Yesterday we talked about the collectivist approach to investing. That’s the “conventional” retirement planning model. 

Retirement Inc. has pushed the collectivist approach for forty years now. It says we should all funnel our savings into various kinds of funds (mutual funds/index funds/exchange-traded funds) and then hold them inside of retirement accounts – 401(k)s and IRAs.

As we discussed, this model created distortions within our society… because it enabled a quasi-political agenda. Worse, the conventional approach strapped humanity to the hamster wheel. Here’s what I mean…

There are a plethora of rules that come attached to retirement accounts. Those rules work together to effectively put our money in jail. Once we lock our savings away in these accounts, we can’t touch it again until we retire without incurring heavy-handed penalties.

Of course, Retirement Inc. pitches its funds as “diversified” – because they own stocks in a wide range of industries. They say their diversification equals safety.

But notice how they only focus on one asset class. And it just happens to be the asset class that pays them fees year after year. Even when they recommend bonds – usually it’s through some bond fund trading in the stock market.

So Retirement Inc. wants us to give them total control over our money. We are to lock it away and trust them with our investments… and hope they “go up”.

I see this approach as incredibly fragile. The self-directed investor can do much better.

My philosophy is simple… Financial security first. Then financial independence.

I define financial security as the ability to weather any sudden change or emergency for an extended period of time… in relative comfort.

That way if you were to lose your primary source of income or have an emergency of some kind – you’re good. You’ll have the resources you need to handle the issue – without it disrupting your life.

For financial security, all we need to do is acquire high-quality assets across a range of asset classes.

We want to have a foundation of reserve assets. We also want to have assets that will generate compound returns for us, year after year. Then we want to invest in some alternative assets that provide us with resiliency in difficult times.

That’s true diversification.

Then for financial independence, all we need to do is acquire assets that produce their own income. We call this passive income.

This is how we put assets and income on the same team. Your assets provide you with income. When you want more income, you just acquire more assets. Then you have more of both.

So now it’s a balanced approach…

If you consistently buy assets that produce extra income, at some point your passive income will exceed your expenses. At that point you are financially independent.

Do you see how this is the direct path to “retirement”?

With Retirement Inc’s plan, we funnel our savings into funds inside of retirement accounts and we hope they go up in value. Then, when we retire, we sell those funds to produce income for ourselves.

So to get income with their approach, we have to sell our assets. Once they are gone, we are poorer. Keep at it and we’ll have to worry about running out of money.

I have to ask – if our goal is to have income in retirement… why don’t we simply create extra income streams in the first place?

That way we can retire sooner if we want to. We don’t have to wait until conventional retirement age.

Plus, we never have to sell anything if our assets are providing us with income. Which means we don’t have to get poorer in retirement.

I firmly believe this dynamic is the secret to true wealth and independence…

It has nothing to do with hitting it big on any one investment. It’s not about gambling or speculating. It’s not about the latest hot trend.

No, it’s about an intentional, comprehensive, well-designed system for creating financial security first… and then financial independence – by creating extra income streams.

And guess what?

We’re no longer talking about traditional retirement here. If you can work up to having passive monthly income that supports all your needs and wants…

Well, you can retire any time you want to. It doesn’t matter if you are 65 or 45. All you have to do is build up the income.

That’s the path to true financial independence. It’s the ticket off the hamster wheel.

And guess what?

This approach is more accessible than ever before today. The Great Reorganization is creating a golden path for the self-directed investor right now – as we speak.

We’re going to spend an hour talking about this dynamic at our webinar on Friday.

We’ll talk about each part of the process in detail. Financial security first… then financial independence.

And then, after we’ve covered the process, I’ll lay out an approach that anyone can use to create extra $3,450 in passive monthly income within just three years or less. Then you’ll be off to the races from there.

I’ve also committed to doing an unlimited Q&A session after our core presentation on Friday. Attendees will be able to submit questions anonymously, and I promise to answer all of them. No question is off limits.

