Category: Daily Insights

Cutting to the chase – we’ve got $2 million parked at SVB. We’ll find out on Monday how much we’ll be able to withdraw…

That note came to me over the weekend. It was from the founder of a start-up company who just raised $5 million in what’s called a Reg CF raise. This is the mechanism by which regular investors can invest in private companies – no accreditation necessary.

SVB refers to Silicon Valley Bank. As of last week, it was the 16^th largest bank in the United States.

This weekend it became the second largest bank to collapse in history. That’s after lines of people stormed the bank to pull their money out.

Over 2,500 venture capital (VC) firms banked at SVB. As did countless early stage private companies. By some estimates SVB did business with roughly half of all private technology companies in this country.

Imagine what those companies went through over the last several days…

As we know, FDIC insurance covers deposits up to $250,000 in the event of a bank collapse. For individuals, this is more than enough. Very few of us keep more than $250k in the bank.

But when it comes to enterprise clients – $250,000 is typically a drop in the bucket.

So half of the tech companies in this country just faced the prospect of losing most of their money. And if that were to happen, we would likely see a record number of businesses go bust at the exact same time… taking out some major VC firms and angel investors with them.

After a few days of panic, the U.S. government stepped in and outlined a $25 billion funding program to ensure that all SVB depositors are made whole. Uncle Sam’s not going to let the early stage tech sector go bust.

But the question is – what happens from here?

Is the banking system in trouble? Will the Fed have to stop raising rates?

The answer to that first question is no.

SVB simply got caught with what’s called a duration mismatch in the banking world. The bank had a large portion of its reserves in long-term U.S. Treasury bonds and mortgage-backed securities.

Now, the value of a bond moves inverse to interest rates. When rates go up, bond values go down.

And that’s what triggered an old-fashioned bank run at SVB. The value of its bond portfolio had declined dramatically… which raised questions about its financial health.

What’s interesting here though is that SVB planned to hold those bonds to maturity. And when a bond matures, investors get their original investment back. No matter what.

So the fact that SVB’s bond portfolio had declined in value shouldn’t have been such a big deal. It was largely just a paper loss. The bank held those bonds for the yield they provided… and that’s it. They weren’t going to sell those assets at a loss.

This begs the question then – what triggered the bank run? What prompted SVB’s depositors to rush to pull their capital out?

Most of us aren’t analyzing our bank’s financial statements every day… so it stands to reason that somebody must have triggered concerns around SVB.

I’ve heard rumors that JP Morgan CEO Jamie Dimon may be behind all this. This is unsubstantiated, but word is that he urged some top enterprise clients to pull their money out of SVB.

And to be sure, JP Morgan is going to be a beneficiary here. Many tech companies will move their deposits to the iconic bank. That includes the founder I mentioned above. The one who had $2 million parked at SVB.

So this begs another question – is there a bigger game afoot here?

We talked last week about how there’s a distinct split between the globalist power structure and the New York banking interests.

Interestingly, the Federal Reserve and the Treasury are on opposite ends of this schism. The Treasury supports the globalist initiative. Meanwhile, the Fed supports the New York banking scene.

So I can’t help but wonder… was this just another shot fired in the war between the Fed and the Treasury?

We’ll see. This certainly shines the spotlight on the Fed’s upcoming meeting later this month.

Many are pointing to SVB and saying that this will force the Fed to stop raising rates. Some think this paves the way for the Fed to “pivot” and cut rates again.

Color me skeptical.

If I’m right about the ongoing battle for monetary supremacy, we’ll likely see the Fed continue along its chosen path. That would include another 25 basis point rate hike later this month… accompanied by “hawkish” talk around future rate hikes.

And if that is in fact what happens, it will be the strongest confirmation yet that the days of low rates and easy money are over. Which means the Age of Paper Wealth has come to an end.

If that’s the case, we’re in uncharted waters here.

Nobody under age sixty has been an adult in a world where rates didn’t consistently go down over time. And how we manage our finances when rates are going down is dramatically different from how we handle our money when rates are rising.

