Category: Daily Insights

Yesterday we talked about some common financial mistakes. I made them all.

The root cause of my problem came from chasing “piecemeal” investments. These are investment ideas I came across that certainly sounded good… but I had no rhyme, reason, or strategy guiding my decisions.

That experience forced me to develop a comprehensive investment system and stick to it. This is critical if our goal is financial independence.

For me, it all started with an honest and thorough assessment of the monetary system and the macroeconomic climate. This sounds like a simple thing… but the current monetary system is rather insidious. That’s because our money loses purchasing power year after year.  

As Tom Dyson pointed out in our membership call last month, this makes it very difficult to plan. This is why Tom’s philosophy centers around owning energy.

So understanding the monetary system and the macroeconomic climate is critical. And we can use that knowledge to construct a strategic asset allocation model.

Asset allocation is all about financial security. It’s about strategically allocating capital to a wide range of assets. Cash, gold, stocks, bonds, Bitcoin, real estate, private notes, and early stage investments are the main assets on my radar.

This is how we achieve true diversification. The key here is that our asset allocation model becomes our reserve. We can instantly turn most of these assets into cash in the event of an emergency. They are our safety net. 

However, to my way of thinking, our asset portfolio is not our retirement savings. In fact, I reject the idea of retirement entirely.

Think about it this way: the traditional approach to retirement promotes the “nest egg” model, the idea that we need to pour our savings into financial assets to work up to this mythical retirement number. “What’s Your Number?” I remember old commercials promoting that slogan.

The idea was that we build financial assets and hope our returns get us up to a big enough number that we can live comfortably in retirement. Then, we draw down our assets to create income for ourselves after we quit working. That is to say, we sell off our stocks and funds and use that money to live on.

Notice how it’s always a choice between assets and income?

When our assets are going up, we don’t have the income. Then when we want the income, our assets have to come down.

And it gets worse.

This approach pits us against the tax code. It doesn’t matter if our financial assets are in 401(k)s, IRAs, or regular brokerage accounts—they are going to get taxed in the end, and tax rates could very well go up in the coming years. That’s not a bad bet.

So the traditional approach puts us on an unstable see-saw. We constantly have to choose between having assets or having income.

Personally, I would rather have assets and income. And I would like my income to go up when my assets go up. I want the two on the same team.

To accomplish this, I use my asset allocation model as a jump-off point to build passive income. That is to say, once I’ve built my asset base up to a reasonable level, I shift my focus to building passive income.

The key here is to acquire assets that throw off cash flow. This way we put assets and income on the same team. When our assets go up, so does our income. And when we want more income… we just buy more assets. It’s a far more robust approach.

And guess what? We’re no longer talking about traditional retirement here.

If we can work up to having monthly income that supports all our needs and wants… Well, we can retire any time we want. It doesn’t matter if we are 65 or 45. All we have to do is build up the income.

So what about taxes?

This is why I see real estate – old fashioned rental real estate – as the best vehicle for building income.

Real estate is an incredibly tax-advantaged asset. By default, we shouldn’t owe any taxes on our rental income. And that’s 100% by the book. It’s all baked right into the tax code.

I’ll leave it there for today. Next week we’ll talk about how to real estate can help us achieve financial independence much faster than we might think possible.

-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.

Our program within The Phoenician League walks members through the steps of implementing everything that we’ve been discussing in these pages. And we have a great support system in place. We’re all walking the same journey together.

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

The true purpose of money is to acquire assets.

That’s the key lesson in the classic board game Monopoly. If we acquire assets, we will always have the financial means to take care of ourselves and our families. That’s even if our active income were to go away.

If we accept this statement as true, the only remaining question becomes: what assets should we acquire?

Our core focus in these pages is how to get our personal finances right given the shifting macroeconomic climate we find ourselves in. My belief is that simply funneling a little money into 401k funds won’t cut it anymore.

So what’s the solution? Here we run into the information problem.

It’s funny… it used to be that a lack of information was one of our biggest challenges. Before the internet, finding information was much more difficult and time-consuming.

Today we have the opposite problem. We are inundated with incredible amounts of information all day, every day.

And if we go online and search for investment ideas and strategies, we are going to find an avalanche of what I call piecemeal investment advice.

There are plenty of services that focus on buying stocks or bonds in a particular sector or market. There are also scores of trading systems out there. They all promise to help us line our pockets with big gains.

To be sure, some of these services are decent. But none of them provide a comprehensive approach to finance.

They don’t provide an integrated system for becoming financially independent. Nor do they help us implement a complimentary tax strategy to maximize our investment returns. Most of the time they’ll keep mum on the tax issue for liability purposes.

I spent the first ten years of my professional life chasing these kind of piecemeal investments.

I would stumble upon a few stock ideas that I liked, so I would buy them. Then I would hear about a great set-up in the corporate bond space, so I would buy it. Then I would learn about a new approach to trading options, so I would try it out.

As a result, I was always bouncing from one thing to another. There was no structure or system to it. And taxes were an afterthought. When it came time to file my tax return, I just hoped for the best.

And I made all the common mistakes along the way.

I’ve poured too much money into short-term speculations that went nowhere. I’ve watched one of my stocks go from $7 a share to $80 a share… only to ride the elevator all the way back down to $10 per share. That wiped out nearly all my gains.

And because I didn’t have a tax strategy in place, one year I found myself having to dip into my individual retirement account (IRA) early. I took out a sizeable withdrawal to cover myself. Then the Internal Revenue Service (IRS) hit me with a 10 percent early withdrawal fee for my efforts.

I had to pay income taxes and a big penalty on the money I took out. You just can’t get financially independent by making mistakes like that.

As a result, I spent nearly ten years in corporate banking for my first career… and I walked away with almost nothing to show for it.

That’s because I squandered my savings on short-term speculations and piecemeal investments. Sure, I made a little money on some ideas. But that was often offset by losing money in other areas.

Needless to say, I didn’t start to see any real financial results until I wised up and developed a comprehensive investment strategy. Once I got my system in place, the rest was history. Results came far faster than I ever thought possible.

And here’s the thing – nothing about it is overly difficult or complex. I’ll share with you my system and how to implement it tomorrow.

-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 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.