So I invite you to take some time to join us on Friday afternoon. We’ll get started at 3:00 pm Eastern sharp. Please register in advance at: https://phoenician-league.lpages.co/webinar-oct24-int/.

See you there!

-Joe Withrow

P.S. We’re calling Friday’s event The New Rules of Money Webinar – the 4.5 Things You Need For Financial Freedom. 

If you can join us, please register in advance as bandwidth is limited. You can do so right here.

The post The Great Reorganization – Part 8 appeared first on Zenconomics.

They say that there are only two guarantees in life – death and taxes. I don’t care much for that statement though. So I’d like to propose a modification.

I think there’s only one guarantee in life… Change. That’s it.

Everything changes over time. We know this to be true by experience.

One day we look in the mirror and see a young, vibrant face. But we don’t think too much about it. We have too many places to go and people to see. Our energy is boundless. We just assume it will always be this way.

Then some years go by and we don’t see that same face in the mirror anymore. Somehow it’s not quite so vibrant. And now it has some lines on it. We might sit and ponder this for a little while… because we don’t have other plans. We lack the energy to do all the things we once did.

Well, it’s the same with the economy and thus our society. Change is guaranteed.

As it stands, the cheap money era that reshaped our society over the past five decades is coming to an end. That which was sustained by printed money and artificially low interest rates will come to an end with it.

We’ve spent the past week discussing what this means at the macro level. Now let’s talk about what it means for us personally.

When we left off yesterday I suggested that the new economic era will be a boon for self-directed investors. The key here is self-directed.

Mainstream finance has preached a form of collectivist investing for the last forty years or so. By that I mean “Retirement Inc.” encouraged everybody to put their money into funds of various kinds held in 401(k) and Individual Retirement Accounts (IRAs).

At first it was mutual funds. They were all the rage in the 1980s and most of the 90s. Then Retirement Inc. created variations. We got closed end funds… then index funds… and finally exchange-traded funds (ETFs).

The common denominator is that all of these funds are managed by a massive asset management firm. That firm decides exactly what each fund invests in… when it invests… how much it invests… and then when it sells. And of course it collects a nice little fee from each investor regardless of its performance.

What’s more, the asset managers vote each shareholder proxy on behalf of all their investors. That means they could get their own people on corporate boards to direct company policy.

Nobody cared one bit about this for years. Most investors didn’t even know they had voting rights as a shareholder.

But then corporate America went woke.

Suddenly companies were sacrificing productivity in favor of wokeism’s favorite acronyms – ESG and DEI. And the same companies donated millions of dollars to various organizations supporting the woke agenda.

This surprised many of us. Why would these companies willingly harm themselves to promote a quasi-political agenda bent on destruction?

That’s when the light bulb went on.

The asset management firms (think Blackrock/Vanguard) gained massive influence over corporate America by voting everybody’s proxy. Then they helped push the woke agenda.

They had a good run for a few years… but those days are over now. Blackrock CEO Larry Fink even had to swear off using the term “ESG” forever.

Destructive political agendas can only fund themselves in a world of cheap money and artificially low interest rates. And the Great Reorganization has moved us out of that world.

So it stands to reason that collectivist investing has peaked. Inertia will keep it popular for years to come… but the rise of the self-directed investor is upon us.

More on what that means tomorrow…

-Joe Withrow

P.S. We’re going to dive into this topic in much more detail at our webinar on Friday.

First we’ll discuss the flaws inherent in “conventional” retirement planning. Then we will lay out exactly how we can each become self-directed investors to grow both our assets and our income at the same time. And I promise – we have a step by step process that anyone can use.

We’re calling our event The New Rules of Money Webinar – the 4.5 Things You Need For Financial Freedom. Please register ahead of time right here if you can join us.

The event will start at 3:00 pm on Friday, October 25^th. The core presentation will run for about an hour. Then we’ll open it up to unlimited Q&A.

You can secure your spot by going to: https://phoenician-league.lpages.co/webinar-oct24-int/. I hope to see you there!