Fortunately, there’s a simple solution. Learn more right here:

Finance for Freedom

-Joe Withrow

May you be blessed to live in interesting times.

The above line is an ancient Chinese proverb… and it absolutely applies to us. My friends, we are at an inflection point in history. Right now.

There are many reasons why that’s the case. But I’m a finance guy, so I’ll focus on the financial aspects. We’ll start with some quick background…

The Federal Reserve (the Fed) is the central bank of the United States. And it owes its existence to a piece of legislation that passed in 1913.

The story of how that legislation was crafted and pushed through is absolutely incredible. If you like mystery novels, the story of the Fed is for you. But we’ll save that for another day.

Today, the Fed claims to have a dual mandate. It’s to ensure maximum employment and price stability.

Between friends, that mandate is bunk. The Fed does neither. Nor is it supposed to.

The Fed’s true purpose is to ensure that the U.S. Treasury is forever solvent… even if it spends money that it doesn’t have.

In other words, the Fed’s job is to print money to cover the U.S. government’s excessive spending. We call this “debt monetization”.

But there’s a new wind blowing out in front of the Eccles building. And it seems the Fed has made a conscious decision to break from the Treasury.

Fed Chair Jerome Powell was on Capitol Hill this week. And he made it abundantly clear that the Fed is no longer going to cover for the Treasury’s malfeasance.

Check out Powell’s exchange with Senator Lummis:

As we can see, Powell made it very clear that the Fed is not going to keep interest rates low just to help the U.S. Treasury service the national debt.

Sure, he paid lip service to the dual mandate. He has to. But the big takeaway is that the Fed\’s not going to support the deficit by keeping rates low.

I know this confused many analysts. It would have confused me a year ago as well.

After all, Powell succeeded Janet Yellen as Fed Chair. And Yellen happens to be the head of the U.S. Treasury now. Aren’t they on the same team?

The answer is no.

The fact is, there’s a power struggle happening in this country right now. This has become apparent over the last twelve months… at least for those who cared to read between the lines and analyze incentives.

Yellen is aligned with what we’ll call the globalist power structure. It seeks to reorganize our society per the World Economic Forum’s “stakeholder capitalism” model.

It’s intended to sound like a friendlier version of capitalism. But in reality stakeholder capitalism is more akin to a grotesque neo-feudalism.

That’s because the “stakeholders” in their vision will control all aspects of money, finance, and energy production.

This necessarily requires the commercial banking system to be diluted or discarded. And it takes all decision-making authority and places it in the hands of the stakeholders. The rest of us are expected to fall in line and accept their edicts.

Meanwhile, Powell is aligned with the New York banking interests. They have been prominent for over a century now. This is the power structure that helped get the Fed established in the first place.

This faction wants to maintain the American status-quo as it currently exists. In fact, their power, wealth, and influence depend on it.

There’s very clear evidence that these two factions have been battling it out for at least twelve months now… maybe longer. Except everything’s happening just under the surface. Most are unaware that anything like this is afoot.

And with Powell’s overt comments on Capitol Hill this week, it’s clear the battle is ramping up. This is the first time Powell publicly admitted that the Fed has broken ranks with the Treasury and the globalist narrative.

So things are about to get especially interesting. And this all has major implications with regards to money and investing.

First of all, understanding what’s happening at the macroeconomic level enables us to make intelligent decisions when it comes to our investments.

Most of the financial world has been stuck in this echo chamber where they are repeating the same thing to each other. They all agree that Powell is raising rates in the present to fight inflation… and that he will “pivot” and cut them again when inflation subsides.

That’s not what’s happening here.

The Fed isn’t raising rates to fight inflation. It’s raising rates to fight the globalist power structure… and to preserve the power and prestige of the New York banking scene.

That’s a deep rabbit hole. And we cover it in a lot more detail in The Phoenician League’s monthly newsletter.

But for investors, the takeaway is this: the days of low rates and easy money are over. The Fed will not support the stock market anymore.

In other words, the Age of Paper Wealth has ended.

