Author: jwithrow

I have some more notes from the frontier for you before we get back to our discussion on asset allocation and reserve assets this week…

We ventured up to an historic old inn last weekend. It’s an establishment in Hot Springs, Virginia that’s run by the Homestead Resort, which was founded in 1766 – ten years before America declared independence.

Captain Thomas Bullitt built the original 18-room wooden inn after receiving a land grant for his military service in the French and Indian War. He figured it could accommodate the visitors who came to the area to bathe in the mineral springs for which the town was named. Thomas Jefferson even visited the original Homestead inn towards the end of his life.

Located deep within the Allegheny mountain range, this area was truly the frontier in those days. Nobody knew what existed to the west of the mountains.

In many ways I feel like Hot Springs is still the frontier. The town sports a population of 540 people, and it’s located 30 minutes from the nearest highway and 40 minutes from the nearest Walmart. As such, the crisp mountain air remains untainted by modern America’s rat race.

Here’s a shot of the inn from our visit:

There’s something magnificent about the old inn laid against the Alleghany mountains under a crisp blue sky. We had lunch there… and we were their only table. Such is life on the frontier.

Getting back to finance…

We left off last week talking about Harry Browne’s Permanent Portfolio and the concept of asset allocation.

As a reminder, asset allocation is about spreading your money – your capital – across several different asset classes according to a personalized model. The purpose here is true asset diversification.

A robust asset portfolio will consist of:

• Reserve Assets
• Strategically warehoused cash
• Capital-efficient stocks
• Cash flow investments
• Alternative investments

We’ll dedicate a separate entry to each of these, starting with reserve assets today.

Continue reading “Reserve Assets for Wealth Preservation”

Yesterday we talked about Harry Browne’s tried-and-true Permanent Portfolio concept. And as we noted, asset allocation is the key to building such a portfolio today.

The idea underlying the Permanent Portfolio is brilliant in its simplicity – build a bulletproof asset portfolio that will thrive regardless of what’s happening with the economy.

That’s where asset allocation comes in…

Asset allocation is about spreading your money – your capital – across several different asset classes according to a personalized model. The purpose here is true diversification.

I suspect many of us hear the word diversification and CNBC’s definition comes to mind. You know—buy stocks in all kinds of different industries so that you have a diversified portfolio. I don’t buy that… because that approach focuses on a single asset class.

To become financially bulletproof, we must build a portfolio across a range of assets that complement each other.

Individually, each asset class has its own strengths and trade-offs. But magic happens when multiple assets are strategically assembled under the same roof.

A robust asset portfolio will consist of:

Continue reading “Bulletproof Asset Allocation”

A note from the frontier before we get to our permanent portfolio discussion today…

I attended my daughter’s dance recital at the old Masonic Theatre in Clifton Forge, VA over the weekend.

I highlighted this building a few weeks ago – the first time I visited it – because I find it fascinating. It’s a historic Appalachian opera house that opened its doors in 1906. Apparently it once hosted everything from presidential speeches to old western performances.

What strikes me most are the elevated opera boxes on the second level of the building – just overlooking the stage. Nobody seems to sit in those things today… so my son and I went up there to check them out.

Here’s a picture I snapped of our view from the box just before the curtains opened:

These opera boxes strike me as a relic from the Victorian era… and there’s something oddly nostalgic about that.

Getting back to the world of finance and economics…

We talked last week about the changing dynamic of global trade and Triffin’s dilemma. When we left off, we asked a key question – what’s it all mean for us? And how should we position our finances given all the uncertainty out there?

Continue reading “A modern Permanent Portfolio strategy…”

We’ve been talking about the Make America Great Again (MAGA) plan the last two weeks. We can condense the plan into three fundamental planks. They are:

• De-lever the US government by cutting out waste, fraud, abuse, and bloat
• Re-invigorate the private sector by de-regulating the financial system
• Reflate the American middle class by reshoring manufacturing, cutting taxes, and driving down energy prices

But as we mentioned on Friday, there is a major roadblock in front of this plan. That roadblock isn’t related to trade wars or geopolitics… it’s something called Triffin’s dilemma.

At its core, Triffin’s dilemma arises from the inherent conflict between a country’s domestic economic priorities and its role as the issuer of the global reserve currency.

For the US, maintaining the dollar as the world’s reserve currency has required running persistent current account deficits… because the world needs a constant flow of dollars.

These deficits support global liquidity. But they create a dynamic that incentivizes imports and undermines domestic manufacturing competitiveness. We ship dollars to the world and the world ships us goods in return.

Stephen Miran, Trump’s nominee for Chairman of the Council of Economic Advisers, spelled this out clearly in his paper titled A User’s Guide to Restructuring the Global Trading System.

Continue reading “Triffin’s Dilemma and the MAGA Plan”

We left off last week talking about how we’re on the precipice of a global economic reordering. That’s what all this talk about tariffs and trade wars is about. The current administration seeks to change the entire dynamic of global trade.

Treasury Secretary Scott Bessent – who strikes me as a deadly serious person – believes in this initiative wholeheartedly. He sees it as an effort to reshore American manufacturing and reflate the once-great American middle class. Here’s what he said in a recent interview:

“The American Dream is not ‘let them eat flat screens’… It’s more than that… The bottom 50 percent of working Americans have gotten killed. We are trying to address that.”

I hadn’t thought about it from this perspective before, but I think Bessent has a point worth considering.

The United States has been a consumer-driven economy ever since President Nixon closed the international gold window and cut the dollar’s final link to gold in 1971. The numbers show this very clearly.

Continue reading “Changing the Dynamic of Global Trade”

Dear reader,

Hello and happy Friday to you. I’m late getting this missive out as I’ve been playing catch-up. We’ll get back to a regular schedule with these next week.