The post The Great Reorganization – Part 7 appeared first on Zenconomics.

We find some variation of this proverb in literature scattered across the centuries. The earliest variation is attributed to St. Marher in 1225. “And te tide and te time þat tu iboren were, schal beon iblescet“, he wrote.

And it’s unquestioningly true.

We celebrated my daughter’s tenth birthday over the weekend. Here she is crafting decorations for her party:

Two of her friends came over to celebrate with her. Madison called it a “sleepover’. But I think that’s a misnomer. I’m not sure those girls did much sleeping. I think they sat up talking about 10-year old girl stuff into the wee hours of the night.

To her, that’s just what you do when you turn 10 years old. But to her father… it’s not so normal.

Because I remember when this young lady first arrived. Indeed, I delivered her myself in the room adjacent to where she is sitting in the image above.

Alas, time waits for no man.

But like a DEI-approved hire, I suppose time doesn’t discriminate. In just the same way, it waits for no economic era. And that brings us back to our running thesis: America’s Great Reorganization…

The thesis is simple. The cheap money era that reshaped our society over the past five decades is coming to an end.

That which was sustained by cheap money and artificially low interest rates will come to an end with it. And this will lead to a comprehensive reorganization – one that will fundamentally alter the landscape of our society.

SOFR replacing LIBOR as the benchmark interest rate for dollar-denominated debt is the catalyst driving this reorganization. For those who missed our discussion on this esoteric dynamic, you can catch up right here: https://www.zenconomics.com/the-great-reorganization-part-2

To summarize it succinctly, SOFR liberated US monetary policy from European influences. It’s what allowed Federal Reserve (Fed) Chairman Jerome Powell to normalize interest rates – breaking ranks with the global central bank cartel in the process.

History may paint that move to normalize rates as the second American Revolution. That’s how significant it was. 

To illustrate why, let’s peer into the future and examine how normalized interest rates could force change across various sectors of our economy.

It all starts with Congress and fiscal policy…

For decades, the U.S. Congress has operated under the assumption that it could spend without consequence. Low interest rates enabled by cheap money policies allowed for ever-increasing deficits with no immediate repercussions.

As it stands, Congress is set to add over $2 trillion to the national debt each year going forward. But as interest rates normalize, this fiscal recklessness will become unmanageable. Because normalized rates will dramatically increase the cost of servicing the national debt. 

The Congressional Budget Office (CBO) projects that total interest payments on the national debt will exceed $1 trillion next year. As interest payments consume a larger portion of the federal budget, Congress will face mounting pressure from the financial sector to cut spending and implement fiscal reforms. The days of kicking the can down the road will come to an abrupt end. 

We’ll see this pressure come from the bond market. As America’s debt balloons, at some point the biggest buyers of Treasury bonds will say “no mas”. That would force fiscal discipline on federal spending. 

Of course, such a scenario would be quite chaotic… if it gets to that point. The fact that Elon Musk is floating the idea of a “government efficiency commission” suggests that some powerful influences already recognize the need to cut federal spending aggressively now – so that dislocations in the Treasury market might be avoided.

Regardless of how it plays out, fiscal discipline is coming back to the federal budget. And that will force discipline throughout the rest of the economy. 

Zombie companies will face a reckoning… private investment capital will contract – which will limit startup funding to only the best companies… and consumer credit will dry up.

At that point American households will be forced to value financial stability, self-reliance, and long-term planning once again. The “keeping up with the Joneses” mentality that has driven so much wasteful consumption will give way to a more sustainable and fulfilling approach to personal finance.

Perhaps ironically, such a mentality will be a boon for self-directed investors. We’ll talk about what it all looks like tomorrow…

-Joe Withrow

P.S. Ready to put this analysis to work and unlock the secrets of true financial freedom? Join me this Friday, October 25^th for our live webinar: The 4.5 Things You Need for Financial Freedom: How to Create True Financial Security in Today’s Economic Climate

We’ll get started at 3:00 PM Eastern on the dot. The core presentation will run for about an hour or so. Then we’ll open it up to Q&A. And I’m an open book – no question is off limits.