And that means what’s worked well for the last several decades won’t work so well going forward. It’s time for a new approach…

-Joe Withrow

P.S. If the battle between the Fed and the Treasury piques your interest, we are actively tracking this story every month in The Phoenician League’s monthly newsletter.

We’ve already spilled tons of ink on the subject – about ten thousand words to be precise. And we’ll continue to do so going forward.

Simply put, this is the most important macroeconomic story of our day. Yet, very few people even know what’s happening… let alone understand it.

In The Phoenician League, we also talk extensively about how to position our investments in response to the major changes that are afoot right now.

This includes robust asset allocation and an intense focus on building passive income streams. And we have specific investment suggestions and a systematic process for going about this.

The Phoenician League only opens its doors to new members a few times each year. And our recent enrollment period ended last Saturday.

That said, we can still accommodate a few new members in the current cohort. So I’m going to make an exception and extend one final opportunity to join our network at a discounted price.

If you’re at all interested in our offering, just go here:

The Phoenician League Membership Program

You can use coupon code member25 at the checkout page to take 25% off of our membership rate. This will be the very last time we extend this discounted offer.

Let me tell you something, son. Never say you’re sorry to a potential client. Ever.

The year was 2007. I found myself in Great Falls, VA interning at a company that presented itself as a high-end investment brokerage. 

That image is what attracted me to the opportunity. 

Great Falls, VA is a suburb of Washington, DC. It’s consistently one of the wealthiest counties in the country on a per capita basis. And it’s surrounded by four or five of the other richest counties in the U.S. 

At the time I wanted to break into the world of investment research. And that’s exactly what the broker who recruited me promised.

The reality was the exact opposite.

The inside of this operation looked like a scene from the old movie Boiler Room. It was a bit dark and dingy. And there wasn’t a computer to be found. 

In fact, computers were prohibited. As were cell phones. They still wrote up trade tickets for clients by hand like the old days.

And there were only five rooms in the entire office. You entered through something of a narrow hallway.

Immediately to the left as you walked in was the conference room. The next room on the left was the president’s office… which was mostly just for show. He never came to work.

If you kept walking, the hallway would open up into our larger workspace. It was a sea of cubicles. They each consisted of a chair, a phone, and a small desktop. Then in the very back you would find the restroom and the compliance officer’s office.

I’m not sure what exactly the compliance officer did all day. But he was a self-described blue collar Italian from “Philly”… and he happened to also be the president’s brother. 

He’s the one who was scolding me.

Listen to me – you’ve got talent. I think you’re the next big thing in this industry. But you gotta grow up. Let me tell you something, son. Never say you’re sorry to a potential client. Ever.

My cubicle was right in front of his office. Which seemed to lack a door. 

He took a liking to me because I worked hard. I recognized at the time that he was just trying to give me what he considered to be good advice.

The problem is, it wasn’t good advice. 

Nor was I working at a high-end investment research firm. It was a chop shop where we made cold calls all day.

Still, that was quite a formative experience for a young guy who wanted to break into the world of finance. And I vividly remembered this story as I sat down to write to you today.

I planned to start out by thanking you for wading through all the marketing emails I sent last week. I figured I could say sorry for blowing up your inbox as well. 

Not because I don’t believe in the message I wanted to share. I very much do. But I also know that we are all bombarded with all kinds of messages every day… and it can be draining. 

So thank you.

Our launch for The Phoenician League last week exceeded my expectations. This was only the second time we have opened our doors. We’re still a new thing.

And to top it off, I received a kind note from a gentleman who joined us during our first launch last year. He shared with me some of the wins he’s had since joining our network. And he was very complimentary of the program we’ve put together.

We’ll open our doors again at some point later this year. I’m not sure exactly when it will be… but I’ll send out a bunch of emails when we do. That’s just what we have to do to get noticed.

Perhaps I should apologize for that in advance. Or maybe I should adhere to my Boiler Room mentor from Philly’s advice and stay mum on the subject.

Either way, we’ll start sending out weekly “infotainment” emails once again now that the launch is over. 

My hope is that these are short, entertaining, and informative. And we’ll put a link at the bottom of each email.

