- The Wealth Expedition
- Posts
- Redefining Luxury
Redefining Luxury
Life has dramatically changed in the past hundred years, and here's why today's generation is taking a good hard look at what it means to be wealthy.
Daniel Lancaster
February 03, 2025
Our weekly newsletter features the following sections:
First time reading? Subscribe for weekly content here.
Justin Welsh’s definition of true wealth:
To think, uninterrupted — creating space for original ideas and deep work
To sleep without an alarm — allowing our bodies to follow natural rhythms
To move at our own pace — rejecting unnecessary urgency
To live without constant noise — choosing a clear mind over chaos
NEWS
What Happened Last Week
Technology stocks took a beating Monday due to China’s DeepSeek firm suggesting that AI might possibly be accomplished much cheaper and with less computing power than originally presumed.
The Trump administration plans to implement a 25% tariff on the import of good from Canada and Mexico until these two countries can satisfactorily stop the flow of illegal immigrants and fentanyl across their borders.
Canadian energy imports will face a 10% tariff, while Mexico’s energy imports will face the full 25%.
Canada and Mexico have announced that they will counter with their own tariffs rather than meet the border demands.
Purchasing Managers’ Indexes for the Eurozone and the UK improved overall in January versus December, a positive sign for future economic growth.
The European Central Bank (ECB) cut interest rates to 2.75% on Thursday, with its Central Bank Chief estimating inflation to return to its 2% target around spring or summer.
US fourth quarter growth was an annualized 2.3%, not quite hitting expectations but still above the 20-year annualized average of 2.1%.
Consumer spending grew at 4.2% last quarter, the fastest in about two years. But after the first quarter this is projected to taper off.
How I See It
Stocks don’t need a lot.
What they need is a level playing ground (few disruptive new regulations), positive economic growth, and cautious investors.
Right now, uncertainty remains elevated due to the sheer number of changes being experienced in the government. No one knows how the economy will eventually balance out the cut in government spending (reducing GDP), the new tariffs, and the targeted regulation cuts and tax cuts (potentially improving GDP).
The tariffs, however, are no surprise to markets. For months now, investors have understood that these are a real possibility at least temporarily while the affected countries negotiate. This new trading environment has been largely priced in already, though the immediate impact on investor sentiment could cause markets to react unfavorably in the days ahead.
But much of the uncertainty that comes from the top down persists through the first two years of a President’s term. That uncertainty gets priced into markets, keeping them cautious.
But the thing that takes markets down is either 1) a totally unforeseen event which reduces expected global GDP by trillions of dollars or 2) markets get ahead of themselves in an extended period of very high optimism.
Right now, markets are relatively quite high on the optimism of strong business conditions and the continued impact and development of AI.
It’s fine for markets to be high in expectation of that. They can still achieve excellent returns even during times of strong optimism when they’re already high.
But what I hope to see this year is more moderate gains, preferably in the single digits to low double digits. If we see more than 15% for the whole year, it may be time to consider the risk more closely.
PARADIGM SHIFT
Redefining Luxury
Justin Welsh, in his Saturday article, redefines the idea of luxury to mean “the freedom to live and think with clarity and intention.”
And I believe that is the growing sentiment of the new generation.
I think that would have been the sentiment of past generations if it had been remotely possible for the average worker. I see evidence of it in books like The Quest of the Simple Life written in 1907.
But life has dramatically changed in the past hundred years, and I think it’s the convergence of these factors which gives this generation cause to reconsider the nuances of what it means to be wealthy:
The average US citizen has far more practical conveniences and “toys” than ever before in human history.
I believe the achievement of material comforts has realigned much of this generation’s viewpoint to look beyond the material, realizing from experience that things alone can’t satisfy and make for a full life.
The division of labor, founded originally on the assembly line mentality, has become the norm for employment.
While this is good and necessary, it is often taken to the extreme which leaves employees feeling micromanaged, monotonous and unfulfilled from the lack of task variety, autonomy and the ability to see a meaningful end result of their work.
What it takes to achieve a physically and mentally healthy lifestyle is far better understood today.
Bodily health is now understood far better at the metabolic and cellular level, as well as how to best achieve a lifestyle which supports that health. Nowadays, money is not the only thing employees are after. If they have to materially sacrifice their mental or physical health to do a job, there’s no salary high enough to compensate for that.
Stories through books, movies, etc. have caused us to examine ourselves more closely with regard to spending quality time with family.
There’s an extremely common theme in movies of a parent who is regularly absent from their children’s lives, missing their sports games and things which are important to them, for the sake of giving them “the life they never had” through the work that they do. I think this message has settled into most people’s psyche and changed how we think about work/life balance.
The interconnectivity of the world causes us to see and consider other ways of living.
We now see people’s lives displayed on social media and elsewhere, and we can observe how others are living life in great detail. This helps us not to get caught in a rut way of thinking, and at least makes us ask ourselves the question regularly if there might be a better way.
All things considered, I do think that this generation is particularly interested in optimizing their total wealth, material and immaterial. And I think if we can answer this question in a satisfactory way, the shockwaves of that revolution will echo through many generations to come.
FINANCIAL TOOL
Active Investing
Even though market efficiency is the normal state of the stock market, evidence also shows that there are rare moments when markets stray from efficiency.
That’s what active managers attempt to identify and use to their advantage.
They don’t simply stick to the benchmark. They actively overweight and underweight certain stocks, industries, stock styles and/or asset classes in order to outsmart the broader market.
These inefficiencies in the stock market develop particularly in times of extreme greed and extreme fear.
These moments may not come around for many years, but if an active fund manager can identify these moments with decent precision, this can make up for the years of underperformance that they are bound to experience from time to time.
It’s a rare breed that can take advantage of these moments in history, though. And it’s even more difficult to tell which ones were lucky and which ones were geniuses.
That’s why I like to do at least three things when analyzing an active fund.
I look at the average 20- and 30-year return history, if available.
I look at the rolling 5-year average for as far back as I can track the annual returns. For example, 1990-1994, followed by 1991-1995, and so on.
I compare these numbers with the benchmark.
Someone might get lucky early on, which causes their entire 30-year return to look amazing. That’s why it’s important to look at the 5-year average rolling returns as well, to see if they are able to replicate some outperformance of the market more often than not. We want to see that happening at least 50% of the time.
Sorting through the skilled, the unskilled, the lucky and the unlucky is not easy, but simply doing these three things can offer valuable insight.
HERE’S HOW I CAN HELP
COURSE 2 OF 3 IS AVAILABLE!
I am in the process of creating the third and final in-depth digital course that, together with the other two, will comprehensively make you a master of your financial destiny.
The second of three courses is now available:
This course will lead you step-by-step toward developing your escape plan into a life of comprehensive wealth: time, flexibility, purpose and money.
Walk through the lessons and accompanying action steps to create an extraordinary life change today which culminates in a bridge to financial independence in the near future.
Each lesson builds upon the last, covering these main topics:
Master high-impact budgeting techniques to create a surplus today
Develop a plan to become debt-free in record time
Raise your salary this year
Use tax strategy to fast-track your goals
Bridge your way to entrepreneurship
This is a learn-at-your-own-pace course with 7+ hours of content that will set you on course to achieve your dream life well in advance of retirement age using simple but powerful habits of finance.
I’d love to hear from you. Let me know what you’d like to see in upcoming newsletters, articles, or a digital course at Contact Us - The Wealth Expedition.