You can secure your spot by going to: https://phoenician-league.lpages.co/webinar-oct24-int/.

See you Friday!

The post The Great Reorganization – Part 6 appeared first on Zenconomics.

To bring new readers up to speed, the thesis is rather simple. Virtually every aspect of our economy has been “financialized” over the past 50 years. This caused some major distortions that threaten to sink the entire dollar-based financial system.

As we discussed yesterday, the mass financialization of our economy was itself a fundamental reorganization of American society. Painting with a broad brush, we went from being focused on quality of life to being obsessed with maximization.

That is to say, the rat race became our reality… and family-owned shops on quaint Main Streets became our past. The case of Downer’s Hardware we talked about yesterday is a microcosm of that massive trend.

However, a major sea-change at the heart of the global financial system signals that we’re in a new era now. We’re at the cusp of another major reorganization of American society. It will resemble some of the better features of our past… as well as new aspects we can’t possibly envision yet thanks to technological innovations.

The vision for this Great Reorganization began to take shape in my mind when SOFR replaced LIBOR as the interest rate benchmark for dollar-denominated loans. The seeds have been sown for several years now. But something caught my attention last week that seemingly confirms it for me.

On October 12^th, the Wall Street Journal ran an article titled: America’s New Millionaire Class: Plumbers and HVAC Entrepreneurs. The article went on to detail how private equity (PE) firms are now rushing to buy skilled trade businesses.

The PE guys plan to “rollup” the skilled trade industry by purchasing locally-owned plumbing and HVAC businesses that can be integrated into a larger company. That way the revenue and profits from a range of small businesses accrue to the larger company… to make it look good.

From there they intend to aggressively cut costs in each local business so as to drive the larger company’s profitability metrics higher. Then in a few years they plan to sell the larger company for a profit and walk away with their pockets fattened.

But here’s the thing – the PE guys aren’t smart. They know very little about the businesses they acquire… and they care about them even less. They only know one game and that’s the financialization game.

What’s more, the PE guys are always three years too late.

I say that with confidence because one of my old colleagues from the investment research world knows them very well. He was the top salesman at a company they acquired around 20 years ago. He saw first-hand how they operate.

The first thing they do is fire every employee with any kind of independent drive. They only want employees who will do what they are told from corporate headquarters without question. But the people with independent drive are always the ones who get things done… so it usually doesn’t takes long for things to go downhill.

My old colleague also has some friends in the PE space. He goes out to dinner with them a few times each year… and he describes them as robotic in their thinking. They aren’t innovators. They aren’t pioneers. They are always looking backwards by at least three years.

So if the PE guys think that they’re going to buy up small plumbing and HVAC businesses from all across America to consolidate the industry… I’m confident in saying we’re going to see a resurgence in locally owned skilled trade businesses over the next decade.

The PE guys will quickly make a mess of things. And then young folks who learn these trades will have the chance to start their own companies, hire the best talent, and quickly capture a huge slice of the market share in their area.

It’s a fundamental dynamic that life reverses entropy. One could even argue that reversing entropy is the primary purpose of life.

We can think of the situation above as reversing entropy within the American economy. And it’s going to happen in most of our industries as the Great Reorganization plays out.

And that brings us back to where we left off yesterday – there is a time for everything… and a season for every activity under the heavens.

Mass financialization – the only world the PE guys understand – its day has come and gone. Because that world can only exist with cheap money and artificially low interest rates.

As we’ve discussed, normalization is now the order of the day.  And normalization changes everything. We’ll talk about how on Monday…

-Joe Withrow

P.S. We’re now a week out from our live webinar: The 4.5 Things You Need for Financial Freedom: How to Create True Financial Security in Today’s Economic Climate

I know we’ve spent the whole week talking about economics and the big picture. I find this stuff fascinating. But more practically, I firmly believe that we have to understand the big picture if we want to get our personal finances right.