Sometimes it will be directing you towards our stuff. Sometimes it will go to somebody else’s stuff who we find interesting and important. 

But either way, our only goal is to provide value and an actionable takeaway. That’s the first and second rule of writing a daily newsletter. I learned them from my friend Tom Dyson.

And since I dropped Tom’s name, I’ll put his new research service in front of you today. 

He’s the investment director over at Bonner Private Research. It’s absolutely a contrarian take on the world of money, finance, and investing.

You can subscribe to their free daily e-letter on Substack right here: Bonner Private Research

Today we’ve got part four of our ongoing Q&A series.

Q. How to get passive income from option strategies?

A. Great question. The best way to generate income using options is to systematically sell uncovered puts and/or covered calls.

For those not familiar with options, they represent a contract to buy or sell 100 shares of the underlying stock. 

When we buy an option, we pay a premium up front, and then the value of our option contract can go up or down based on how the underlying stock moves. BUT, our option contract gradually loses value over time as it approaches expiration. 

That being the case, sometimes we can lose money even though the stock moved slightly in our direction. That’s incredibly frustrating.

This is why I believe selling options is the way to go. 

Continue reading “Answers to the Top Survey Questions Part Four”

Today we’ve got part three of our ongoing Q&A series:

Q. How do we create financial freedom outside of the corrupt monetary system?

A. I love this question. It’s clearly coming from a libertarian angle. And in a world where price inflation is raging, it’s more important than ever before.

My answer here is a little bit nuanced. It starts with a strategic asset allocation model that includes both gold and Bitcoin.

I see both gold and Bitcoin as market-based money. Both are outside of the control of government and the central banks of the world. Nobody can duplicate or debase them.

Now, the powers that be can certainly manipulate the dollar-based price of both gold and Bitcoin. And they do. But if we hold both assets in self-custody, nobody can stop us from using them.

Continue reading “Answers to the Top Survey Questions Part Three”

Today we’ve got part two of our ongoing Q&A series:

Q. What is the minimum amount that you can start with in your system?

Q. How to generate passive income when you don’t have a lot of money?

Q. How fast can you start making passive monthly income? Can I start with $500 and start getting $10 a month in passive income in the next month?

A. All great questions. 

Lenders require us to put at least 20% down on rental properties. So the minimum amount we need to start depends on the purchase price of the first property we want to buy. 

To quantify this, we have properties available anywhere from $80,000 to $750,000. We can get started with properties on the low end of that range for somewhere between $16,000 and $20,000.

That said, we also have strategies we use to help us produce income while we are saving up for real estate down payments. I have used one of these strategies to consistently generate an annual return of 9.2% with no market risk. 

Starting with $500, this rate of return would throw off $4 in passive income in the first month. Then it would compound from there. 

Continue reading “Answers to the Top Survey Questions Part Two”

Friends,

Just a quick follow-up on our passive income discussion this week.

We had some great questions come in through our passive income survey a few weeks ago. These are items we will address in our upcoming workbook series. It’s called How to Go From $0 to $10,000 a Month Passive Income.

But I would like to answer some of the top questions that came in as well. I’ll list them Q&A style below.

And by the way, I’m happy to answer any additional questions you may have. If you have a question that we haven’t addressed yet, just reply to this email and ask away.

Q. Can you make the system clear? I lose my way in complexity… thank you.

A. If I had to describe our approach in three steps, they would be:

• Understanding
• Financial Security
• Passive Income

We start with an honest assessment of the monetary system and the ongoing macroeconomic climate. This provides us with understanding.

Then we build a strategic portfolio of reserve assets. This portfolio will leverage our understanding of the macro climate. It provides us with financial security.

And in The Phoenician League, we help everyone craft their own customized asset portfolio with specific investments. We provide consistent updates on our investments as well.

From there we build a passive income portfolio. We use rental real estate as our vehicle. The tax advantages are just too good to pass up.

We also get members matched up with ideal rental properties and all the professionals they need to manage these properties and their overall portfolio.