The reason I’m late is that we took a family vacation to Delray Beach, Florida last week. My daughter Madison is now ten years old… and this is the first real vacation that we’ve taken since she’s been here.

I figure one vacation every ten years is a pretty good rhythm. Especially when you make new friends like these:

We met this guy out on one of our morning walks. He seemed content to observe us humans in our native habitat at first. But then my son tried to pet him… and that’s where the line was drawn. This thing belly-flopped into the bushes and disappeared into the Florida morning – moving much faster than one would expect.

Speaking of moving fast, it’s become clear that we’re on the precipice of a global economic and monetary shift unlike anything since the Bretton Woods Agreement of 1944.

Continue reading “The Global Economic Reordering is Upon Us”

When we left off yesterday, we were exploring the idea that it could possibly be Springtime for America and our economy.

I would have immediately rolled my eyes had I heard someone make such a statement eight months ago. After all, it’s been clear for a while now that we’ve been hurdling towards a sovereign debt crisis in this country.

Yet, the US government continued to run massive deficits and pile up even more debt regardless. It was like they were intent on skimming every last cent from their grift before the train sped over the cliff.

The only way to avoid that fate is for the government to get its fiscal house in order. And soon. Nearly $17 trillion worth of US Treasuries are coming due over the next three years. That’s almost half the national debt.

Since the US government runs budget deficits each year, the only way it can repay those bonds coming due is by issuing new bonds. But will the market step up to buy $17 trillion worth of newly issued Treasuries over the next three years?

Given that the federal debt didn’t hit $17 trillion until 2013, it took the US government 224 years to amass that level of indebtedness. And now it has to re-issue that much in just three years’ time?

That’s simply not going to happen if the government continues to run $2 trillion budget deficits each year. Because we’re talking junky-level financial management here. And who’s going to lend $17 trillion to a junky?

The good news is that there is hope. As cynical as I was about this eight months ago, there’s now a path forward to a balanced budget and fiscal sanity.

Continue reading “The Path to Fiscal Sanity”

Spring has finally sprung here in the mountains of Virginia. Winter’s last ride is over.

It has been a while since I’ve written to you… everything is moving fast in the world of finance and economics. It’s a lot to keep up with, and there’s always a tug-of-war between narratives and counter-narratives out there. But I’m starting to wonder—could it be Springtime for America as well?

Things that I didn’t think were possible are starting to happen. Ideas that were once considered extreme are starting to circulate. Here’s one of them:

Think about it—Donald Trump announces the External Revenue Service, and his goal is very simple… his goal is to abolish the Internal Revenue Service and let all the outsiders pay.

You see, Musk is going to cut $1 trillion – that’s his job. And then we’re going to get rid of all these tax scams that hammer against America, and we’re going to raise a trillion dollars of revenue. That’s how we’re going to make America great again!

The above quote came from newly appointed Commerce Secretary Howard Lutnick at an interview last month. Lutnick is the CEO of investment giant Cantor Fitzgerald – which also happens to be one of the 24 primary dealers within the Federal Reserve System.

This is quite a privileged position to be in. The primary dealers bid on US Treasuries at auction and receive direct access to the Fed’s cheap financing through the discount window and repurchase (repo) agreements.

All that’s to say that Lutnick is a true insider. He’s attuned to the plumbing that underlies the dollar-based financial system. And here he is talking about abolishing the IRS…? How’s that for a sea change?

Continue reading “Springtime for America?”

Hey friends – I have a short note for you today to close out the week…

I’m happy to say that we’ve had a real winter up here in the mountains of Virginia—for the first time in several years. The ground’s been covered with snow for most of February.

Here’s the latest:

I’m not sure what could be more beautiful than this. Appalachian winter in all its glory.

Meanwhile, America’s Great Reorganization continues to get more and more interesting. Now the Secretary of Commerce is out there telling people that the goal is to cut $1 trillion in spending, create $1 trillion in revenue by monetizing assets… and then to abolish the IRS and get rid of the income tax.

If they are serious about creating a golden age for America – I’m not sure anything would do the trick better than scrapping the income tax. Just imagine…

I’m not getting too excited yet. Talk is cheap, as a wise man once told me. But there’s no doubt that this is all getting very interesting.

I’ll have more nuanced updates for you soon. But until then, I’d like to invite you to give the Remnant Finance Podcast a look. The hosts invited me on this past week and we had a great discussion spanning macroeconomics and a whole host of other topics.

You can find our podcast episode below. But it’s one of many great episodes available in the Remnant Finance archive. The hosts are naturals and the topics are always interesting and relevant. This has become a can’t-miss podcast for me each week.

I attended my daughter’s dance class at a historic Appalachian opera house this week… and I was struct by its design. A local Masonic Lodge commissioned construction of the building, and it opened its doors in 1906.

The theatre was originally known as the Mason Hall and Opera House of Clifton Forge. Today it’s known locally as the Masonic Theatre. Here’s a shot I took from the balcony.

I’ve never been to a play or a musical of any kind – I suppose I’m about as uncultured as one can be in that regard. So I didn’t know those elevated opera boxes were really a thing.

I read through a little bit of the theatre’s history as I waited for the dance session to start. Old Western movie icons Lash LaRue and Tex Ritter once performed on this stage. And apparently William Jennings Bryan gave a speech there during his final presidential campaign of 1908.

Then I found my way to the underground level out of curiosity – and I was equally impressed. It seems the building was built directly over top of a creek that flows into the Jackson River, which snakes through the region. Check this out:

Continue reading “The Breadcrumbs and the Golden Age”