So we’re going to talk about practical, actionable investment strategies at our webinar next week. We’ll go live on Friday, October 25^th at 3:00 pm Eastern. The core presentation will run for about an hour or so. Then we’ll open it up to unlimited Q&A.

And I promise, we’ll make sure you walk away with some robust strategies that you can begin to implement immediately. We’ll even send you three financial guides to help you put everything into practice.

You can register for the event at https://phoenician-league.lpages.co/webinar-oct24-int/.  We have some great bonuses prepared for those who register ahead of time – for those who would like to study up on some of our strategies early.

See you next week!

The post The Great Reorganization – Part 5 appeared first on Zenconomics.

There’s something magical about this time of year. It’s a reminder that everything is finite. As the book of Ecclesiastes says: There is a time for everything… and a season for every activity under the heavens.

The gravel road pictured above is our driveway. There’s one way in and one way out… like we’re at the end of the world up here. Most days I feel like we are.

We bought this property from the family who owned the old Downer’s Hardware store in the nearby town. They opened the store in 1953 and ran it for just over 50 years.

We were a couple decades into the “cheap money” experiment when Downer’s Hardware closed its doors in 2004… but we hadn’t yet reached the apex.

We talked yesterday about the result of this experiment – cheap money cheapens everything. The case of Downer’s Hardware illustrates this dynamic…

When the family-owned store opened in 1953, it could sell individual screws, nuts, and bolts for a penny each and still make enough money to keep the lights on. That’s $0.01 – the lowest denomination of the dollar. One penny still held purchasing power.

Fast forward to today and you can buy individual screws for around $0.65 at Lowe’s or Home Depot. But nobody does.

Instead, we buy a pack of 200 screws for $5.99. Then we use the one or two screws we need, and we put the rest on the garage shelf.

We’ll have plenty of screws for the next time we need them, we think. Then 20 years goes by and we forget we even have those 198 screws on the shelf. But we don’t care—they only cost $5.99. That can’t even buy us lunch today.

This is how cheap money encourages waste.

We needed two screws… not 200. But we bought 200 because they only cost $5.99.

We got a “deal” and Lowe’s got to add some revenue in its endless quest to meet quarterly earnings forecasts. But 198 screws went to waste. What else could that metal have been used to make?

Meanwhile, Downer’s Hardware wasn’t around to sell us screws in any quantity. Because it couldn’t afford to keep the doors open selling screws for $0.03 each ($5.99 / 200).

Is that a bad thing?

Perhaps not. The Downers found other work and we can still buy screws for $0.03. But only if we buy 200 of them. If we just want one screw it’s $0.65.

But what did we give up?

After all, we used to be able to get one screw for $0.01 – that penny in our pocket held actual purchasing power. And we could buy that screw from the nice family who made their living running a hardware store.

What we’re talking about here was a fundamental reorganization of our society. The same thing that happened to Downer’s Hardware happened to millions of small businesses on Main Streets all across America.

And you know what… it worked out great for a lot of people. Corporate managers got their bonuses and everybody’s retirement accounts went up. Especially after the global central bank cartel pushed interest rates to zero.

But lest we forget – there is a time for everything… and a season for every activity under the heavens.

Like the leaves falling from my hickory tree in the image above, the cheap money era’s days are coming to an end. Tomorrow we’ll talk about why…

-Joe Withrow

P.S. We’re going to distill America’s Great Reorganization into actionable investment insights at our event next week. We’re calling it: The 4.5 Things You Need for Financial Freedom: How to Create True Financial Security in Today’s Economic Climate

We’ll go live on October 25^th at 3:00 pm Eastern. The core presentation will run for about an hour or so. Then we’ll open it up to unlimited Q&A.

And I promise, you won’t get any fluff from us. Only actionable insight and specific investments you can make right now. You can register for the event at https://phoenician-league.lpages.co/webinar-oct24-int/.  I hope to see you there!

The post The Great Reorganization – Part 4 appeared first on Zenconomics.