Our goal is help everybody build a passive income portfolio that throws of $10,000 a month in extra income. And we have a systematic method for adding the properties we need to make this happen.

Q. How do you negotiate a good deal on a property?

A. We invest through a nationwide real estate network. The network’s brokers have relationships with new home builders and local rehabbers in every market that we invest in.

For the home builders, selling properties through our network is much easier than listing on the MLS and hosting retail buyers all day. They can simply move homes much faster by selling to investors.

The same goes for the rehabbers. Having the ability to sell into our network allows them to move properties consistently. That’s critical for their business.

As such, these professionals are willing to work with us on pricing and concessions much more so than they otherwise would be. Whatever they lose in margin, they know they’ll make up on volume. If they can sell into our investment network, that is. We have strict criteria.

Because of this, our network’s brokers can negotiate good deals on our behalf. Our network doesn’t accept any property that doesn’t produce strong cash flow. That is to say, every property has to be priced such that it will deliver great returns for investors.

Q. Is income truly passive? How much maintenance work is required?

A. This is a great question. Can income truly be passive? Don’t you have to do something for it?

From my perspective, our approach to building cash flow with real estate makes it as passive as it could possibly be. That’s because we have professionals in our network who handle every aspect of the transaction and property management for us.

That said, it does require a little bit of work. But not much. Most weeks I spend no more than ten minutes on my real estate portfolio.

These ten minutes consist of bookkeeping and corresponding with property managers. Of course I also go over the property management report every month.

We talk about exactly how to handle these items in our program.

Meanwhile, the rent checks just show up in the bank, month in and month out.

Q. Will you include tax strategies so we can safeguard our earnings?

A. Absolutely! This is the beauty of using real estate as our cash flow vehicle. The tax code treats real estate extremely favorably. We talk about this a lot in our program.

By default we should not owe taxes on our rental income. That’s just utilizing standard deductions and straight-line depreciation.

There are also some more advanced tax strategies we can use to offset other forms of income. Those require more planning… but they are available to us.

Q. Won’t I get put in a higher tax bracket?

A. Not with our approach. Real estate is incredibly tax-advantaged – as we just discussed. If used correctly, we won’t owe any taxes on our rental income.

What’s more, there are ways to use accelerated depreciation to reduce our overall tax bracket for our other income sources. This requires advanced planning. But we discuss the strategy in detail in our core content.

Q. What is the difference between different types of income according to the IRS? And how are they taxed differently?

A. Another great question. This one ties in with the previous.

Please know that the great CPAs in our network would break down this answer in even more detail than I will today. But I’ll give you what I believe is the most relevant answer for our purposes.

The IRS puts “active” and “passive” income in different buckets. And the two buckets are isolated from one another by default.

Active income refers to W2 income and any income we receive from businesses that require day-to-day activity.

Passive income is income that comes from our rental properties, limited partnerships (syndications), and any other source that doesn’t require day-to-day activity from us personally.

To me, what’s important here isn’t the tax rate.

The key is that we can’t use passive losses to offset active income or vice versa. This plays a major role in our tax planning.

For example, let’s say our real estate generated $10,000 a year in cash flow. And with our deductions and depreciation, we show $12,000 in expenses. That wipes out our tax liability and produces a loss of $2,000.

We then carry over this loss to the next year. That way it’s available to us to offset future passive income.

This all may sound complicated… but that’s why we have great CPAs in our network. We don’t have to worry about any of this – our CPA firm will handle it for us.

Now, keep in mind that the IRS says we cannot use this $2,000 passive loss to offset active income. It can only offset passive income.

That is, unless we employ some expert tax strategy. There is a way to cross the arbitrary barrier and use passive losses to offset our active income.

This strategy takes some advanced planning. And it requires us to meet strict IRS qualifications. But to me, it’s the equivalent of modern-day alchemy for those who can pull it off. It’s an incredibly powerful tool to eradicate our tax burden.

I don’t have the space to dive into the details around this strategy today. But we absolutely discuss it in length within our core content in The Phoenician League.

