR)
The 10-year Treasury Rate

We talked about the Fed Funds Rate yesterday.

As a reminder, when we talk about the Fed cutting or hiking rates, we’re talking about the Fed Funds Rate. But here’s the thing – it only influences short-term interest rates. To understand why, we have to understand the other benchmarks.

The Secured Overnight Financing Rate (SOFR) is the primary benchmark for trillions of dollars in corporate loans, adjustable-rate mortgages, floating-rate loans, interest rate swaps, futures contracts, options, derivatives, and other structured financial products. It reflects pure borrowing costs without bank credit risk.

SOFR is a critical benchmark for large corporate and institutional borrowing and hedging activity, and that extends into longer-term financing. Often this activity occurs when a company is undertaking larger-scale projects.

So SOFR is arguably more important than the Fed Funds Rate when it comes to spurring larger projects that could generate economic growth.