Okay, we’ll leave it here for today. Please be on the lookout for part two of our Q&A series tomorrow.

-Joe Withrow

P.S. Don’t forget that The Phoenician League is currently open to new members.

And for those who join us this week, we’re taking 25% off our normal membership rate. Just use coupon code member25 at the checkout page to claim your discount.

For more information, just go here: The Phoenician League Membership Page

The temperature has dipped below freezing up here in the mountains of Virginia. The first snow flurries of the season will happen in the morning. And Weather.com tells me that tomorrow night’s low will be precisely zero degrees Fahrenheit.

That can mean only one thing. The holiday season is here.

And in the holiday spirit, I would like to share with you my two favorite holiday traditions. They involve gold and spiked eggnog.

Every year at this time I buy my two kids physical gold and silver coins. And I write each of them a heartfelt note to go along with the gifts. The note is dated so that maybe one day they will come across them again and have fond memories of their childhood.

Continue reading “My Two Favorite Holiday Traditions”

We talked about the Fed’s silent coup yesterday. It stems from the battle between the New York banking interests and the old-world European power structure.

What this battle is really about is control over the engines of finance.

As the Austrian economists have pointed out, the fractional reserve banking system allows the commercial banks to pyramid credit on top of base money at a 10-to-1 ratio.

This effectively gives the commercial banks the ability to create money from nothing as well. The central banks aren’t the only money-printing game in town.

And this allows the banks to determine what gets financed and what doesn’t. There’s an immense amount of power in this.

For example, should we finance oil exploration and small-module nuclear reactors… or acres upon acres of windmills and solar farms?

Should we finance small local farms… or push all agriculture into a few multinational corporations?

The ability to aggregate and allocate capital is absolutely critical to modern civilization. Those who control the engines of finance have an outsized ability to shape our world.

And here’s the thing – there’s fierce competition among the commercial banks. This ensures that each bank strives to make good credit decisions. Most of the time, anyway.

The better their loans perform, the more money, power, and influence they accumulate. So they want to finance promising companies and projects.

The European Deep State wants to usurp this power for themselves.

And they want to eliminate all competition so that there are no consequences for poor decisions. This would allow them to favor pet projects specifically designed to restructure society according to their aims.

That’s the heart of their “stakeholder capitalism”. That’s what the “Great Reset” is all about.

So the battle is on.

The Fed’s aggressive actions this year have been about beating back the old-world European powers. The “combatting inflation” meme was just a cover story.

And this is why the Fed is not going to pivot any time soon. It’s going to get the Federal Funds Rate back up between six and seven percent.

And I think they are content to let it stay there. The Fed isn’t raising rates now just to cut them dramatically later. Those days are over.

That means we’re living through an incredible macroeconomic shift. The Fed is not going to support the U.S. stock market anymore.

We better tailor our investment approach accordingly. What’s worked well for the last thirty years will not work so well going forward.

The solution? Strategic asset allocation.

More information right here: Finance for Freedom Masterclass

The Federal Reserve (the Fed) executed a silent coup this year.

Fed Chair Jerome Powell and President of the New York Fed John Williams successfully replaced the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) here in the U.S.

SOFR is now the benchmark interest rate for dollar-denominated loans and derivatives. That means it influences other dollar-based interest rates.

LIBOR previously held that role. And the key here is that LIBOR was heavily manipulated. We know that definitively thanks to one of the investigations into the 2008 financial crisis.

So for as long as U.S. rates were tied to LIBOR, European banks had some influence on monetary policy in the U.S.

In other words, the Fed was trapped in a box. If it tried to raise rates while LIBOR was still the benchmark, the European Central Bank (ECB) and the large European banks could have manipulated LIBOR lower.

That would ensure long-term rates could not rise too much, regardless of where the Fed set its target rate. Thus, the Fed wasn’t in the driver’s seat.

That’s why what happened this year was a silent coup. The Fed was determined to raise rates. And ousting LIBOR was the only way to do it.

Of course, this begs the question – why?

Continue reading “The Fed’s Silent Coup… And What It Means for Our Investment Strategy“